According to a Purdue University expert, the U.S. doesn't have the ability to handle the amount of ethanol that is likely to be produced by the end of 2008.
"Ethanol production capacity has grown tremendously fast, and it's going to almost double from its high level today to the end of 2008," said Wally Tyner, Purdue Extension agricultural economist. "It has grown so fast that the capacity to produce is bigger than the capacity to market."
Tyner says a combination of lower ethanol prices, reduced production and possibly exporting some ethanol is likely to occur.
"There will be a lot of pressure on ethanol prices in 2008," Tyner says. "And with high corn prices that means there will be a lot of pressure on profitability of ethanol during the next year."
The main factors that hinder the amount of ethanol the market can handle are rail capacity to ship to the East Coast, West Coast and South, and the terminal space to blend the ethanol. Construction of tank space and rail lines will be necessary to increase the marketability of ethanol.
"All this can happen, but it takes time," Tyner says. "It is already being done in Florida, but not everywhere, and it most certainly will not be done by the end of 2008. This puts a real infrastructure constraint on even getting to the physical potential."
There is a big push by auto manufacturers to build more flex-fuel vehicles to use E85. While Tyner says it will take years to change the percentage of the nation's fleet that is flex-fuel; he does say the faster we move in that direction, the faster it will happen.