Green Options

The U.S. Department of Energy today announced that it plans to take advantage of the recent decline in crude oil prices, and has issued a solicitation to purchase approximately 12 million barrels of crude oil for the nation’s Strategic Petroleum Reserve (SPR) to replenish supplies sold following hurricanes Katrina and Rita in 2005.

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.

Hurricane Ike battered Texas, causing untold damage for millions of home-owners in Houston and Galveston.  But some people in Chicago had a pretty bad weekend, too.

After raining all day on September 13 and 14, the Windy City became the flooded city.  The far-reaching tendrils of the hurricane dumped 9 inches of rain in less than 24 hours.  Roads and basements became water logged.  The Chicago River overflowed in some parts, leading to the evacuation of about 300 homes.  Flooding in Northwest Indiana led to the closure of Interstate 90.

Texas biodiesel producer GreenHunter Energy says that hurricane damage to its gulf coast refinery — currently the largest in the nation — will take it out of production for 6 to 8 weeks.

The GreenHunter facility is capable of producing 100 million gallons of biodiesel per year (Mgy) using a combination of animal fats and vegetable oils. Prior to Hurricane Ike, they had been ramping up production and last Friday announced that they had achieved a 65 Mgy output. It’s unclear how the hurricane damage will affect their time frame for reaching full capacity.

EPA has already approved two waivers from volatility and reformulated gas requirements in Texas.

As Ike closes in, drilling platforms in the gulf have been evacuated, refineries closed and now the Port of Houston is closed. MSNBC reports:

Exxon Mobil, Valero Energy, ConocoPhillips and Marathon Oil are among the companies halting operations as the storm closed in. Refineries on the upper Texas coast account for one-fifth of U.S. refining capacity.

In the week prior to landfall the energy and economic impact of Ike began [...]