Recession fears have put downward pressure on oil, gas and ethanol prices in recent days, despite tight world stocks that would normally mean higher prices. So, what does that mean for the biofuels industry?
A few months ago, Renewable Fuels Association head Geoff Cooper was talking about rising energy prices.
“If oil stocks and gasoline stocks tighten, as a result of a conflict, yeah, that’s going to pull prices for all energy commodities higher, it’s going to pull things that can substitute for gasoline higher—and that includes ethanol.”
But today, market fears of a recession are overwhelming concerns about tight stocks, gradually driving energy prices lower.
“Consumers are driving less and beginning to curtail their purchases of gasoline, and so, obviously, that’s easing some pressure on the demand side. At the same time, you’ve got fears of recession that have the market really jittery, that we could see significant reductions in consumption.”
Bottom line according to Cooper; “We’re seeing ethanol prices remain at, at least a 50 to 60 cent discount to gas. In fact, it’s been wider than that in recent weeks, and, again, what enables that, is when the cost of the feedstock is falling, as well.”
Corn prices were also falling on recession fears, with futures prices on new crop corn way down this fall, giving ethanol producers some protection against falling margins.