November 6, 2008

Demand for ethanol outpacing production

Thanks to the Renewable Fuels Association for pointing out this week that ethanol demand continues to outpace production.

The latest Energy Information Administration figures show that 647,000 barrels of ethanol were produced per day in August, up from 614,000 in July. Meanwhile, RFA calculated that demand in August was 661,000 barrels per day, which equates to about 10 billion gallons per year.

RFA said there was also a big increase in ethanol imports for August, which it attributed to importers looking to capitalize on the final days of a loophole in trade regulations. This "duty drawback" provision allowed for the import of ethanol and the export of another fuel, like jet fuel, to recapture the $0.54 tariff placed on foreign ethanol imports.

In either case, the growth in ethanol production in August came as corn prices continued their rapid (and unprecedented) decline, with prices now being about half of what they were in late June.

RFA also noted that: Such a dynamic further erodes the argument of livestock, poultry and food processing companies that have argued ethanol is responsible for the dramatic increase in food prices. It also calls into question the reports from groups such as the World Bank, the United Nations and others that US ethanol production is responsible for high corn prices.

On a separate note, it is important to point out that the bankruptcy filing of VeraSun does not equate to a failed ethanol policy or that all ethanol producers are in trouble. Like anyone who got sideways in the market and over extended, VeraSun is paying the price. However, several other ethanol producers are in quite good financial position - and, as RFA pointed out - continue to see strong demand for ethanol.

Yet even today there are headlines saying the new Administration plans to follow the current Administration's "failed policy" on ethanol. One reason cited is VeraSun ... but that all ethanol producers are "collapsing". Of course these kinds of articles are full of other poor information (like blaming food riots in Egypt on the United State's biofuels policy). And a whole lot more.

So yes, the battle wages on in spreading the truth. Help set the record straight! Encourage reporters of the story above (their email addresses are at the bottom of the article) to research the truth. Use facts, be courteous and ask good questions.

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