Pump Prices May Fuel Ethanol Decision in June

This article was written by Oilprice.com -- the leading provider of energy news in the world. 

Ethanol prices have more than doubled over the last few months due to harsh weather conditions and transportation bottlenecks spurred by railway congestion, adding to ethanol producer woes that are already mounting over the uncertainty of government blending mandates.

With oil from the Bakken shale and Canada fighting railway congestion as well, and approval for the Keystone XL pipeline an ongoing question mark, prices are soaring and ethanol is getting the short end of the stick because the profit margins are smaller.  

The end result is a glut of supply at ethanol refineries, some of which have had to temporarily shut down.

In terminals at New York, Chicago and the on the Gulf Coast, spot prices for ethanol have risen to over $3.50 per gallon from under $2.50 per gallon just in the last month.

What it means is that ethanol—which has traditionally been cheaper than gasoline—is now more expensive. And in the US, prices at the pump carry a heavy political weight.

As the Environmental Protection Agency (EPA) considers a potential revision of the 2014 ethanol mandate, this price jump could be the market indicator that sounds the death knell for ethanol producers who are hoping there won't be any downward revisions in the renewable fuels plan.  

In June, the EPA will have to set a floor for the amount of ethanol oil refiners will be required to blend into the mix for this year. In November last year, the EPA proposed reducing the 2014 corn ethanol requirement by 1.4 billion gallons to 15.2 billion gallons--a proposal that has had ethanol suppliers up in arms.

And the oil industry is fighting back with its own resources. This week, securities filings showed that ethanol blending credits cost refiners at least $1.35 billion last year—or three times the cost of 2012, according to a 31 March Reuters report based on disclosures from only nine refiners. The costs are related to the necessity of purchasing Renewable Identification Numbers (RINs), which are paper credits refiners have to use in order to meet quotes for ethanol blending.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

 


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2905075, ~/Articles/ArticleHandler.aspx, 9/21/2014 10:35:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement