Ethanol Companies in Trouble; Experts say Industry Will Survive

Source:

"According to the Renewable Fuels Association based in Washington, D.C., production is down and dozens of plants have been idled in the last few months."

Not so long ago, the biofuel ethanol was a political and policy darling as gas prices soared and the world focused on reducing emissions.

But the companies that produce the colorless liquid appear to be running into trouble as the global economy tanks. Canadian producers are shelving plans to build or expand plants and U.S. companies are idling their facilities.

"Basically because of the economic recession and because of the slump in the crude oil prices, since the cost of producing ethanol is fairly high, none of these activities are economical," said Suren Kulshreshtha, an agricultural economics professor at the University of Saskatchewan in Saskatoon.

Kulshreshtha said much of the development in the biofuel started when oil prices spiked. Ethanol, which has traditionally been made by fermenting corn, wheat, or sugar cane, was seen as a way to help keep prices down at the pumps while extending the global energy supply and cutting greenhouse gas emissions.

"Ethanol was very profitable a couple years ago," said Alfons Weersink, a professor with the food, agricultural and resources economics department at the University of Guelph in Ontario.

"Recently oil price and ethanol price have fallen, but corn price hasn't fallen quite as much, and so that's part of the reason why margins have shrunk at these ethanol plants."

The Canadian Renewable Fuels Association acknowledges there are challenges in the industry. But association president Gordon Quaiattini said it's less about the price of oil and more about the ability to attract funding. There is also a drop in demand because of the slumping economy.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe