Ethanol Has Banner Year in 2006

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Last January, President Bush's State of the Union address noted that the United States is "addicted to oil." The comments were one of the biggest boosts to the domestic ethanol industry. Estimates put domestic production of ethanol at 5 billion gallons for calendar year. Despite near record crops, 2006 brought hefty prices to producers in large part because of the booming ethanol industry.

Past history held no comparison with last fall's rising corn prices despite stock levels. This bull market may bring $4 corn prices yet this year. However, analyst Logan Caldwell, Houston BioFuels Consultants, warns U.S. ethanol production capacity is forecasted to exceed U.S. ethanol demand sometime in the spring of 2007.

Several reports looked to pin down the profitable scenarios in ethanol. Some key ones include the following:

The Renewable Fuels Association reported that domestic October ethanol production tied the all-time high set in September 2006 by producing 333,000 barrels per day (b/d), according to data released by the Energy Information Administration. The U.S. ethanol industry was averaging 310,000 b/d of production through October, an annualized volume of 4.75 billion gallons. Industry estimates show ethanol production reaching 4.9 billion gallons for the year, an increase of more than 25% from 2005.

For the year, demand has averaged 339,000 b/d or more than 4.3 billion gallons. Total demand for 2006 will greatly exceed 5 billion gallons, more than one billion gallons over the requirement of the Renewable Fuels Standard.

Here's a look at some of the highlights for the year.

  • January 1 - The Renewable Fuels Standard (RFS) takes effect. The program is implemented under the default guidelines as the full program is developed.
  • January 31 - During the State of the Union Address, President Bush declares, "America is addicted to oil."
  • May 5 - Gasoline refiners complete voluntary elimination of MTBE from the market.
  • May 25 - The nation's 100th ethanol biorefinery opens in Iowa.
  • May 27 - The Indianapolis 500 runs on a 10 percent ethanol blend, representing the first change in fuel in more than 30 years. In 2007, the entire Indy Racing League, including the Indy 500, will run on 100 percent ethanol.
  • August 8 - The Renewable Fuels Standard celebrates its one year anniversary with no fewer than 29 new ethanol biorefineries under construction since the bill was passed.
  • September 9 - The Environmental Protection Agency (EPA) releases its proposed rule to fully implement the Renewable Fuels Standard.
  • October 10-12 - For the first time, three cabinet members and the President of the United States speak from the same stage about the importance of renewable fuels in America's energy future.
  • November 14 - Big 3 automakers, General Motors, Ford and DaimlerChrysler meet with President Bush and pledge to make half of new vehicles manufactured FFVs by the end of the decade.
  • December 10 - Congress extends the tax credit offset on imported ethanol to January 1, 2009.
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