What’s Driving the Boom in Ethanol Production?
Market conditions and policy factors are fueling the rising interest in ethanol. A rapid runup of oil prices over the past several years has combined with provisions of the Energy Policy Act of 2005 and already existing Federal and State biofuel programs to provide economic incentives for an expansion of U.S. ethanol production. Crude oil prices, which averaged less than $20 a barrel (refiners’ acquisition cost for imports) in the 1990s, reached almost $68 in summer 2006, and averaged $59 for the year. This increase in prices reflects rising global demand for crude oil resulting from strong world economic growth, including rapid manufacturing gains in China and India. Further growth in global economic activity will continue to drive up world demand for oil, particularly in highly energy-dependent economies in Asia. Although the increase in demand is likely to be partly offset by future oil discoveries, new technologies for finding and extracting oil, and continued expansion and improve
