Ethanol Alternative Fuel Investments
Ethanol Alternative Fuel Investments: Let Uncle Sam Make You Rich in a Wicked Bear Market
A Taipan Publishing Group Strategy Report
by Irwin Greenstein, Senior Research Analyst, Taipan Publishing Group
One of the biggest government payouts can help secure your financial survival in the worst of bear markets.
This government program continues to dole out money like clockwork, ensuring that recipients of these subsidies thrive -- regardless if the bear is growling at the door.With subsidies expected to hit $11 billion, it seems that just about anyone who wakes up in the morning can cash in from this government program. And now is the time for you to get in on ethanol alternative fuel investments.
“Business as usual” is a phrase that belongs to a happier bygone era. The plunge of markets around the world has rocked consumer confidence, and the repercussions are truly global. Never before have markets been so interconnected by high-speed data networks, leaving investors no wiggle room for mistakes.
In less than a year, what started out as subprime hiccup turned into a high body count of foreclosures. The number of home foreclosures in the U.S. bolted 75% in 2007. That amounted to 2.2 million foreclosures, or nearly 1% of all U.S. households.Ethanol Alternative Fuel Investments: Beyond Consumer Confidence
Hard-spending Americans have finally cut discretionary spending as a last-ditch attempt to remain solvent. They can’t borrow on their house anymore. Their buying power has plummeted along with the dollar. And just getting to and from work costs them more than ever before.
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The triple-pronged pitchfork of mortgage meltdown, devaluated dollar and sky-high energy costs has pinned the American consumer to the wall.
In turn, countries that manufacture the cheap junk Americans buy (think China, Mexico and Vietnam among others) are seeing their stock markets suffer from a bad case of the jitters.
The key to surviving -- or even getting rich-- is to put as much distance as possible between the so-called smart money and your portfolio for the time being. Instead, let Uncle Sam set you on the road to riches with this rock-steady program of subsidy payouts.
Ethanol Alternative Fuel Investments: The “E”-Word
As long as the money flows from federal and state coffers into this industry, you can stabilize your portfolio for the next 12 months or more. The next most important thing you can do is make a lot of money in the process.
And that brings us to the “E”-word: ethanol.
Tax credits and incentives for ethanol production will cost taxpayers an estimated $6.3–$8.7 billion dollars annually between 2006 and 2012. This payout is largely subsidized by 51-cent-per-gallon excise tax credit that refiners receive for meeting the federal Renewable Fuels Standard (RFS) mandate.
So that means, for the next four years, the ethanol industry will be guaranteed an income, thanks to government subsidies.Ethanol Alternative Fuel Investments: An Incredible Cash Infusion
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Immune from the vagaries of supply and demand, there is an inherent subsidy from the Energy Policy Act of 2005. It mandates that 4 billion gallons come from renewable fuels in 2006, rising to 7.5 billion in 2012.
Overnight, ethanol became the poster child for alternative fuels as the government fattened it up with an incredible infusion of cash.
The biggest single catalyst to massive ethanol payouts is the Volumetric Ethanol Excise Tax Credit. It grants a tax credit to ethanol blenders who combine ethanol with gasoline, in the amount of 51 cents per gallon of pure ethanol blended.Ethanol Alternative Fuel Investments: Money Is Pouring In
In addition to the direct subsidy from the VEETC, many states reduced motor fuel taxes on favored fuels. Heaped on top of those subsidies are tax breaks for investment in the infrastructure required for biofuel production.
Overall, money is pouring into ethanol from every possible federal, state and local agency to help guarantee that the ethanol is here to stay.
What you may not know is that many states have passed their own ethanol subsidy laws.
Minnesota awards ethanol manufacturers a 20-cent-per-gallon producer incentive to support the state's ethanol production. South Dakota’s subsidy provided $3.1 million to ethanol plants in just three towns in 2001. Nebraska pursued a similar policy awarding 60 cents in federal and 20 cents in state subsidies per gallon of ethanol produced.Ethanol Alternative Fuel Investments: Hefty Subsidies
Tally it all up and you’ll find that 20 states award tax credits or other incentives to build ethanol production plants.
These hefty subsidies can insulate investors from the turmoil battering markets around the world. Invest in ethanol, and suddenly you can find yourself in perhaps one of the most financially sound sectors anywhere.
One of the biggest secrets is that the federal government has, in fact, subsidized ethanol industry 1978 with tax exemptions totaling over $11 billion -- the revenue stream for ethanol makers that is likely to continue through 2012.
In 2006 alone, ethanol subsidies totaled $7 billion for 4.9 billion gallons of ethanol. That's $1.45 per gallon of ethanol.Ethanol Alternative Fuel Investments: A Guaranteed Windfall
Heck, most CEOs would kill for that kind of guaranteed windfall -- especially over the past 30 years.
The subsidies are a meal ticket to huge sums of investment capital. For example, ethanol subsidies fund refineries, creating more jobs and higher profits for corn growers. As Wells Fargo economist Michael Swanson observed, “If you’re in rural Iowa right now, there is no other industry that can bring along a $125 million plant.”
As America’s oil refineries are patched up with bubble gum and duct tape, over 100 new ethanol production facilities have been built in the U.S.
Ethanol Alternative Fuel Investments: The Ethanol Surge
According to a February 2007 report by the Department of Energy, ethanol production will surge over the next 20 years with the aid of government subsidies. The ethanol industry will need to develop at a feverish pace each year through 2012.
The DOE plans to displace 30% of the gasoline used in 2004 with biofuels by 2030, and the majority of that displacement is expected to come from ethanol.
Indeed, even the normally cautious DOE predicts that ethanol could put a 30% dent in America’s gasoline consumption by 2030.
But those projections are probably low, especially after the democratic takeover of Congress could open the door to a bigger-than-expected push for ethanol.
House Speaker Nancy Pelosi has proposed a doubling of the amount of ethanol required by law to be blended into gasoline by 2012.
Collin Peterson of Minnesota, who has just taken over the House Agriculture Committee, says he will also be more aggressive in seeking ethanol subsidies.
And other House democrats say they plan to establish a dedicated fund to promote renewable energy and conservation, with a lot of the money going into research for making ethanol from sources other than corn.This and other energy sources like uranium are the primary focus of our current report.
Why should the fat cats on Wall Street be the only ones to benefit from the government payouts? While some ethanol companies may fluctuate with the markets, one thing remains absolutely certain: Over the next four years, the ethanol industry will continue to receive government checks.Get in on these opportunities now. Sign up for your FREE Taipan Daily e-letter and receive the bonus Chart of the Day alerts. |
Originally published February 11, 2008.
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Copyright 2007-2008, The Taipan Publishing Group, Taipan Daily and Chart of the Day, 808 St. Paul St., Baltimore, MD 21202. All rights reserved. No part of this report may be reproduced or placed on any electronic medium without written permission from the publisher. Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed.