U.S. `Appears' to Have Adequate Ethanol, Bodman Says (Update3)
2006-03-22 12:16 (New York)
(Adds analyst comments in seventh and eighth paragraphs).
By Tina Seeley
March 22 (Bloomberg) -- The U.S. right now ``appears'' to
have adequate supplies of ethanol, a grain-based gasoline
additive, to meet demand, Energy Secretary Samuel Bodman said.
There are ``a number of people concerned about'' ethanol's
ability to fill the demand for gasoline additives, Bodman told
reporters after a speech in Washington. Concern about ethanol
has grown because use of another additive, MTBE, is being phased
out. MTBE, or methyl tertiary butyl ether, has been linked to
groundwater contamination.
The Energy Information Administration, the statistical arm
of the Energy Department, warned in a report last month that
ethanol production might not rise fast enough to meet demand in
the eastern U.S. and Texas, where there may be some price
volatility.
President George W. Bush included a 65 percent increase in
government spending on research and development of ethanol and
other biofuels in his 2007 budget. The goal is for biofuels to
replace 75 percent of U.S. oil imports from the Middle East by
2025, Bush said in his State of the Union speech on Jan. 31.
Ethanol is blended with gasoline to increase available
gasoline supplies and reduce emissions.
The near-term increase in ethanol demand would result in
``some price gyrations in ethanol markets, I would think, as
MTBE phases out,'' Bodman said. ``New ethanol plants are
starting up at a pretty significant clip right now.''
`Child's play'
Potential problems from companies voluntarily switching
from MTBE to ethanol are ``child's play,'' compared with the
disruptions experienced after two hurricanes hit the Gulf of
Mexico last year, Deborah White, a commodities economist at
Societe Generale SA, said in an interview today.
The government is ``moderately likely'' to issue waivers to
companies that are unable to meet requirements for gasoline
additives, White said. The U.S. Environmental Protection Agency
will ``only issue a waiver at the very last minute if it's clear
that otherwise there would be a major price spike to, say, $3 a
gallon'' for gasoline, she said.
Bodman said he has not heard of any companies that will
request waivers.
There is also concern about the ability to transport
ethanol for use in gasoline sold at retail stations, since the
fuel cannot be combined with gasoline in pipelines.
``We're going to have to be more effective than we have
been in transporting ethanol, and so there may be some
dislocations,'' Bodman said. ``But based on what I can see so
far, there appears to be pretty good response to the
situation.''
--With reporting by Sara Walker and Nick Salter in London.
Editor: Banker.
