Ethanol price fallout bringing gas prices down, down, down

Citibank says that the current low ethanol prices are going to last another six months or so. Until prices do go up, according an article by Robert Pore in the Grand Island Independent, the price of gas at the pump should remain somewhat low, thanks to that 10 percent ethanol blend in most of the gasoline supply in the U.S. Pore spoke with Steven Sorum of the Nebraska Ethanol Board, who said that the current excess ethanol production is what's driving prices down.

While Nebraska certainly makes a lot of ethanol, I do not think that Pore got his facts right from Randy Klein, director of market development for the Nebraska Corn Board. Pore writes that Klein told him that now that Nebraska makes 1 billion gallons of ethanol a year, Nebraska is "completely self-sufficient energy-wise, especially with all vehicles in the state operate on 100 percent ethanol." Say what? That's just incorrect.

Still, I think we can take Pore's point that cheap ethanol making up 10 percent of the gasoline can make the overall price for that gas cheaper. Farmers probably aren't happy about this, but if Citibank is correct, next year they'll be happy and everyone who buys gasoline won't be, not as much anyway.

[Source: Grand Island Independent]

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