Thursday, March 02, 2006

More ethanol supply issues

Yesterday I touched on the fact that we will probably be importing ethanol from Brazil this year. That isn't going to be the only supply problem:
The United States could have a hard time finding enough rail cars, trucks and truck drivers to move ethanol this year as demand for the fuel additive grows, the U.S. Energy Information Administration said Tuesday.
"We'll need to find a whole lot more rail cars that may not be readily available," EIA analyst Joanne Shore said in an analyst conference call. "There's also concern about trucks, and the truck drivers needed for moving this are in short supply."
The EIA has said the transition to ethanol could trigger higher prices this summer as driving demand picks up and the oil industry shifts away from MTBE.

"We would not be at all surprised to see temporary supply-demand imbalances resulting in price surges," Shore said.

This bottleneck in the distribution of ethanol is a legitimate concern. Railways are already operating at high capacity, and the New York Times just reported Monday that there is a significant shortage of drivers in the trucking industry. If Wisconsin decides to mandate ethanol, we are going to see a big bump in the price of gasoline this summer. Those elected officials who decide to support the mandate are not going to have anywhere to hide when everybody in this state who uses gasoline is fuming at the price increases caused by the 10% ethanol.

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