On February 23rd, I wrote in this column, titled A Few Good Men, about former military general Wesley Clark and how he was named co-chairman of Growth Energy, a new biofuels group/association. I stated they have four primary objectives, which Clark would be directly focused on delivering against. They were:
- Help move the blending cap from the current 10%, to 15-20%
- Increase the perceived importance of ethanol as a part of national and energy security
- Maintain the current subsidy program in place, which is due for renewal
- Position the industry as one that should not be allowed to fail
Today, I believe the importance of delivering on point #1 is quickly diminishing and the importance of numbers 2,3 and 4 are increasing. If you were to follow the biofuels marketplace, you’d realize that biofuel plants are shutting down at an alarming rate. The reason being, they simply aren’t profitable in today’s marketplace. Crude oil is too low and their feedstock (mostly corn or soybeans) too high. With many of these facilities either shutting their doors or considering this alternative, a shortage of ethanol could quickly emerge. In turn, remaining production sites would be unable to meet the ethanol inclusion mandates in place. The shortfall would be met by lowering the standard (by offering exceptions) or start importing ethanol (most likely source, Brazil).
So as I iterated in my initial post, Growth Energy will be marching up to Capitol Hill, demanding their fair share of stimulus dollars. This industry is no longer focused on growth, but rather survival. At least that’s the way I see it.
Tags: Biofuels, Uncategorized
Demanding “their fair share of stimulus dollars”?
The stimulus package isn’t Christmas, and Congress isn’t Santa Claus. Is it fair that an industry that was born subsidized, got greedy and over-built, and then demanded and got the government to create an artificial demand for its product, should now get back in line for yet MORE hand-outs?
What we are witnessing is euphamistically called a “restructuring” of the industry: capacity is adapting to demand. The renewable fuel standard will be met, because as plants close, prices for ethanol will rise. Bailing out inefficient plants will only prolong the problems for those producers that are relatively efficient.