"It's CHEAPER than oil." "Prices will DROP by at least (pick one:) 5, 10, 15, 20, 25 cents/gallon" "Our farmers will get a New Market (and get rich, ha ha ha bwahahabwahaha.)"
Horse manure.
Somebody looked it up, and guess what they found?
In May of 2005, when ethanol proponents were running around the Capitol claiming how a 10 percent ethanol mandate would lower gasoline prices, ethanol was selling on the Chicago Board of Trade at $1.20 per gallon. And indeed, it was much cheaper than the price of unleaded gasoline that was selling then at $2.24 per gallon.
On February 10, 2006 the average retail price of unleaded gasoline in Wisconsin was $2.375 per gallon, about 14 cents more than in May 2005. On the same day, ethanol was trading at $2.73 per gallon on the Chicago Board of Trade — an increase of $1.40 in just nine months. That’s more than a 128 percent jump in the wholesale price of ethanol.
(snip)
According to a February 2, 2006 article from the Oil Price Information Service (OPIS), “This latest round of price increases for domestic ethanol is tied predominantly to new demand for the Northeast as well as from huge metro RFG markets in Virginia and Texas. There clearly is more ethanol buying interest at the moment than there are sellers willing to commit barrels or term product for distribution in the pivotal second and third calendar quarters.” The OPIS article goes on to state, “As February began, spot ethanol in the New York Harbor vicinity was pegged at nearly $2.70/gallon. Six-month term deals for April through September delivery were discussed at between $2.70 and $2.80/gallon.”
The U.S. Department of Energy’s (DOE) Energy Information Administration (EIA) predicts “a very tight ethanol market” for at least the first part of 2006. A complete phase-out of MTBE in gasoline on the East Coast would require 2.5 times the quantity of ethanol used on the East Coast last year, or an additional 90,000 barrels a day.
So tell me, Sergeant Schultz, BagManJimbo, and Congressman Green: how DO you do that deal where blending $2.70/gal ethanol with $2.35/gal gasoline makes gas CHEAPER?
Like the natural gas argument, it's not about the cheapness. It's about forcing a monopoly that can't possibly cover the market down our throats to limit our standard of living.
ReplyDeleteAnytime you subsidize the purchase of something you drive up market price (due to artificial demand) Eliminate the federal subsidy. At these prices, no one needs a subsidy for ethanol. Corn is cheaper than ever and methods for producing ethanol have improved dramatically. Ethanol should be accessible to everyone but the subsidy should be eliminated also. The subsidy ethanol receives is a good reason oppose any mandate.
ReplyDeleteThe radio ads imply fuel costing 93 cents a gallon, like gasoline in Saudi Arabia.
ReplyDeleteRR: BTW, it's demand that's driving the price, not the subsidy, which OUGHT to bring the price down, not up.
ReplyDeleteBut you're right: this whole thing is a string of "hide-and-seek" games with price, supply, and ADM's bottom-line.
The blender gets the subsidy at 50 cents per gallon. So the blender can buy the stuff at $2.70 and it is still cheaper to him than gasoline by a nickel. Eliminate the subisdy and the price of Ethanol would drop below that of gasoline otherwise the blender would not buy ethanol and mix at a loss. The details are important. So you are correct it is all about demand but there would be no demand at $2.70 per gallon if not for the subsidy. KILL THE SUBSIDY
ReplyDeleteNobody will KILL THE SUBSIDY.
ReplyDeleteBush won't. Farm-state Pubbies won't. State can't.
Greed and corruption? Yup.
I wish they'd leave it up to the free market. It's been that way for years. I remember, if you wanted ethanol, most stations had it in the mid-grade fuel. There are a few stations where I live that refuse to buy it. I'm glad as my brand new car loses 5 mpg on hwy and 3.5 in town if I have to buy ethanol. Where are my savings?
ReplyDeleteI just looked at the futures markets to compare gas and Corn-A-Hole at the same level, and the news is even worse. Unleaded gas for March 2006 delivery closed at $1.4290 per gallon on NYMEX, while ethanol for March 2006 delivery closed at $2.730 per gallon on CBOT.
ReplyDeleteRounding to the nearest penny, that makes Corn-A-Hole $1.30/gallon more expensive than unleaded gas. Expressed as a percent, that's 90.9% more expensive for Corn-A-Hole.