By Russell Blinch
WASHINGTON (Reuters) - Talk of a glut in the U.S. ethanol market should be a thing of the past now that Congress has mandated a five-fold increase in the renewable fuel by 2022, the head of the biggest U.S. ethanol lobbying group said on Monday.
The industry and Wall Street have been concerned about rising supplies of corn-based ethanol as well as tightening profit margins from the jump in corn prices to above $5 a bushel.
Bob Dinneen, president of the Renewable Fuels Association, told the Reuters Global Agriculture and Biofuels Summit that with crude oil at nearly $100 a barrel and the passage of the new energy bill calling for greater ethanol use, the future has never been brighter for the industry.
"I have not heard of anyone talk of a glut since December 19, when the president put his signature on the energy bill," he told Reuters.
Dinneen said the requirement in the bill that calls for 9 billion gallons of ethanol this year "obliterates anybody's notion that there is a glut of ethanol out there." Current ethanol usage is about 6.5 billion gallons per year.
He said with rising oil demand from the developing world, particularly India and China, the United States was going to need greater amounts of renewable fuels to help alleviate the rising prices of crude oil.
"We are clearly going to need significantly greater volumes of domestic renewables -- ethanol, biodiesel. The economics today are very favorable as you look at where prices are," Dinneen said.
He defended the continued use of tax incentives as well as the renewable fuel standard in the energy bill in order to get over the intransigence of the oil industry, which he said prefers refining hydrocarbons rather than carbohydrates.
"Left to their own devices, history would demonstrate that oil companies would rather use their products than ours," Dinneen said.
He also maintained that increased demand for grain helped reduce federal farm support costs by some $8 billion, while the tax incentives costs the federal treasury some $3 billion.
"So, clearly, we are saving the government money. We are creating a new important industry for this country. And we are the only fuel around that can have any positive impact on global climate change," he said.
There has been a rising tide of criticism that using food crops to generate fuel is driving up world food costs, which ultimately hurts the poor the most.
But Dinneen said rising demand for food and rising fuel costs were also part of the problem.
"It's really hard to draw the connection that rising commodity prices is what is truly responsible for the recent increase in consumer food prices," he said.
The new energy bill caps corn-based ethanol production at 15 billion gallons a year, with the rest coming from non-food "cellulosic" sources, such as switchgrass and wood chips. Continued...
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