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Demand boosts ethanol price, worrying backers

Growing demand for ethanol has boosted prices for the corn-based fuel additive, worrying ethanol supporters just as they're making inroads getting motorists interested in the alternative fuel.
ETHANOL
A tanker truck is loaded with ethanol at the Golden Grain Energy ethanol plant, in Mason City, Iowa. Surging demand has forced ethanol prices higher, putting a damper on efforts to promote the fuel as an alternative to gasoline.Charlie Neibergall / AP file
/ Source: The Associated Press

Growing demand for ethanol has boosted prices for the corn-based fuel additive, worrying ethanol supporters just as they're making inroads getting motorists interested in the alternative fuel.

Greg Boesch, who owns Fred's Mini Mart in Shadeland, said that when he began selling a fuel that contains a high percentage of ethanol, it was between 30 cents and 40 cents a gallon cheaper than gasoline.

Now, he's only able to keep the price of both products at $2.57 a gallon by losing money on sales of E85, a blend composed of 85 percent ethanol and 15 percent gasoline.

"I had been telling my customers that it was going to be cheaper. Now, all of a sudden, I'm having to back down," Boesch told the Journal and Courier of Lafayette for a story Saturday.

Boesch's station a few miles southwest of Lafayette is one of 23 gas stations in Indiana that sell the fuel. State officials hopes to raise that number to 40 by the end of the year, and federal officials want to keep them supplied.

But last week, representatives of the energy industry told the U.S. Senate Environment and Public Works Committee that an unprecedented high demand for ethanol will likely drive the price of gasoline up this summer.

Guy Caruso, who heads the U.S. Energy Department's statistical division, estimates that 130,000 barrels per day of extra ethanol will be needed beginning May 5 -- an amount equal to almost 50 percent of current output.

Wholesale prices for ethanol have surged to roughly $2.75 a gallon, or about 50 cents per gallon higher than usual. Meanwhile, the average retail price of gasoline in the United States is $2.50 a gallon -- the highest level since October.

Some analysts say gasoline prices may reach $3 a gallon by summer.

The new demand for ethanol stems largely from the decision of many states to stop allowing methyl tertiary butyl ether as an additive in gasoline. MTBE, which can contaminate ground water, composes about 10 percent of every gallon of gasoline with which it is blended.

Community and government leaders across the nation hope to eventually replace the additive with ethanol, a grain alcohol many consider a renewable fuel.

Nationwide, 33 ethanol plants are being built and six of them are in Indiana.

Belinda Puetz, director of marketing for the Indiana Corn Marketing Council, said she doesn't doubt that once more ethanol is produced, the price of the additive will fall.

"We are kind of in that awkward stage where the demand is greater than the supply," she said. "We should have some of that production available in 12 to 18 months."