Ethanol set to bite into crude sales

(A report by Tamsin Carlisl published March 10, in The National, a newspaper published in United Arab Emirates.)

Rising U.S. consumption of ethanol will help flatten demand for petroleum-based fuels in the coming months, OPEC predicts. In its latest monthly oil market report issued yesterday, just a week before OPEC ministers meet in Vienna, the organization’s secretariat pointed to an eight-fold increase in U.S. ethanol consumption since 2000. “With the continued rise in U.S. [petrol] stocks and surging ethanol volumes in the [petrol] pool, as well as ample idle refinery capacity, any seasonal upwards movement in the [petrol] market is likely to be limited,” the OPEC report said.

…OPEC also said the projected demand for its crude was “still much less” than the group’s production. The oversupply amounted to about 1.5 million barrels per day (bpd), it estimated. Adding only a portion of that surplus to commercial inventories within the Organization for Economic Co-operation and Development (OECD) would swell oil stockpiles, “adding to the already inflated levels of more than 90 million barrels above the five-year average”.

Our Take:
For our critics who wonder about the value of encouraging domestic ethanol production with tax incentives: try a summer without gasoline price spikes. That will be worth billions to U.S. consumers. Makes that vacation trip up north, or driving to New England or California sound pretty good after all.

By Jonathan Eisenthal


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