Abstract
This paper analyzes the relationship between crude oil price and fuel ethanol firm profit. Corn is the main raw material for fuel ethanol in China. According to our survey of fuel ethanol firms, three tons of corn input can produce one ton of fuel ethanol output technically, so we can estimate cost of fuel ethanol firms. Government of some provinces mandated gasoline with 10% ethanol fuel for environmental protection. Sinopec and PetroChina paid to the fuel ethanol firms in accordance with 0.911 times of gasoline price, so we can estimate earnings. Government can determine the subsidies of fuel ethanol firms based on estimation of their profit.
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