Blending: Ethanol’s New Growth Sector

Abstract

<p>The evolution of the ethanol industry continues at a brisk pace. U.S. ethanol production capacity has grown tremendously over the past several years. But recent lower ethanol prices, combined with still strong corn prices, have put a damper on continued expansion. Figure 1 shows the price movements for ethanol in 2007. At the beginning of the year, the ethanol price started out at around $2.50 per gallon. But prices have backed off since then, with recent ethanol prices at between $1.50 and $1.70 per gallon. This price drop has tightened margins at ethanol plants across the nation. But at the same time, the price drop has provided new growth opportunities in ethanol, on the blending side.</p>