energy.agwired.com

In advance of EPA’s decision to be announced today on the requested partial waiver of the Renewable Fuels Standard, the Consumer Federation of America (CFA) is warning that cutting ethanol production will increase gasoline prices “substantially.”

The comments were filed in response to a study prepared for the state of Texas by Phillip K. Verleger and Darrel B. Chodorow who erroneously claim increasing demand for gasoline and crude oil would lower prices.

“The suggestion that increasing demand will lower oil and gasoline prices is not only contrary to Economics 101 and what independent analyses by Wall Street firms, government agencies, and academic institutions have concluded,” said Dr. Mark Cooper, CFA’s Director of Research, “but the study’s authors do not provide one shred of evidence to support their strange argument.”

Cooper says independent studies indicate that a reduction in ethanol production would increase the price of gasoline by almost 50 cents a gallon.

“We looked at the movement of refinery output, imports, exports and inventories, as well as recent price changes and could find no evidence that the market is or would behave in the bizarre, counterintuitive way that the Texas theory predicts,” Cooper concluded. “It is critical that the EPA base its decision on the waiver request on a proper understanding of how current energy markets work in the real world.”

Ethanol makers, who have been having a tough time making ends meet as their primary feedstock skyrocketed in price, are finally seeing some relief in lower prices… and better bottom lines.

This Aberdeen (SD) American News article posted on the Chicago Tribune web site has details:

The industry, which buys corn to make ethanol, has been finding it tough to make even a tiny profit, said ethanol consultant Mark Luitjens of Aberdeen, who has been part of the industry since 1992.

Now it’s taming down. The futures price is $2.20 a bushel less than it was three weeks ago, [Nathan Schock of Poet, a Sioux Falls-based ethanol enterprise] said.

The story also says that much of the rise in corn prices has been fueled by speculators… and not any real supply-and-demand factors. Those in the ethanol industry are hopeful that speculation is over and real market forces, such as the expected large corn crop this year, will help keep corn prices in a range where farmers and refiners can make some money.

Missouri’s ethanol industry got a boost today as pro-ethanol Republican gubernatorial candidate Kenny Hulshof defeated Sarah Steelman, who had vowed to cancel the state’s new ethanol mandate. Hulshof will now face Democratic candidate Jay Nixon, who also purports to support ethanol.

As you might remember from my earlier posts (especially on July 23), ethanol had become a key issue in the Republican side of the governor’s race when Steelman sided with Big Oil in opposition to Missouri’s 10 percent ethanol in nearly every gallon of gas sold in the state. The airwaves were filled with commercials with Hulshof and Steelman criticizing each other for their stances on the green fuel.

Despite her unenlightened attacks against ethanol (including the false charge that it is the main reason for food price increases, which we have shown time and time again that skyrocketing oil costs are the real culprits), Missourians were smart enough to see through Steelman’s petroleum-fueled smokescreen and voted for Hulshof, a corn farmer who has a first-hand interest in ethanol.

The vote was close, with Hulshof winning by just a few percentage points, and it shows just how much in the balance any ethanol mandate would be. And that shows how much we’ve got to keep up the fight to make sure everyone knows the truth about ethanol: it saves money, it conserves non-renewable oil, and it just makes sense for our energy independence.