Posts tagged “ethanol prices”
What Ethanol Problem?
If you live in the Midwest, you are in the midst of a thriving ethanol industry. But the Midwest does not control its own destiny when it comes to ethanol. That is still controlled by the federal government.
When I first started writing about energy nearly a decade ago, many of my early articles were addressed at the ethanol policies we were pursuing in the US. Even though I supported renewable energy, I felt like we were going about things in the wrong way. While I acknowledged that you could subsidize lots of ethanol production into existence, there needed to be a clear path for sustainability in the event that strong government intervention waned.
Today, nine years after I began writing about energy, we have an ethanol industry that has undergone rapid growth, but it is an industry that still relies heavily on the hand of government in the form of the Renewable Fuel Standard (RFS). One need look no further than the uproar over the Environmental Protection Agency’s (EPA) decision to lower the RFS for 2014. CONTINUE»
The previous essay spoke of the selfishness of many of today’s political leaders in spending tax dollars for votes, while compromising the economic opportunities for the next generation. In this essay, I want to focus on the selfishness of a particular group: Ethanol special interests, who have succeeded in gouging taxpayers for another $6 billion in wasteful spending in 2011. Let me make it clear — again — that I am not against ethanol as fuel. In fact, I have spoken out many times in favor of ethanol in specific circumstances. I reiterated this position recently on a Podcast interview on This Week in Energy. For example, I think many areas of the Midwest could produce ethanol sustainably, use it… Continue»
I thought it was a bit humorous recently — when corn ethanol prices dipped and were cheaper than both sugarcane ethanol and gasoline (even when adjusted for lower energy content) — that some corn ethanol proponents pointed to this as a watershed event. Their underlying message, which was repeated almost daily in the comments on my blog, was that corn ethanol had now reached the point of permanent price competitiveness with gasoline. But I have repeatedly warned about price volatility in the energy business; that nothing is permanent. Today natural gas is $4 per million BTUs, but a few years ago it was $15. Oil has traded between $10 and $150 over the past decade. And corn — upon which… Continue»
The Saudi Arabia of Ethanol Iowa is to corn ethanol what Saudi Arabia is to oil. At present Iowa has the capacity to produce 3.5 billion gallons of ethanol per year, which is 26% of the nation’s total (Source). This is of course due to the large amount of corn production in Iowa, enabled by ample rainfall and rich topsoil. But Iowa differs from Saudi Arabia with respect to energy production in one very important detail: Saudi Arabia satisfies their own energy needs with the oil they produce, and exports the excess. Iowa on the other hand exports the vast majority of the ethanol they produce while importing gasoline as motor fuel. Gasoline consumption in Iowa is presently around 1.6… Continue»
As we continue to develop biomass as a renewable source of energy, it is important to keep the cost of energy in mind, because this has a very strong influence on the choices governments and individuals will make. I sometimes hear people ask “Why are we still using dirty coal?” You will see why in this post. Last year I saw a presentation that projected very strong growth in wood pellet shipments from Canada and the U.S. into Europe. My first thought was “That doesn’t sound very efficient. Why don’t we just use those here in North America?” It didn’t take very long for me to find out the answer to that. It is because wood pellets are much more… Continue»
In a move that wasn’t really a surprise, today the EPA announced that they are not yet ready to approve ethanol blends above E10 for automobiles: EPA Notifies Industry Group on Status of Ethanol Waiver Request WASHINGTON – The U.S. Environmental Protection Agency (EPA) today announced that it expects to make a final determination in mid-2010 regarding whether to increase the allowable ethanol content in fuel. In a letter sent today to Growth Energy – a bio fuels industry association that had asked EPA to grant a waiver that would allow for the use of up to 15 percent of ethanol in gasoline – the agency said that while not all tests have been completed, the results of two tests… Continue»
I got a kick out of this story from the newest issue of Subsidy Watch: New research from Missouri refutes allegations that ethanol mandates save money A report from a Missouri-based research organization debunks the claim that Missourians are saving money through a state law requiring that retail gasoline contain a minimum of 10% ethanol. The report is in reaction to an assertion by the Missouri Corn Merchandising Association (MCMA), alleging that Missourians will save more than US$ 285 million through the E-10 mandate in 2008, and nearly US$ 2 billion over the following decade. The MCMA arrived at these numbers by taking the price difference between pure-grade gasoline and E-10 blended fuel, and multiplying it by Missouri’s projected annual… Continue»
Wow! I just checked a few stocks that I tend to watch, and Pacific Ethanol (PEIX) has now fallen to $1.85 a share. It is now down more than 95% off its high, and down more than 90% from the first time I warned that the company was overvalued. Once boasting a market cap of almost $2 billion, that has now fallen to $82 million. Now, where are all of those posters who kept telling me what a deal this was after it fell to $10? Like our friend James, who cited PEIX investor Bill Gates’ “ability to see into the future” as a reason to invest in PEIX, and told me I was “very, very stupid” if I thought… Continue»
Executive Summary: The current cost to produce a gallon of ethanol is approximately $3/gal. The current price of ethanol is $2.86/gal, which explains why ethanol producers are shutting down. If corn and natural gas prices remain high, I think ethanol has to rise to something like $3.40-$3.60/gal to make it worthwhile to ethanol producers. So, if I was a commmodities investor, I would probably go long ethanol right now. The only risk factors I can see – given that there is a mandated (and rising) demand for ethanol – is if corn or natural gas prices collapse. ————————— This is an update to a post I originally made back in February 2008: Corn Ethanol Economics. While this is approximate, I… Continue»
Someone e-mailed a few days ago and asked some questions about the present economics of corn ethanol. I did a few calculations, which I think are interesting enough to share. (Note that because this is a snapshot, the numbers will change over time. But you should be able to use the methodology here to roughly calculate the economics at any point in time.) I found multiple references for all of the numbers I am going to use, but I will only reference a single source. According to Ethanol Reshapes the Corn Market, one 56-pound bushel of corn will yield up to 2.7 gallons of ethanol and 17.4 pounds of distiller’s dried grains with solubles (DDGS). The current spot price of… Continue»