Are Ethanol Prices Driving Gas Prices Higher?

“There's a long and the short answer to that,” he told AgriTalk host Chip Flory on Monday. “The short answer is yes, the long answer is it is [pushing prices higher] but is disproportionately small compared to what gasoline is. Gasoline is doing the heavy lifting on the rise in fuel prices.” 

( Farm Journal )

Gas prices across the country have been trending higher for the past few months. Are ethanol prices to blame? Jordan Fife, ethanol trading manager of BioUrja Trading, says yes and no. 

“There's a long and the short answer to that,” he told AgriTalk host Chip Flory on Monday. “The short answer is yes, the long answer is it is [pushing prices higher] but is disproportionately small compared to what gasoline is. Gasoline is doing the heavy lifting on the rise in fuel prices.” 

Since the flooding that occurred on March 18, West coast ethanol basis versus Chicago ethanol basis was 41 cents. Last year it was 23.5 cents, he says. 

“So, we've got a 17 and a half cent increase on the West Coast load for the ethanol portion of the fuel,” Fife explained. “Trade for the East Coast for ethanol, since the flood is about plus four, so Chicago plus four cents. The same time last year, we were trading flat, so it is increasing a bit there. Then plants for ethanol in Nebraska, Iowa were at about minus 10 cents last year, at this time. Right now, it’s about minus one cent.”

While he admits those are some big numbers for ethanol, when you look at the gasoline side of the equation the numbers are even higher. 

“We were about $1.18 at the Gulf Coast for gasoline prices on December 24,” Fife said adding that today they were $1.87. “That's a [69-cent] increase. Compared the biggest increase I could find for ethanol, 17.5 cents, and the biggest one I could find for gasoline, 79 cents, and you tell me which is a which is doing the heavy lifting there.”

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