Gasoline demand: Better late than never

Ethanol Report
By Rick Kment | June 26, 2013

May 31—Despite the preholiday spike in gasoline prices throughout the country, the main focus of the ethanol-to-gasoline market has not been based on overall demand up to now. Instead, the contributing factors are falling ethanol inventory levels due to moderate downward pressure in ethanol production because of weak plant margins and high corn prices over the past year. Total ethanol supplies fell to the lowest levels since the U.S. Energy Information Administration started tracking ethanol inventory in June 2010, bringing inventory levels down to 672 million gallons. The annual uptick in demand for ethanol and gasoline during the summer driving season will continue to drive decreasing ethanol inventory levels.

The low levels have ultimately resulted in strong ethanol price increases. The ethanol price is currently just 3 cents per gallon below the price of RBOB gasoline prices. This is the lowest price spread seen between ethanol and RBOB gasoline since November 2011. Despite the current corn prices, the expected demand for ethanol could continue to push ethanol prices higher through the summer months.