Debunking The Ethanol Bust...

By Steve Hargreaves,
CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Recent reports of an ethanol bust may be greatly exaggerated.

Sure, the fuel has seen its price tumble in the last few months. Spot prices for a gallon of the stuff in Chicago went from about $2.30 five months ago to about $1.50 today, according to numbers from the Oil Price Information Service. In 2006, ethanol briefly sold for over $4 a gallon.

Plus the price of corn - the raw material for most ethanol produced in the U.S. - has nearly doubled since the start of 2006. This one-two punch has hit shares in ethanol companies - Verasun (Charts) has lost about half its value over the last year, as has Pacific Ethanol (Charts).
Sugar cane ethanol's not-so-sweet future

The drop in ethanol's price has been attributed to too much product on the market, the result of overeager investors pouring money into the sector and new plants springing up across the Midwest. But ethanol is unlikely to remain in oversupply for long, thanks to ongoing investments in bringing the product to market, a renewable energy bill that calls for expanding ethanol's use and a base price that's now about 50 cents less than gasoline.

CNN Money.Com/Sept. 4, 2007