Ethanol needs to be able to compete with oil prices in the $30-$50 range, James Woolsey, former CIA director and now an advocate for renewable energy, said during the recent Renewable on Parade conference.

Sano Shimoda, a biofuels investment analyst with BioScience Securities, said, “You have to get your costs down.”

He said ethanol would need to lower its costs to compete with oil prices of $25-$30 per barrel without any government subsides.

The fuel vs. food debate taking place with ethanol could prevent the blenders tax credit from being renewed in 2010, Shimoda said.

“That is where we need to be,” he added.

At the moment, he said ethanol only makes sense as a blending fuel.

To be competitive, Shimoda said ethanol plants need to find more ways to capture value or reduce operating costs than just buying corn, making ethanol and distillers grains.

When responding to a question, he said he would not invest in a traditional ethanol plant.

Other than controlling its costs of production, Shimoda said there might be some “surprises” looming in ethanol industry.

One of those surprises could be potential shakeout of ethanol plant ownership. “A majority of the ethanol plants will not be owned by their current owners,” he said.

The shakeout could be similar to the “dot-com” bust in the 1990s in the investment community.