U.S. Ethanol Prices Rise as Peak Gasoline-Demand Season Nears
2006-04-21 12:35 (New York)
By Bruce Blythe
April 21 (Bloomberg) -- U.S. ethanol prices rose this week,
extending a rally since the end of March, as refiners and fuel
blenders prepared for increased gasoline demand in the summer.
Demand is up because the grain-based fuel is being phased in
as a component in reformulated gasoline sold in large U.S.
cities, while a rival additive, known as MTBE, or methyl tertiary
butyl ether, or MTBE, is being phased out by May.
There's concern over whether the East Coast will have
sufficient ethanol supplies by summer, said Sal Gilbertie, an
energy trader for Fimat USA in New York. At least six service
stations in the U.S. mid-Atlantic region were out of fuel
yesterday because of the shift to ethanol-blended gasoline,
according to the AAA, the nation's largest travel group.
``We're in buildup toward gasoline peak usage season, so
even people that seem to have a surplus of ethanol are still
withholding it in case they need it,'' Gilbertie said, referring
to refiners and blenders. ``The supply isn't exactly where people
need it.''
U.S. ethanol prices averaged $2.5348 a gallon today, up 3.8
percent from $2.4421 at the end of last week, according to
Bloomberg data. The average was up 6.4 percent from $2.3826 at
the end of March and more than double $1.2157 a year ago.
Corn-based ethanol is mostly produced in the Midwest and
shipped to the East Coast by barge or rail car. It can't be
shipped on petroleum pipelines because it binds with water, which
ruins gasoline. Instead, refiners and wholesalers mix the ethanol
with gasoline at terminals where the blended fuel is loaded onto
trucks bound for retail outlets.
``There's a lack of readily available transport to get the
ethanol from where it's produced to where it's actually needed,''
Gilbertie said. ``There's clearly a domestic transportation
disconnect.''
Philadelphia, Wilmington
The filling stations that ran dry yesterday were located in
the Philadelphia and Wilmington, Delaware, regions, AAA spokesman
Geoff Sundstrom said. Service stations and fuel terminals can't
move to ethanol-based fuel until they empty and clean their
tanks, a process that can take as long as two days, he said.
Ethanol can make gasoline burn more efficiently and is being
used to replace MTBE, which has been known to leak from
underground fuel tanks and contaminate water supplies. Ethanol
consumption is also being pushed by President George W. Bush, who
in August signed an energy bill requiring oil companies to put
7.5 billion gallons of ethanol into gasoline annually by 2012, up
from about 4 billion gallons in 2005.
U.S. refiners used ethanol in about 40 percent of the
gasoline produced the first week in April, up from 33 percent in
the same period last year, according to a report from the
American Petroleum Institute released earlier this week.
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