As gasoline prices edge toward $4 a gallon, ethanol production is declining.
According to the latest report from the Energy Information Administration, ethanol production averaged 856,000 barrels per day last week, down almost five percent from the previous week to the lowest level in six months. Production has been steadily declining for the past four weeks due to a number of factors, including higher corn prices. Ethanol plants used about nine million less bushels of corn last week than the latest USDA forecast average.
The higher gasoline prices also have an impact on ethanol production, since nearly all gasoline sold in the country is blended with ethanol. As gas prices go up and people cut back on consumption, demand goes down, which in turn lowers demand for ethanol.