Declining Gas Prices Bad News for Ethanol Producers

Not everyone is fully enjoying the decline in gas prices, according to U-S Department of Agriculture Chief Economist Joe Glauber. In Iowa, motorists are paying just under $2 a gallon. That’s down from $3.05 a year ago.

“That’s good news for everyone except ethanol producers,” Glauber says.

Iowa is the country’s largest producer of both corn and ethanol, a fuel made from corn. Corn prices have been plummeting and the decrease in gas prices has been adding to the downward pressure. As ethanol-blended fuel prices drop to keep competitive with gasoline, ethanol plants are reducing how much they’ll pay for corn.

“Ethanol is competing with gasoline and a lot of our ethanol goes out in world markets,” Glauber said. In some world markets, ethanol can’t keep pace. “Last month, we had a little bit there where ethanol prices were trading higher than gasoline,” Glauber said. “We haven’t seen that in several years.”

Iowa has 43 ethanol refineries capable of producing more than 3.8 billion gallons annually. Two years ago, the prices at the gas pump hit $5 a gallon in some areas of the country. This past week, there were 13 states with gas under $2 a gallon.

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