Yet another effect of the plunge in oil prices over the past seven months: The case for biofuels has never looked flimsier. The FT gives a pretty damning summation of the current state of America’s biofuel boondoggle:
The biofuel industry initially grew with the political support from three constituencies: environmentalists, farmers and, in the US at least, the “energy security” lobby. Over the past few years, environmentalists have largely withdrawn their support for biofuels while shale oil has given the US their energy security without the need for biofuels.
Farmers, of course, would love to see this program continue; it gives them guaranteed buyers for their corn. But for every other stakeholder, this program makes no sense whatsoever. Corn-based ethanol’s green merits have been discredited. The economic rationale for blending more and more of the biofuel into gasoline was shaky to begin with, and with the recent oil price crash depressing gasoline prices to levels not seen in five years, whatever margins existed for ethanol plants have all but evaporated.The smart move would be to take advantage of the changing market climate and scrap the biofuel mandate altogether. Bills are working their way through Congress now, but the sooner we can put this “green” policy experiment in our collective rear view mirror, the better.