Citigroup: New energy bill will push ethanol prices higher
While the auto industry reactions were pretty much universally positive when the new energy bill passed earlier this month, Citigroup is ready to throw a bit of water on the parade. The banking giant is predicting that the new legislation will make ethanol even more expensive in 2008. According to an article on Purchasing, Citigroup analysts wrote in a report that "We firmly believe the new energy bill will serve as a significant catalyst to the ethanol industry, as the higher mandated ethanol levels stipulated by the new renewable fuel standard should serve to bring ethanol supply and demand back into balance, thereby strengthening ethanol's pricing fundamentals." Does this mean that the glut will be over soon? Will promises of higher prices drive even more ethanol producers into the business? What about corn prices? Or beer?
[Source: Tom Stundza / Purchasing.com]
Reader Comments (Page 1 of 1)
Nathan 11:20AM (12/31/2007)
Ethanol impacts the price of beer so minimally that it's hardly worth mentioning. See my comment in that post:
Let's run some numbers. A gallon of beer contains about one pound of barley (http://www.ag.ndsu.nodak.edu/aginfo/barleypath/barley&beer.html). With a 48-pound bushel of barley selling for around $4, that means that a gallon of beer (about a 12-pack) has less than ten cents of barley in it. So if barley doubles (which no one is predicting) the cost of your $10 12-pack will go to $10.10. I don't know about you, but I'm still looking forward to New Year's Eve.
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Tim 7:29PM (12/31/2007)
Oh, I really trust Citigroup after they did such a wonderful of helping to create the current mortgage crisis... NOT!
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sensitive_man 11:47AM (1/01/2008)
However, Corn based ethanol has impacted the price of many other products such as beef, milk, eggs etc. basically anything that is fed corn to bring to market. Ethanol is not the solution to our energy needs no matter what the lobbyists for the industry say.
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1985 Gripen 1:47PM (12/31/2007)
Personally I will use E85 in my flex-fuel car as often as I can as I believe that despite all its flaws ethanol is still better for the global climate change problem than gasoline.
However, that being said the price of a gallon of E85 should cost at least 30% less than a gallon of regular unleaded to make the price an incentive to use E85 instead of gasoline. This is because a vehicle running on E85 will get approximately 30% worse fuel economy than a vehicle running on gasoline.
Unless the price of a gallon of E85 is at least 30% less than that of gasoline you'd be paying more per-mile to run E85.
However, most people being stupid (just witness how people complain about the price of a gallon of diesel being more expensive than a gallon of gasoline without figuring the price-per-mile) they'll probably buy the fuel with the lowest price on the big sign at the fueling station, not considering the price-per-mile anyway...
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Wildgoosechase 1:34AM (1/01/2008)
The energy bill may cause a swhort term spike in ethanol prices, but in the long run they will fall as additional and more effiecient producers enter the market. This coupled with the predicted climbing oil prices will ensure the popularity of E85.
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