Ethanol glut, price drop, transport issues make some wonder if the boom is over

Lots of people have been writing about the possibility that the ethanol boom will go bust, because of overproduction, and that prospect is now in the minds of many more people, since it is the subject of a New York Times story that was published in many newspapers today.

"Companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut," partly because it can't be transported in pipelines from the Midwest to the more populated coasts. "The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks," Clifford Krauss writes from Nevada, Iowa.

Iowa State University economic professor Neil Harl told Krauss the boom may have already ended, but "Some analysts outside the industry think the current market upheaval may be more than simply a hiccup," Krauss writes. One is Aaron Brady at Cambridge Energy Research Associates, but even he says, "If Congress doesn’t substantially raise the renewable fuel standard, then this is not just a short term problem but a long term issue, and there will be more of a shakeout in the industry." The Senate-passed energy bill "would require gasoline producers to blend 36 billion gallons of ethanol into gasoline by 2022, an increase from the current standard of 7.5 billion gallons by 2012," but it is unclear whether the House will follow suit, Krauss writes. (Read more)