Ethanol Makers Losing Money Due to Hurricane Ike Damage and Rising Corn Prices
U.S. ethanol producers are being hit by a one-two punch: Hurricane Ike-related damage is softening demand for the alternative fuel while rising corn prices are increasing operating costs.
Last week, Hurricane Ike left many US oil refineries hobbled in its wake — including the nation’s largest biodiesel refinery. As a result, oil production is down.
Demand for ethanol in the US is closely tied to oil production because of the federal ethanol-gasoline blending mandate. So as oil production has fallen, so has ethanol demand.
At the same time as Hurricane Ike was downing oil refineries, corn futures — essentially the betting on whether or not the price of corn will rise or fall in the coming months — have risen dramatically due to the volatile financial markets and a general upward trend.
