An energy industry analyst believes the government is underestimating the ethanol demand outlook.

The Energy Information Administration’s annual energy outlook, issued Tuesday, projected that ethanol demand will more than double from today’s level to 11.2 billion gallons in 2012.

According to an Associated Press report, Chris Shaw of the global financial firm UBS says that may be too low because, if all announced plants are built, U.S. ethanol capacity could reach 12 billion gallons as soon as 2008. He believes “this would translate to a similar level of demand for 2009, as we see supply opening up new sources of demand.”

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