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Latest Victim Of Ethanol Glut: BioTown, USA

biotownusa.jpgOn Sept. 13, 2005, Indiana Governor Mitch Daniels declared that the little town of Reynolds, Ind. — with a population of just over 500 — would officially become BioTown, USA. The idea was to re-energize the town and make it energy-self-sufficient through biofuels and waste-to-energy technology. Residents were encouraged to purchase alternative fuel vehicles; the town got its own biofuel station. Two years later, VeraSun (VSE), the ethanol producer that had been planning to build a 110-million-gallon-per-year ethanol biorefinery in Reynolds, says it will suspend construction of the refinery due to current market conditions.

That’s got to hurt. VeraSun is referring to what we chronicled yesterday: an ethanol surplus has caused a drop in prices, which, combined with a spike in the price of corn, has created hard times for ethanol producers. It’s not a good sign for the ethanol industry when not even the very BioTown itself is able to sustain ethanol production in the current market.

VeraSun says it would like to resume construction of the refinery in 2008, “depending upon the return of more favorable market conditions.” We’re not sure how much the town was depending on the refinery for jobs or the local economy, but BioTownians, we feel for you.

5 Responses to “Latest Victim Of Ethanol Glut: BioTown, USA”

  1. Once again the news story should not be about the bad news for ethanol and the “glut.” The glut is really just a short story about oil company glut-tony. How can a country that has record gasoline prices and for decades not be able to produce enough of it own crude oil or gasoline have a glut of alternative fuels? We need 140 billion gallons of gasoline each year and we produce 6 billion gallons of ethanol. Do the math. There is not a glut; there is an incredible market distortion in a not so free transportation fuel market.
    A few points to ponder. Ethanol is currently selling for about $1.00 per gallon below the price of gasoline yet oil companies are choosing to buy ethanol credits (RINs) despite the ethanol glut and enormous potential margins. This appears to be a strange tactic for a gasoline business that historically cuts deals on portions of pennies, not dollars. Could they really be trying to erode consumer and investor confidence in ethanol and slow down its growth? Ethanol is lowering gasoline prices in many markets and according to DOE has lowered the price of oil by $2.50 per barrel. Every consumer is the victim in this ethanol glut, not just the ones that live in BioTown USA. I hope the country still has time to start running on consumer power again. Google the “Big Oil’s Big Stall On Ethanol” and the “Ethanol Fact Book”