The Energy Information Administration said in a weekly report on the petroleum markets that short-term profit margins for dry mill ethanol producers have been consistently low by historic standards since the last quarter of 2007, failing to catch an updraft through the first half of 2008 when crude and gasoline prices spiked to record highs, and have since fallen dramatically. Earlier in the year, ethanol plant margins were held down by climbing feedstock costs and rapid growth in new production in response to spiking ethanol prices in 2006.
“The bottom line: In spite of being the recipient of government subsidies and mandates, ethanol has not avoided the boom and bust cycles seen in other commodities, though it has followed a different tempo,” said the EIA. “In fact, ethanol was already in a bust period when the current financial crisis, which has now added to the industry’s problems, hit.”
The EIA recounts the various roles ethanol as a blendstock has had in the gasoline pool, noting that for decades it served as a either a volume enhancer, an oxygenate, an octane booster, and, starting in late 2003, as an alternative to methyl tertiary butyl ether for blending into reformulated gasoline.
