Domestic Fuel

Over 120 articles on a Google news search for ethanol are coming up with headlines blaming ethanol for gas shortages in Texas and on the East Coast. But if you read the whole article, there’s a little more to it than that.

Take this AP report, for example. The lead sentence says stations are facing shortages as “the industry grapples with a transition to more ethanol-blended fuel.” Read on and you find analysts “emphasized that the problem has more to do with delivery schedules than a dearth of fuel,” and that the problem will be temporary.

US Energy Secretary Samuel Bodman is quoted placing the blame for higher gas prices right where it belongs – on crude oil.

”There’s no simple way to bring down high crude prices,” he said, pointing out that the climb has been due to supply concerns stemming from global production disruptions and geopolitical tensions, as well as strong growth in global demand for oil. Crude futures for June delivery on the New York Mercantile Exchange closed at just above $75 a barrel, a record high. Gasoline futures for May delivery closed at $2.24 a gallon. ”I wish there were a magic wand I could wave that would cause prices to decline,” Bodman said. ”There isn’t one. We’re continuing to deal with the same issues we’ve been dealing with — suppliers having a hard time keeping up with demand.”

The supply disruptions are mainly due to terminal owners having to drain their tanks of MTBE-laced gasoline before they fill them up with ethanol blends, a delay that ideally should take maybe a day or so for any one terminal, making this a very short term shortage.