Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

Ethanol Glut Depresses Prices

October 3, 2007

The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading, The International Herald Tribune reports.Only last year, farmers spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.According to The International Herald Tribune, while generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President George W. Bush and other policy makers to serve as a serious antidote to the nation's heavy reliance on foreign oil.Many industry experts say the worst problems are temporary and have been intensified by transportation bottlenecks in getting ethanol from the heartland to the coasts, where it is needed most. And even if some farmers who invested in the plants lose money, most of them are reaping a separate bounty from higher prices for corn and other commodities, which are expected to remain elevated for some time.The ethanol boom was set off, The International Herald Tribune says, when Congress enacted an energy law in 2005 that included a national mandate for the use of renewable fuel in gasoline, obliging the market to consume 7.5 billion gallons a year by 2012, compared with 3.5 billion gallons in 2004.
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