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Ethanol Boom May Boost US Natural Gas Prices
By Mr Ethanol | April 22, 2007
Stuff.co.nz:
The US ethanol boom could push lofty natural gas prices even higher as the explosion of new distilleries and a soaring corn crop raise industrial and agricultural demand.
Ethanol refineries tend to use natural gas-fuelled boilers, and natural gas is also used in the production of fertilizer for corn, which is the main feedstock for ethanol in North America. (Sugar cane is the main feedstock in South America.)
“It’s another way we’re becoming dependent on natural gas,” said senior analyst Christopher Jarvis at Caprock Risk Management. “A rise in gas demand is in the cards for this year, and next, and an additional uptake from ethanol could definitely have a material impact.”
Experts said that the ethanol boom – which has already contributed to inflation in the prices of bread, meat and diesel fuel – could add roughly 1 per cent to US natural gas demand within a year and a half, magnifying an already tight balance between production and rising consumption from homes, businesses and power plants.
Ethanol production increased by 25 per cent last year and is set to rise even more in the next few years as the administration of President George W Bush offers farmers millions of dollars in incentives to produce the fuel in an attempt to cut imports of foreign oil.
The United States already has about 116 ethanol distilleries, with 78 plants under construction and seven undergoing expansion. If all the new plants and expansions come on line, total capacity will be above 12 billion gallons per year, according to the Renewable Fuels Association.
Up to 95 per cent of US ethanol plants use natural gas boilers because they are seven times cheaper than ones that burn coal, Gil Yang, an analyst at Citigroup Global Markets, said in a research note.
In addition, farmers this year are planning to plant a bumper crop of corn, the main US ethanol feedstock, possibly the most since World War Two. Corn fields consume large amounts of fertilizer, the ammonia of which comes from natural gas.
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