ETHANOL BUSINESS

Declining Gas Prices Cut Into Ethanol

December 8th, 2008 | Author: Mr Ethanol

Columbia Daily Tribune:
Dwight McDonald pulled back the nozzle after filling his big tanker rig with 8,500 gallons of fuel destined for the Hy-Vee grocery store in Osage Beach. He smirked when asked, “Blended or unblended?”

“It’s pretty volatile right now,” he said, adding that he was filling the tanker with blended fuel.

But McDonald in the past two weeks has been switching between hauling “blended” E-10 – gasoline mixed with 10 percent ethanol – and regular unleaded gasoline. The back-and-forth occurs at the request of gas stations that closely monitor prices to see whether it is to their advantage to sell an ethanol blend or not. It has become a day-by-day, hour-by-hour game of price watching.

“All these customers have got a computer they’re hooked up to where they get the prices off the wire,” McDonald said. “And prices can change during the day, so I hear from them” pretty often.

At the end of business Friday, gasoline futures for January were selling for 90 cents a gallon on the New York Mercantile Exchange. Ethanol futures on the Chicago Board of Trade were selling for $1.40 a gallon.

This is a big change from most of 2008, when unleaded gas was priced significantly higher than ethanol, and the preference for blended gas was a no-brainer. To encourage the sale of ethanol mixed with gas, Missouri offers blenders a 51-cent-per gallon tax credit for selling the blended gas.

But gas prices have been plummeting in recent weeks. For the first time since a 10 percent ethanol standard took effect Jan. 1, the price of unleaded and 10 percent ethanol gas has been competitive.

Photo: Nick King.

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