What price of crude oil makes ethanol production profitable?
There has been a great deal of interest this summer in the ethanol market, Renewable Fuel Standard (RFS) mandates and corn use for ethanol production. The increased interest reflects the impact of the historic drought of 2012 in the Midwest and concerns about how reduced corn supplies will be allocated across consumption categories, notes Scott Irwin, University of Illinois ag economist.
Irwin analyzed the basic economic question of how high crude oil prices have to be in order for U.S. ethanol production to be profitable. Sometimes this simple, but important issue, is lost in the blizzard of daily market data and analysis. The answer also helps provide a frame of reference for thinking about the longer-term outlook for the market demand for ethanol.
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