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Ethanol & Fertilizer Could Drive Natural Gas Price Higher
By Mr Ethanol | April 30, 2007
Huliq:
The ethanol boom could dramatically impact natural gas prices. Some analysts are predicted a natural gas demand increase up to one percent from the ethanol boom. But their estimates do not include increased fertilizer demand to increase corn yields.
“Farming looks mighty easy when your plow is a pencil and you’re a thousand miles from the cornfield.” – former U.S. President Dwight Eisenhower.
What does growing corn and other crops have anything to do with natural gas? It takes about 33,000 cubic feet of natural gas to produce one ton of nitrogen fertilizer. About 96 percent of the corn planted in the United States depends on fertilizers, such as Anhydrous Ammonia (NH3), 28pct-Liquid Nitrogen, Urea and Ammonium Sulfate. Fertilizers consume more than three percent of total U.S. natural gas use. The ethanol boom could dramatically impact natural gas prices.
Some 90 percent of the cost of manufacturing nitrogen fertilizer depends upon the price of natural gas. The more fertilizer produced, the more natural gas is utilized and the higher both eventually cost. And according to widely followed natural gas commentator Phil Flynn of Chicago-based Alaron Trading, “Ethanol plants are going to require natural gas consumption to produce electricity.” Flynn hadn’t yet conducted a study into how much natural gas consumption would be required for these plants, but said in a telephone interview that he could be pursuing this.
We asked Flynn if the ethanol mania would have any impact on natural gas prices. “Absolutely,” he responded, citing that increased corn planting would require natural gas for the nitrogen-based fertilizers and to power the 116 existing ethanol plants. Another 78 plants are now being constructed. Flynn pointed out natural gas prices would benefit from the ‘front and back end’ of the ethanol boom.
Nearly 95 percent of U.S. ethanol distilleries use natural gas boilers. Citigroup analyst Gil Yang estimated 28 billion cubic feet of natural gas would be consumed for every one billion gallons of ethanol produced. Cumulative ethanol production could surpass 12 billion gallons. Some analysts are predicted a natural gas demand increase up to one percent from the ethanol boom. But their estimates do not include increased fertilizer demand to increase corn yields. Full article.
Topics: Negatives, News, Prices |
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