Prohibition Pitfalls in an Ethanol Economy

Against the backdrop of record oil prices, geopolitical instability in the Middle East and the war on terror, last year the U.S. Congress passed significant new incentives for ethanol production. In addition to substantial subsidies, tax credits and protective tariffs already in place, the Energy Policy Act of 2005¹ imposes an escalating mandatory target for U.S. consumption of renewable fuels (mostly ethanol by default) that reaches 7.5 billion gallons in 2012.² The Act effectively doubles the market for ethanol, which stood at 3.4 billion gallons in 2004.³ In 2006 alone, projections call for ethanol consumption to rise by nearly 50 percent.⁴ The industry is poised to continue its brisk growth.