Friday, April 01, 2005

Why ethanol futures have no future

If trading a futures contract in a commodity that has no future sounds like a contradiction, it is. Proponents of ethanol as motor vehicle fuel love to tell you that it will get us off imported oil. What they fail to tell you is that it takes more energy to produce ethanol than the ethanol yields. Therefore, what ethanol's supporters are saying is a logical impossibility. In fact, we're subsidizing the production of ethanol with energy from oil and natural gas!

For that reason it seems to me that the newly created futures contract for ethanol will have a relatively short shelf-life.

(Via Triple Pundit.)

Bonus joke:

Do you know how to make a small fortune in the commodities markets? Answer: Start out with a big fortune.

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