August 14, 2008

Proof That Ethanol Is Causing Economic Pain

That's right. An article in the news today provides proof that ethanol is causing economic pain.... to Asian oil refiners.

According to the article oil refiners in Asia are facing the prospect of a glut of gasoline on the market due to the fact that new refinery capacity is coming online at a time when U.S. demand is weakening. All this adds up to tough times ahead for refiners.

Refineries in Asia face falling gasoline prices and growing losses in producing the fuel, as the prospect of a sustained global supply glut looms over the industry in the next few years.

After more than five years of robust profits, the value of gasoline against benchmark Brent crude has slid into discounts last month, and more losses are expected due to additional output capacity in Asia and the Middle East as U.S. demand falls.

And part of the reason for falling U.S. demand is the expansion of ethanol production.

The lower consumption will be worsened by increased ethanol blending, set to bring U.S. gasoline deficit to 772,000 bpd in 2010, down almost a third versus 2007, Purvin & Gertz data show.

"U.S. gasoline demand growth will significantly affect the decision making among Asian refiners as that's the natural home for exports. They will have to very closely watch what is happening to the ethanol situation," Mukherji said.

Source : Daily News and Analysis

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