If you're going to make a case for ethanol, it needs to be based on economics, not politics. Economics is all about allocation of resources, which free-market economists believe should be done by the market. Obviously, those in favor of tax incentives to big corporations (aka "corporate welfare") don't agree.
Are tax incentives in general a good allocation of resources?
Is it a good allocation of resources to give half of a state's tax incentives to a single industry whose business model is so fundamentally flawed that most of its plants went bankrupt?
Is it a good allocation of resources when those highly subsidized ethanol plants are picked up at bargain prices by one of the largest corporations in the country?
As for the future profitability of those plants, that remains to be seen. With the elimination of the blenders' credit, it will be much harder for them to make a profit. If demand for ethanol drops, Valero will have no choice but to close some plants.
As for your argument that it costs a lot of money to produce gasoline from oil, I'm afraid that doesn't hold water. Remember, every gallon of ethanol produced from grain started out as a barrel of crude oil. If you can come up with a way to take petroleum out of the picture and still make ethanol, then you can make that argument. But today, both gasoline and ethanol start out as crude oil pumped out of a well in Saudi Arabia.
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