WASHINGTON, D.C. -- The Federal Trade Commission recently reported concentration in the U.S. ethanol market has decreased from last year's low levels due to the growing number of firms entering the ethanol market.



In its annual report, the FTC stated "that current U.S. ethanol production is not highly concentrated," the Renewable Fuels Association reports.



The FTC utilizes the Herfindal-Hirschman Indices (HHIs) to determine concentration. As outlined by the FTC and the Justice Department, HHIs with values below 1000 are deemed not concentrated.



According to the FTC report, the U.S. ethanol industry's score ranges between 326 and 995. These scores represent a decrease of 21-35 percent from last year's report. This report is a requirement of the FTC by the Energy Policy Act of 2005.



"The highly competitive nature of the U.S. ethanol market is evident by the growing number of new producers joining the industry," said Renewable Fuels Association President Bob Dinneen. "Ethanol production in the U.S. is offering Americans from all walks of life the opportunity to invest in our energy future. To meet the growing demand for ethanol, the continued expansion of the industry, with the entry of new producers in new areas of the country into the market, will be essential."



According to the FTC, 90 different firms were operating ethanol biorefineries by mid-October 2006. That is an increase of 15 firms from a year ago. The FTC goes on to estimate that 110 firms will be operating facilities by the end of 2007.



The report also notes that ethanol production is exceeding minimum mandated levels, and likely competes with other blending components (i.e. iso-octane, alkylate) at those production levels. Additionally, the increasing availability of E85 and flex-fuel vehicles in the marketplace is causing drivers of those vehicles to choose between gasoline and E85. These facts, according to the report, could mean the FTC's analysis overstates concentration and exaggerates the "likelihood of the potential for ethanol producers to engage profitably in anticompetitive behavior."



The report concluded, "...that U.S. ethanol production is unconcentrated, or, at most, only moderately concentrated under the Horizontal Merger Guidelines, revealing little incentive or ability for one or more firms to act anticompetitively."



The complete report is available online.



Currently, 109 ethanol biorefineries nationwide have the capacity to produce more than 5.2 billion gallons annually. There are 53 ethanol refineries and 7 expansions under construction with a combined annual capacity of more than 4.2 billion gallons.



SOURCE: Renewable Fuels Association news release.