Citigroup sees US ethanol prices "improving" in 2008

What's better, high or low ethanol prices? It all depends on whom you're asking. For mega-bank Citigroup, higher prices mean things are "improving."
Certainly this isn't true if you're the end consumer, but for the faceless economists, higher prices mean stronger stocks. While Citigroup, according to Reuters, sees weak ethanol prices continuing for the next six months or so, things will "improve" in the first quarter of 2008. The improvement will come about once increased ethanol production capacity hits its peak and then starts to go down next year.

I suppose this means ethanol's current "39 cent a gallon discount to wholesale gasoline" will be tightened, and ethanol prices will go up at the pump. It seems to me that ethanol producers certainly have an interest in pushing the price of their product as high as they can, as long as they keep it cheaper than gasoline (if for no other reason than ethanol's got less oomph in the tank, and if you're going to be getting fewer mphs, you certainly don't want to pay more for the privilege). That seems like the businessman's way of thinking, but I'm not a businessman, so I'll defer to those of you who are, in the comments.

[Source: Reuters]

Share This Photo X