The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.
Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.
But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.
Shift your demand curve to the right and watch equilibrium price and quantity rise. Then, push your supply curve to the right far enough so that price falls (by 30%).
3 comments:
wow, I'm the first one to comment on this one. Well, I just find it interesting that people put so much faith in ethanol. Its kind of ironic how it ended up turning on them. I don't think the United States will be off petroleum anytime soon. Once it does actually happen, then people need to start introducing ethanol.
It definitely doesn't surprise me that the demand for ethanol has plumetted, which serves as great reasoning to say that people shouldn't have put such great faith on something other than the "norm," which in this situation is petroleum gasoline versus ethanol. I mean it always takes time to make changes and adjust,and just like Logan said, I don't think society will be making that transformation any time soon.
Just as Logan stated, I also find the irony in the event with ethanol going down as a commodity. Originally, I remember numerous campaigns to encourage ethanol production and ethanol usage as the holy grail to solving "proposed man-caused global warming" and reducing the amount of oil that we obtain from countries that don't really treat us positively such as Mexico or Venezuela. Yet, as it progressed in reality, the idealistic hopes did not turn out that well and so people won't be attempting the switch to ethanol, unlike the nation of Brazil (which if my memory serves me right, uses ethanol as its primary automotive fuel)
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