homepage logo


Estherville gas breaks $2

By Staff | Nov 14, 2008

Gas prices Estherville convenience stores fell below $2 per gallon on Thursday. EDN photo by Michael Tidemann

Due to decreased worldwide demand for petroleum, gas prices have been in freefall over the past several weeks, despite OPEC production limits.

According to Bob Houseman at Riverside Sinclair, where prices hit $1.99 along with other area service stations Thursday, U.S. oil demand is down 1.1 million barrels a day.

Just as higher gas and diesel prices devastated the economy through higher prices at the grocery shelf, lower prices have had an equal negative impact.

One notable example would be the announced bankruptcy of VeraSun Energy which early this month announced it would seek Chapter 11 bankruptcy protection. VeraSun was the second-largest ethanol producer in the country, producting 13 percent of the ethanol in the U.S.

VeraSun pointed to high corn costs and overall market conditions as the reasons for the filing. VeraSun was caught in a perfect storm, locked into contracts for high-priced corn and facing plummeting gas prices.

VeraSun has plants in Hartley and Welcome, Minn., as well as other locations throughout the Midwest.

Green Plains Renewable Energy which owns the Superior plant, on the other hand, has been in an expansion mode since its merger with Virgin Bio Verde (VBV) owned by Virgin Airlines founder Richard Branson. The company had its “first grind”, or official opening of its Obion, Tenn., plant Sunday. The Obion has a nameplate capacity of 110 million gallons a year, making a total GPRE production capacity of 330 million gallons.

According to Scott Poor, GPRE corporate counsel and director of investor relations in Omaha, a solid risk management program is key to success in the ethanol indusry. He said the issue is not whether low gasoline prices are competing with ethanol production cost margins but whether corn prices are low enough to allow ethanol to be produced at a profitable level.

Poor declined to cite GPRE’s “break-even” price or cost of production, saying that was a moving target depending on which facility was operating. In addition to Estherville and Tennessee, GPRE has ethanol plants in Shenandoah and Indiana.

Green Plains has also joined Growth Energy, an ethanol advocacy group which intends to vigorously promote ethanol development with the Obama administration.

“The Obama admministration thus far has been incredibly supportive of ethanol and we expect that to continue,” Poor said.

Poor said Growth Energy is expected to have a significant impact on the ethanol policy of the new administration.

“Market volatility is not unique to ethanol,” Poor said. “Some of the market dynamics are not unique to the ethanol industry at all. We just have to build a business model that’s able to roll with all the changes.”