Why Ethanol demand will fade with rising costs & its Implications on- PEIX, ADM, ANDE & VSE
Stocks: Pacific Ethanol, Archer Daniels, Andersons, VeraSun
By Yaser Anwar, CSC of Equity Investment Ideas
Ethanol prices are hitting record levels this week, adding to the cost of gasoline as the nation heads into the peak vacation driving season.
A gallon of ethanol was going for as much as $5.75 on East Coast spot markets, more than double the $2.54 that it fetched as recently as three months ago, says Tom Kloza, analyst for the Oil Price Information Service.
Ethanol has gradually replaced MTBE, a petroleum-based additive thought to cause cancer, as the lower-polluting alternative. And demand has outstripped supply.
With ethanol prices so high, the 10% of ethanol in reformulated gasoline, as the blend is called, could add about 30 cents a gallon to the cost of gas, Kloza says.
After summer, ethanol prices could fade. Demand will fall as the season for reformulated gas ends. And 33 new ethanol plants are to be completed by year's end, says Michelle Kautz, spokeswoman for the National Ethanol Vehicle Coalition, an industry group.
Implications for stocks: Ethanol stocks had been very hot since President Bush's speech on Jan. 10. Stocks like PEIX, ADM & ANDE had skyrocketed but have come down quite alot. With the new VSE IPO, the stock has almost gone down everyday after its debut & with more public offerings in the pipeline & increasing Ethanol costs, this will negatively affect the Ethanol sector.
Bullet points source USA Today
http://www.equityinvestmentideas.blogspot.com/
By Yaser Anwar, CSC of Equity Investment Ideas
Ethanol prices are hitting record levels this week, adding to the cost of gasoline as the nation heads into the peak vacation driving season.
A gallon of ethanol was going for as much as $5.75 on East Coast spot markets, more than double the $2.54 that it fetched as recently as three months ago, says Tom Kloza, analyst for the Oil Price Information Service.
Ethanol has gradually replaced MTBE, a petroleum-based additive thought to cause cancer, as the lower-polluting alternative. And demand has outstripped supply.
With ethanol prices so high, the 10% of ethanol in reformulated gasoline, as the blend is called, could add about 30 cents a gallon to the cost of gas, Kloza says.
After summer, ethanol prices could fade. Demand will fall as the season for reformulated gas ends. And 33 new ethanol plants are to be completed by year's end, says Michelle Kautz, spokeswoman for the National Ethanol Vehicle Coalition, an industry group.
Implications for stocks: Ethanol stocks had been very hot since President Bush's speech on Jan. 10. Stocks like PEIX, ADM & ANDE had skyrocketed but have come down quite alot. With the new VSE IPO, the stock has almost gone down everyday after its debut & with more public offerings in the pipeline & increasing Ethanol costs, this will negatively affect the Ethanol sector.
Bullet points source USA Today
http://www.equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 5:08 AM
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