Ethanol May Help Lower Gas Prices

Cindy Zimmerman

ReutersAccording to a Reuters news service article today, “explosive [ethanol] production is stifling an established driver of oil markets — U.S. gasoline demand — and could lead to lower prices at the pump.”

The article quotes analyst Eric Wittenauer of AG Edwards in St. Louis saying, “‘Ethanol blending could help ease U.S. refining bottlenecks and that could be ultimately reflected in lower prices at the pump.’”

The article continues on to say that as the ethanol delivery system grows, it should provide constant pressure on gasoline demand.

“Gasoline demand … on an underlying basis, is looking pretty weak in terms of growth,” said Adam Robinson, an energy analyst at Lehman Brothers. “And on the other hand, you’ve got ethanol which is substituting for gasoline in the existing pool.”

Equally important as reducing prices at the pump is ethanol’s role in reducing oil and gasoline imports. According to the outlook of Valero, the nation’s largest oil refiner, the “company foresees ethanol growth ‘offsetting gasoline imports to the U.S.’”

Read the whole article here.

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