Ethanol market takes hit from low oil prices

Des Moines Register
By DAN PILLER • dpiller@dmreg.com • November 21, 2008

Oil prices have hit levels not seen in more than three years, which is good news for drivers but not ethanol producers.

Prices at the pump fell to a national average of about $2 a gallon Thursday, with the average prices in 23 states - including Iowa at $1.92 - even less than that.

The decline in the price of crude oil has taken with it the price of ethanol, which has fallen from $2.90 per gallon last July to $1.64 per gallon Thursday on the Chicago Board of Trade.

Of concern to ethanol producers is the spread between ethanol and unleaded gasoline, whose price closed at $1.04 per gallon Thursday on the New York Mercantile Exchange. Oil companies have more incentive to add the 10 percent ethanol blends to gasoline if ethanol is cheaper.

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