Growing US ethanol market may not be able to absorb supply
Monday, 11 June 2007
NEW YORK, June 10, (AFP): Government-encouraged efforts to ramp up US ethanol production, part of a bid to diversify American energy supplies, are succeeding, but some analysts fear a glut may be developing for the biofuel.
The boom in ethanol production, fueled by a government tax breaks and a desire to develop home-grown fuel supplies, has caused some industry analysts to wonder if the market is a bubble in the making.
Some energy analysts like Antoine Halff at Fimat are asking if it could be the "end of the honeymoon" for ethanol.
Investment in ethanol-producing plants has increased dramatically in a market still in its infancy in the past year, helped by attractive margins and cheaper costs compared to oil refineries.
Changes in environmental safeguards governing the composition of gasoline has also required refineries to start boosting output of ethanol to replace MTBE (methyl tertiary butyl ether).
Ethanol output has also been encouraged by sharp spikes in gasoline prices, which have breached 3.00 dollars per gallon (80 cents per liter) in most of the United States.
According to the Renewable Fuel Association, there are 120 ethanol "biorefineries" operating across the United States with a capacity of some 23.4 billion liters (6.2 billion gallons) per year.
Seventy-seven new biorefineries are currently under construction, with eight plants being expanded, which is expected to double overall capacity by 2009.
But the infrastructure, for drivers to fill up their cars at an ethanol-supplying fuel pump for example, is not keeping pace with the supply side, analysts say.
"Under current logistical conditions, the US ethanol market may be nearing saturation," Halff said. Other analysts agreed.
The boom in ethanol production, fueled by a government tax breaks and a desire to develop home-grown fuel supplies, has caused some industry analysts to wonder if the market is a bubble in the making.
Some energy analysts like Antoine Halff at Fimat are asking if it could be the "end of the honeymoon" for ethanol.
Investment in ethanol-producing plants has increased dramatically in a market still in its infancy in the past year, helped by attractive margins and cheaper costs compared to oil refineries.
Changes in environmental safeguards governing the composition of gasoline has also required refineries to start boosting output of ethanol to replace MTBE (methyl tertiary butyl ether).
Ethanol output has also been encouraged by sharp spikes in gasoline prices, which have breached 3.00 dollars per gallon (80 cents per liter) in most of the United States.
According to the Renewable Fuel Association, there are 120 ethanol "biorefineries" operating across the United States with a capacity of some 23.4 billion liters (6.2 billion gallons) per year.
Seventy-seven new biorefineries are currently under construction, with eight plants being expanded, which is expected to double overall capacity by 2009.
But the infrastructure, for drivers to fill up their cars at an ethanol-supplying fuel pump for example, is not keeping pace with the supply side, analysts say.
"Under current logistical conditions, the US ethanol market may be nearing saturation," Halff said. Other analysts agreed.