I was reading a story in the Wall Street Journal titled “Why Gasoline Prices May Rise,” and the following paragraph grabbed my attention:
Another reason for steady gasoline prices: the use of ethanol as an additive to gasoline is on the rise. While crude prices have soared, ethanol prices have dropped as much as 30% in recent months and are likely to drop more, Eitan Bernstein, an analyst with Friedman, Billings, Ramsey & Co., said in a report yesterday. Ethanol costs more than 60 cents a gallon less than gasoline, and gasoline suppliers can offset some of the rise in crude-oil prices by blending their gasoline with small amounts of the cheaper fuel.
Would be curious to find out how much of that affordability of ethanol is due to government incentives (mind you, it’s not like the oil industry doesn’t receive its own subsidies). In any event, claims that ethanol will contribute to higher gasoline prices are being proven wrong. The next step is to show that cellulosic ethanol can follow the same cost curve.