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Corn Pipe: Will Falling Ethanol Prices Mean Savings at the Pump?
Posted by Jeffrey Ball
The Journal’s Ana Campoy reports:
For all the bad rap ethanol’s been getting from politicians and environmentalists, it’s actually helped keep gas prices from going even higher in the past few months.
Refiners have been paying an arm and a leg for crude oil—the main raw material they use to make gasoline. By blending cheaper ethanol into the mix, they make oil-based gasoline go farther. In March, refiners blended 20% more ethanol than in the same month last year, and 7% more in February, according to the latest government data.
That’s not only giving refiners a break, but consumers too.
If ethanol were out of the picture, gas would be more expensive at the pump because refiners would pass on at least part of the higher costs to the consumers.
Gasoline would also be scarcer, putting more pressure on prices. With record-high oil prices on one side and tight-fisted drivers on the other, refiners are steering away from gasoline into more profitable fuels, such as diesel. But as refiners cut back gas production, ethanol is increasing supplies at the pump.
Ethanol’s role as hamburger helper can only be pushed so far, though. Antoine Halff, an analyst at brokerage firm Newedge, recently said in a note that “data show ethanol blending inching closer to saturation…”
In the East Coast, more than 92% of the gasoline produced in March contained ethanol, meaning there isn’t much more room to blend in more, observes Mr. Halff. Same goes for the Midwest, where more than 82% of gasoline production in the same month contained ethanol. About the only place that has room to significantly boost the amount of ethanol in its gasoline pool is the Gulf Coast, where only 14% of gasoline production contains ethanol. But much of what is produced there is then shipped to other parts in the country—and ethanol-laced gas doesn’t travel long distances well, says Mr. Halff.
The good news is that ethanol prices will only get cheaper as refiners struggle to digest the growing production of the corn-based fuel. We’ll see if they pass on the savings to their cash-strapped customers or use them to patch their tattered bottom lines instead.
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Local Conditions |
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| Sisseton, SD |
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| Chg Zip Code: |
| Temp: |
67oF |
Feels Like: |
67oF |
| Humid: |
61% |
Dew Pt: |
53oF |
| Barom: |
30.01 |
Wind Dir: |
SE |
| Cond: |
N/A |
Wind Spd: |
5 mph |
| Sunrise: |
5:44 |
Sunset: |
9:20 |
| As reported at SISSETON, SD at 9:00 AM |
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