Thursday, February 14, 2008

Ethanol boom having an impact on U.S. gasoline demand

While debates rage on whether ethanol will ever be "green," one aspect of the alternative fuel is becoming clearer: explosive production is stifling an established driver of oil markets -- U.S. gasoline demand -- and could lead to lower prices at the pump.

ethanol output has rocketed as the U.S. government touts it as a fuel that cuts greenhouse gas emissions and weans the country off foreign oil. Washington offers producers hundreds of millions of dollars in incentives and gives blenders a 51-cent-per-gallon credit for mixing the fuel into gasoline.

U.S. gasoline demand growth could be hit even further if producers figure out how to economically make low-carbon ethanol out of crop waste and switchgrass, a development many experts say is a decade away.

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