Citigroup: New energy bill will push ethanol prices higher

While the auto industry reactions were pretty much universally positive when the new energy bill passed earlier this month, Citigroup is ready to throw a bit of water on the parade. The banking giant is predicting that the new legislation will make ethanol even more expensive in 2008. According to an article on Purchasing, Citigroup analysts wrote in a report that "We firmly believe the new energy bill will serve as a significant catalyst to the ethanol industry, as the higher mandated ethanol levels stipulated by the new renewable fuel standard should serve to bring ethanol supply and demand back into balance, thereby strengthening ethanol's pricing fundamentals." Does this mean that the glut will be over soon? Will promises of higher prices drive even more ethanol producers into the business? What about corn prices? Or beer?

[Source: Tom Stundza / Purchasing.com]