Abstract
The decline of oil prices is having an impact on the prices of other energy products. It is also forcing the reconsideration of interfuel substitution. In this article, the long-term prospects of the U.S. fuel-ethanol industry are analyzed using a system of econometric models. The modeling system comprises the INFORUM interindustry macroeconomic model and an econometric submodel detailing the ethanol production decision as well as the corn, soybean, and wheat markets. The system is used in forecasting simulations to examine the impact that changes in world oil prices would have on ethanol profitability. The results of this study suggest that, without substantial increases in real oil prices or subsidy levels, ethanol will become unprofitable in the near future.
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