Ethanol Costs More Than Gasoline?

One would think ethanol is as flammable as crude oil, but ...

Ethanol prices surge as rail problems cut supply. The Wall Street Journal is reporting:

Ethanol for delivery in April rose 6.9% last week to $2.467 a gallon, the highest settlement since Dec. 4 on the Chicago Board of Trade.

Prices are up 40% from a low of $1.757 a gallon reached Jan. 27. A bitterly cold winter and rising crude-oil shipments have caused railroad traffic to back up in the Midwest, where most U.S. ethanol is made, using corn grown in the region.

The snarl is preventing the biofuel from reaching the coasts, where refiners mix it with gasoline or it is exported. "You just can't get it moved to where you need it to go," said Jerrod Kitt, director of market information at Linn Group, a Chicago-based brokerage.

"You could definitely see $3 [a gallon] ethanol in the Midwest." In New York Harbor, where shipping costs usually bump up ethanol prices by 10 cents a gallon over the Chicago benchmark, buyers are paying about $1 more per gallon, according to data from pricing service Platts.

The higher prices are because railcars are so scarce, said Matt Clausen, an ethanol trader at CHS Inc., an Inver Grove Heights, MN, agribusiness cooperative. At the same time, demand from buyers such as Canada and the Philippines has remained robust because Brazil, the second-largest producer behind the U.S., is exporting less ethanol while it uses more of the biofuel, analysts said.

Again, another great article in the WSJ.