Skip to comments.Wall St. Exploits Ethanol Credits, and Prices Spike
Posted on 09/15/2013 5:26:34 AM PDT by reaganaut1
It was supposed to help clean the air, reduce dependence on foreign oil and bolster agriculture. But a little known market in ethanol credits has also become a hot new game on Wall Street.
The federal government created the market in special credits tied to ethanol eight years ago when it required refiners to mix ethanol into gasoline or buy credits from companies that do so. The idea was to push refiners to use the cleaner, renewable fuel, or force them to buy the credits.
A few worried that Wall Street would set out to exploit this young market, fears the government dismissed. But many people believe that is what happened this year when the price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts.
Traders for big banks and other financial institutions, these people say, amassed millions of the credits just as refiners were looking to buy more of them to meet an expanding federal requirement. Industry executives familiar with JPMorgan Chases activities, for example, told The Times that the bank offered to sell them hundreds of millions of the credits earlier this summer. When asked how the bank had amassed such a stake, the executives said they were told by the bank that it had stockpiled the credits.
A spokesman for JPMorgan, when asked about the exchange with the executives, disputed the account, saying the bank does not trade ethanol credits for a profit in the way it trades other securities, but is registered to deal in credits through its energy business.
(Excerpt) Read more at nytimes.com ...
Think what it would be like if they had a carbon market to manipulate.
Everybody hates taxes but cap and tax couldn't be any worse than cap and trade
Think that this is bad? Just wait, Obamacare could start a market on health care futures and then won’t that be fun?!?
Besides being an economic waste of taxpayer monies, ethanol is an energy waste. Just how much energy does it take to plant, fertilize, harvest, and process corn into ethanol; a fuel with far less energy content than gasoline?
Flick Lives: “Just how much energy does it take to plant, fertilize, harvest, and process corn into ethanol; a fuel with far less energy content than gasoline?”
That’s a very complicated question. Ethanol has about 2/3 the energy content of gasoline.
The best way to know if ethanol is cost effective is to keep government from distorting the ethanol market. The market will then quickly sort out what is most profitable.
Bottom line: If ethanol is a good deal, it doesn’t need government subsidies and mandates to survive.
It would be cheaper to just write corn farmers a government check than to subsidize the ethanol boondoggle.