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Investing in Ethanol: What Lower Prices Mean for the Industry
In the beginning of January, ethanol was trading at about $1.83. Gasoline was trading for about $1.72.
Now those levels have more than reversed. Currently, wholesale gasoline trades for $1.98 while ethanol trades for $1.56. Why the big change? Two things happened…
First, the ethanol market was scorching hot when refiners made the switch from MTBE. Ethanol prices shot up to more than $4.50 a gallon. That brought some new ethanol producers to the industry, which brought new supply, forcing prices all the way down to current levels.
Investing in the Ethanol Market
The market is well supplied now.
Conversely, refineries experienced some major problems this spring, which forced gasoline prices substantially higher. While this encouraged higher refinery utilization (hopping from 87% to more than 90%), our gasoline stocks were hit hard, meaning our supply was limited for the driving season. That kept prices fairly high through the summer.
This flipping of roles could portend a slight boom for ethanol. The lower price of ethanol would lower prices at the pump for consumers. With more capacity set to come on line as plants across the Midwest become operational, even more supply will be available.
And, of course, producers will have to sell more to maintain profits with lower-priced ethanol.
In today’s TFN E-News Alert, I tell you which producers could benefit most from a mini-boom in ethanol.
S.R. Nunnally
Editor, Commodities & Resources Report
Taipan Financial News
Europe’s new energy roadmap is turning five tiny energy companies into “The Green Fab Five” of 2007. Early investors in the “The Green Fab Five” are well positioned to see gains of 330% over the next eight months!
The European Commission declared war against the OPEC nations in early January when it made a decision to shift 20% of its energy purchases away from oil-based products to renewable energy sources. This unprecedented move has OPEC leaders crying, “foul,” while at the same time The Green Fab Five is seeing huge green profits.
Smart investors that get in now, before the mainstream media starts running with this story, could see at least a 330% gain within eight months.
Get more details on how to join a savvy group of investors that have already decided to profit from this opportunity.
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