My analysis of ethanol statistics last summer was close to perfect. I measured demand for the grain-derived fuel, calculated supply and concluded that "the industry has blown a nice little bubble for itself."
Except - there is no ethanol "market." The ethanol business is driven by government planners, not freely acting buyers and sellers.
I didn't consider opportunities to portray ethanol distilleries as weapons in the global war on terror. I forgot about the 2008 presidential election, in which farm-state pandering will be crucial. In short, I forgot about the politicians, who show every sign of expanding the boondoggle to legendary dimensions and ensuring that investors pile into corn likker for years.
Things look bullish for ethanol projects whether or not they make economic sense.
The latest indicator: Baltimore ethanol plants. As reported by The Sun's Tom Pelton, Atlantic Ethanol plans a $100 million facility in Curtis Bay, and Ecron Inc. envisages a $200 million project for Sparrows Point.
Baltimore ethanol factories would seem the equivalent of Egyptian ski resorts. Most ethanol comes from corn, which is grown mainly in Nebraska, Iowa and other faraway places. Most ethanol distilleries are in the Midwest. So far, the East Coast has none.
Even so, part of the ethanol game is managing transportation costs and building plants close to customers, says Randy Roy, Atlantic Ethanol president. "We think being in the Baltimore area and being on the water helps us do that," he adds.
(Roy declined to name Atlantic Ethanol's investors; some are local, he says.)
Ethanol is an alternative and supplement to gasoline.
Because shipping ethanol to terminals is expensive, it might indeed make sense to put plants on the East Coast, home of 40 million thirsty cars and trucks. Maybe more money will be saved on getting ethanol to customers than will be spent on trucking corn to Baltimore.
But it almost doesn't matter.
It's impossible to find a politician who opposes ethanol welfare. Republican presidential candidate John McCain, who once opposed increased ethanol production, thinks it's a great idea. Democratic candidate Hillary Rodham Clinton, another previous opponent, sees ethanol as a key part of her $50 billion "moon shot" program to cut U.S. addiction to oil from unstable countries.
President Bush signed the 2005 energy bill that requires the United States to consume 7.5 billion gallons of renewable fuel by 2012. Then he raised the bid, calling in his 2007 State of the Union speech to reduce the projected use of gasoline by 20 percent in the next decade, mainly with ethanol. (Ethanol makes up less than 5 percent of gas use now.)
And Congress looks like it will comply, requiring once undreamed-of ethanol consumption even as it maintains the industry's $2 billion annual tax-credit subsidy.
So who cares if existing plants and those under construction will produce 12 billion gallons of ethanol - 60 percent more than we'll need even five years from now, under current law? ("It's groundbreaking and grand-opening season" in the Midwest, says Matt Hartwig, spokesman for the Renewable Fuels Association, the Washington ethanol lobby.)
Who cares if dozens of new projects, such as the ones in Baltimore, are on the drawing board? Who cares that making ethanol may consume as much energy (including fossil fuels) as it produces? Who cares if ethanol competition is dissuading oil companies from building new refineries - a key reason gas costs more than $3 a gallon?
This isn't the alternative-energy strategy that we need. But it looks like the one we're going to get.
Last week an economist at Iowa State University predicted that ballooning plant capacity would reduce ethanol prices and depress profits and new investment. Silly him. He also was looking at finances, not politics.
It's true that the ethanol stocks I wrote about last summer have declined on fears of a glut. Under current law, most gas can't contain more than 10 percent ethanol, and at some point all the gas will be blended. Most cars aren't supposed to use richer blends. A fall in gas prices would also hurt ethanol producers.
But have faith in the politicians, who still haven't found a limit on how often they can play the al-Qaida card. Ethanol investments are indeed a bubble, but with government's aid there's no guessing how big it'll get.