Ethanol: Three Developments to Watch

 |  Includes: ADM, ANDE, AVR, PEIX, VSUNQ, XNL
by: Konrad Imielinski

Here are today's biggest stories surrounding the sector:

-The House approved an $18 billion tax package today that would repeal a tax break for the country's five largest oil companies. The money, which would be collected over 10 years, would be used to provide tax breaks for alternative energy sources such as wind, solar, and cellulosic ethanol. President Bush, though, is expected to veto the bill if it passes Congress. This is odd considering Bush was the one who stated two years ago - when oil was at $55 as barrel - that oil companies no longer need government subsidies. With oil currently hovering around $100 a barrel and oil companies reporting record profits, why is Bush threatening to veto? Republicans are worried the new tax "would inhibit investments in domestic oil and gas exploration and production." Oh, Please!

-Another problem has been added to ethanol's list: Ethanol fires are harder to put out than gasoline ones as water cannot be used and a special type of firefighting foam is required. This is a foam that many fire departments in the country don't have and is 30% more expensive than the conventional foam used for gasoline fires.

- Cargill announced today that it will suspend construction on its 100 million-gallon-per-year ethanol plant in Kansas due to high corn prices.