Hurricane Katrina has had far-reaching effects throughout the country. Not only did the devastation disrupt the lives of thousands of people along the Gulf Coast, but it’s also impacted the lives of every citizen through a ripple effect—one of these ripple effects being gas prices.
The big hurricane-related issue in gas prices was the eight or so refineries shut down on the Gulf Coast. The demand for fuel usually spikes during the summer season, Memorial Day to Labor Day, but the hurricane caused a disruption in the flow of fuel to gas stations throughout the U.S., which prompted an additional spike in fuel prices.
Is there an answer to these high gas prices? Farmers and the agriculture community like to think the answer is ethanol and other biofuels. The hurricane brought forth another benefit of using the home-grown, clean burning fuel made from corn.
The hurricane also caused a disruption in the flow of barge traffic on the Mississippi River. Since corn is the primary raw product used to make ethanol and processing plants are located in the Midwest near cornfields, this allows us to keep corn right here and process it into the final product.
On September 12, Rep. Don Moffitt of Galesburg introduced House Bill 4105 during a press conference at the Peoria County Farm Bureau. The passage of House Bill 4105 during this fall’s General Assembly veto session would provide a one-year exemption from the state sales tax to stimulate the purchase of new E-85 or flex fuel vehicles. A vehicle valued at $20,000 would save $1,000 if the purchaser didn’t have to pay a 5 percent sales tax. Moffitt was joined by several area legislators, which gave this bill bipartisan local support.
If consumers purchase more flexible fuel vehicles, the number of ethanol plants and E-85 stations would increase, giving a boost to our local economy in processing, constructing, transporting, and growing the components of ethanol economics.
Demand for ethanol is increasing. Illinois currently is blending ethanol at the 10 percent level in 87 percent of the gasoline sold, which is up five points from the first of the year. Many large fuel providers are expanding the geographic area where they offer ethanol, and some companies are offering ethanol for the first time. Demand for ethanol is now 277,000 barrels per day; facilities that can produce 65,000 barrels a day are under construction to meet growing demand in the future. This rapid expansion is expected to continue in the near future, so investment opportunities in emerging facilities deserve a thorough evaluation.
As recently as three months ago, ethanol supplies were abundant and prices were extremely competitive. That production was absorbed, and a certain amount of ethanol pricing volatility is anticipated as supply and demand ebbs and flows. However, the current damage to the nation’s energy infrastructure is exacerbating the situation. Ethanol expansion should help moderate pricing in the months and years ahead. IBI