The biggest producer, Archer Daniels Midland Co., may resort to exporting ethanol. Pacific Ethanol Inc., backed by Microsoft Corp. co-founder Bill Gates, dropped 70 percent in New York trading this year as profits collapsed. Record oil prices, which make blending of ethanol with gasoline more profitable for refiners, haven't stemmed the declines.

``Ethanol companies are near break-even at best,'' says Ron Oster, a principal at Broadpoint Capital Inc. in Albany, New York. ``That's not a good recipe when you have $100 oil.''

[...]

Scientists question the wisdom of using ethanol. Stanford University researchers say ethanol, originally added to gasoline in the 1970s to reduce tailpipe emissions, does nothing to improve the environment.

``It takes more energy to produce ethanol than it actually gives off,'' says David Pimentel, a Cornell University professor who has studied production of the fuel for two decades.

Ethanol is a form of alcohol indistinguishable from moonshine that's created by fermenting and distilling the starches from corn, sugar, wheat and other crops. Harvesting, crushing, fermenting and distilling corn requires 29 percent more energy than ethanol produces, says Pimentel, a professor of ecology and agriculture.

Energy Gain

Michael Wang, an environmental engineer at the Argonne National Laboratory outside Chicago, says Pimentel is wrong to include energy spent on making fertilizers and pesticides. Ethanol production results in a 33 percent gain in combustible energy, Wang says.

[Why not???]

[...]

Help From Washington

U.S. distillers' best hope for a recovery rests with attempts by farm-state lawmakers to increase the amount of ethanol in gasoline, Berg says.

Democratic leaders in the House of Representatives and Senate are negotiating on whether a final energy bill should include a Senate plan to increase the so-called renewable fuels mandate to 36 billion gallons a year, more than five times the amount produced now by all 131 U.S. mills.

``Long-term prospects for the industry depend very much on whether a new energy bill requires higher blending targets,'' Berg says. ``Any increase in the mandate would give a psychological lift to the ethanol market.''

Almost one-quarter of the $33.8 billion corn crop is devoted to ethanol, causing food companies to raise prices for tortillas, meat and soda-pop made from corn-based ingredients. Land prices climbed 13 percent in the central U.S. during the second quarter, the biggest increase in at least 27 years, according to the Federal Reserve Bank of Kansas City.

[...]

According to studies performed by Michael Wang at Argonne National Laboratory, one unit of energy output from gasoline requires 1.2 units of energy input when all aspects of gasoline production are taken into account.

One unit of energy output from corn ethanol, on the other hand, only requires .74 units of energy input. Sugarcane ethanol is about four times as efficient as corn ethanol.