As we've been reporting, demand for ethanol has been extremely high this year. The cause is not just due to consumer demand but government mandates to double the ethanol supply by 2015 and to replace MTBE, a petroleum additive. According to analyst Tom Kloza, the demand adds as much as 30 cents per gallon of gasoline.
However, the prices could possibly drop by year's end and remain low into next year. July and August are peak vacation months in the U.S. and have the highest fuel consumption. Replacement of MTBE in the fuel supply would be complete while new ethanol production plants (33 by year's end) would be ready to start production in 2007. Note that E85 prices are not affected by current prices due to negotiations between fuel sellers and their suppliers.

[Source: USA Today]

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