Evaluating the Economics of Ethanol by

The ethanol industry has experienced booms and busts throughout its nearly 200-year history. Currently the industry is booming with production due to market sentiment and enacted policies. However, sentiment has begun to shift against corn ethanol due to increasing food costs and increased government expenditures propping up the industry. Despite the record increase in gasoline prices ethanol has struggled with its own rising costs of production and market turmoil. This masters project assesses the economics of corn-based ethanol production in the United States through the development of three models. The Ethanol Supply Curve Model constructs an ethanol supply curve based on user defined commodity prices. The model compares the marginal cost of ethanol production to the wholesale price of gasoline in order to determine the ability of ethanol to compete with gasoline and whether a fuel subsidy or renewable fuel standard is required to promote ethanol production. The Ethanol Profit Model solves for a facility’s profit margin under user defined commodity conditions. The Ethanol Variable Subsidy Model calculates the price-contingent subsidy required for ethanol to compete with gasoline on a price basis