The Death of Ethanol: One Thing Wall Street Saw Coming

The Wall Street Journal ^ | November 3, 2008 | Heidi N. Moore

[saganite]

Once upon a time, ethanol was seen as the future of clean energy and as leading the U.S. to energy independence.

That was 2004, but Wall Street wised up fast that ethanol was ready for a bust. So, in 2006 and 2007, when Wall Street firms started investing their own money in renewable energy companies, they left ethanol far behind.

snip

It is one of the few things Wall Street investment banks have gotten right lately, while private investors including Bill Gates and Richard Branson were bullish on ethanol as recently as January. We were thinking of this in reading about how this weekend ethanol producer VeraSun Energy filed for Chapter 11 bankruptcy protection. It was hardly a surprise, given that a month ago, VeraSun was predicting a steep loss and hired Morgan Stanley to evaluate its options. And the company isn’t alone; the entire ethanol sector is getting its comeuppance.

Of course, Wall Street’s disillusionment with ethanol goes back further than a month ago. That is because, to Wall Street banks, the sector is haunted by failure. In 2004 and 2005, investment banks brought a clutch of ethanol companies to market. To say their performance has been lackluster is an understatement; all are trading under their offering prices and were doing so even before the credit crunch that began in 2007. Last year, I talked with several prominent energy bankers, one of whom derided the ethanol sector as “a waste of time and capital.” He said ethanol derived from corn costs more to produce than it saves and that it is so corrosive it has to be shipped overland, expensively, rather than running through more cost-efficient pipelines.

[steelyourfaith]

ping

[saganite]

Freepers were way out front on this issue. I can recall threads from 2 or 3 years ago saying essentially the same thing the market is saying. Even my mother gets it. She knows ethanol is a scam.

[qwertypie]

Iowans deserve their fate as much as the Michiganders. Hitching their wagons to a falling star.

[cripplecreek]

You’re going down with us.

[Obadiah]

Last year, I talked with several prominent energy bankers, one of whom derided the ethanol sector as “a waste of time and capital.” He said ethanol derived from corn costs more to produce than it saves and that it is so corrosive it has to be shipped overland, expensively, rather than running through more cost-efficient pipelines.

Kind of a summary statement. BTW, I didn't know that ethanol was that corrosive. I'm sure it was great for your car's engine though, and just terrific spilled on your paint!

[qwertypie]

Some will go down harder than others. Those who voted for sleazebags in order to get a corn/ethanol subsidy deserve the worst.

[wendy1946]

There actually are a small handfull of believable new energy ideas out there at present; ethanol is not one of them. The very production of ethanol should be viewed as criminal activity.

Believable new ideas include the EESTOR super capacitor, the oil from algae idea, the Evinrude/Bombardier new-gen 2-Stroke, and the Massive Yet Tiny (Angellabs/Mighty) engine, new kinds of nuclear reactors including the new small reactor we're now reading about.

[bubbacluck]

Our kids debated energy policy a few years back. While doing research they came to the conclusion that ethanol wouldn’t work. They came to this conclusion in about ten minutes. The facts were so obvious.

[Sacajaweau]

One of my local farmers said that Congress was absolutely stupid in pushing this, that the plants were built with huge grants. They built them and took the money and ran.

[johnandrhonda]

Ethanol is corrosive? I though it couldn’t be piped because it was hydroscopic...

[from occupied ga]

There actually are a small handfull of believable new energy ideas out there at present; ethanol is not one of them. The very production of ethanol should be viewed as criminal activity.

It was primarily a means that the Bush controlled Republican party used to buy votes and pay off agribusiness conglomerates with taxpayers' money (most notably Archer Daniels Midlands) for their financial support of the Republicans. It was always a scam and a rip-off for the taxpayer, but some dishonest freepers who obviously were getting part of the loot attacked me repeatedly for saying so. I can't remember all of them, but there was a mr sucky (or something like that) who was particulaly vociferous in defending ethanol. Ethanol as a motor fuel - an idea whose time should never have come David Pimental is right you use more energy to produce ethanol than you get out of it. Corn ethanol only has one legitimate use.

[agere_contra]

Well said. I remember those threads.

If a fuel needs subsidy, it is not a fuel.

[saganite]

I would include geothermal in that list although there are problems making widespread use of it because drilling to the depths required in most places is barely feasible

[outinyellowdogcountry]

The push I saw for ethanol was Tom Harkin, D-Iowa.

[from occupied ga]

D-Iowa

A democrat got in on the Republican pork - the state says it all, besides it was a Republican controlled Kongress and a Republican white house that inflicted this on us.

[NellieMae]

I have been avoiding ethanol all that I can. Their are only a few stations around that don’t have it in their gas. I try to gas up at Chevron since it is supposed to be ethanol-free.

[saganite]

I don’t think the fight to kill ethanol is done by any means. I believe congress is set to expand the ethanol requirement in gasoline dramatically. It’s a political football now, not a market issue. The subsidies will continue but with the companies failing that were supposed to process and distribute the stuff going under it may be necessary for the govt to step in and take it all over. That’s the way things are done now.

[from occupied ga]

Thanks!

[saganite]

Ethanol can’t be piped and it’s corrosive to certain of your car parts if the car has not been made ethanol ready. Distribution is very expensive because it has to be trucked.