6. US Bioenergy and VeraSun Energy merge
In November 2007 VeraSun Energy announced a merger agreement with US BioEnergy, which potentially creates the largest ethanol producer in the United States. VeraSun Energy and US BioEnergy were America’s third and fourth largest ethanol producers before the merger was agreed, operating at roughly half of the capacity that market leaders ADM and POET have. The new VeraSun Energy will have 9 ethanol plants with a combined capacity of 870 million gallons. Moreover, another 7 facilities are expected to come online in the third quarter of 2008, bringing the company’s capacity to 1.64 billion gallons and making it America’s number one ethanol producer.
With such a scale, VeraSun will be able to meet the annual needs of a large refiner like Valero, BP or Exxon Mobil. Because of that, the expanded VeraSun will be able to play a more significant role in negotiations. In addition, economies of scale enable it to cope with tight margins and it will contribute to the consolidation of the United States ethanol market. Because of that, the merger between VeraSun Energy and US BioEnergy is listed number 6 in the most important ethanol events list of 2007.
5. Oil prices rise 57% on supply concerns and geopolitical tensions
One of the most important developments this year was the 57% increase in oil prices to a record trading price of $99.29 per barrel. A number of geopolitical factors have caused uncertainty in the market, which helped to push prices up. One of the most recent factors is the tension in Northern Iraq which fuels fears that the dispute between Turkey and the Kurdish region in Northern Iraq may escalate and threaten oil output in the wider region. Furthermore, concerns that Iran could use its own oil supplies as a bargaining chip in any future showdowns, militant violence in Nigeria's largest oil-producing region and recent violence in Afghanistan and the Yemen has also served to inflate prices. The weak dollar, which makes it cheaper for importers to buy dollar-denominated oil supplies, is also a major factor. However, the biggest catalyst for oil's seemingly remorseless rise has been the balance between demand and supply. Demand is at an all-time high, fuelled by the continued economic expansion of the Indian and Chinese economies.
The unprecedented price levels have created much needed awareness among politicians and the general public that the world’s heavy reliance on oil for transportation is becoming a pitfall for future economic growth, often referred to as energy security. As a result, alternative fuels have received substantial political and financial support, needed to realize a substantial market share in the worlds fuels matrix. In addition, the surge in gasoline prices has improved the cost-competitive position of ethanol in the world’s largest fuel market, the United States. Without doubt, the 2007 oil price levels have contributed to the development of ethanol as an energy commodity. However, analysts emphasize the volatility of the oil market at the moment, saying crude oil prices could break the $100 per barrel barrier, as well as drop back to between $60 and $70. Therefore, the 2007 oil price levels are listed number 5 in the most important ethanol events list of 2007.
© Ethanol Statistics 2008
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