Monday, August 4, 2014

Which type of business organization in the US currently has the lowest average profit margin?

Which type of business organization in the US currently has the lowest average profit margin?
It depends if you consider "lowest average profit" in the context of local businesses only, or the international market. I'm assuming since you're talking about profit margins, that your question is going to exclude non-profit public services like the U.S. Postal Service or public schools.

Anyways, I would guess the biofuels industry would have the lowest, or soon to be the lowest profit margins in the international context. This is because unlike most industries, it's not purely profit driven; it receives much of it's support from political/nationalist intent (not being reliant on Middle Eastern nations for oil).

The reason this is so unprofitable is because wheat biofuels yield 140% the energy required to produce it. However, South American sugar cane biofuels can produce up to 900% the energy required to produce it. South American nations also have much larger stretches of fertile land and longer growing seasons than North America. Hence they cannot only make vastly higher quality fuel, but make it in vastly larger quantities. Additionally, converting ALL of America's wheat farms to biofuel production would only fulfill about 1/10th of their current oil demands...

In short, the American biofuel industry was doomed from the start, in terms of global economics. Much like Germany's coal-to-oil conversion technology developed during WW2, the only conceivable way it could become useful is if one is unable to trade with the outside world. Unless America is embargoed by the U.N. or the global economy crashes it will be safe to assume that American biofuel production will always maintain a negative profit margin.

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