Thursday, January 31, 2008

Ethanol 'Glut'

The Energy Information Administration (EIA) is reporting that ethanol stocks in the United States fell 2% in November, a correction from the widely held position that refinery capacity coming online would result in too much ethanol being supplied to the market. The stocks fell 229,000 barrels to 11.1 million barrels of ethanol in the United States even though ethanol production has jumped 45% this year alone. Although not a huge change, it signifies the importance of ethanol and how refiners and blenders alike are beginning to use the fuel more pervasively. Analysts attribute the drop in ethanol to the huge increase in capacity that led to a large drop in ethanol prices. This in turn encouraged blenders to blend ethanol into their gasoline as a way to cut prices. With the fall in ethanol stocks, we should see the price of ethanol begin to steady, particularly since the cost of feedstocks such as corn have not dropped in recent weeks. Either way, it seems that the industry has proven the critics wrong, for the time being, as ethanol demand has kept up with the supply.

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1 comment:

mus302 said...

When the September number came out and ethanol production had exceeded demand, I was a little worried that all the predictions of a glut were coming true. Nice to see the October and November numbers bounced back.