Valero bets on ethanol production

Valero Energy Corp., the U.S.’s biggest refiner, said it will focus on ethanol production despite a sharp drop in demand that left 21% of U.S. ethanol capacity idle. The company acquired ethanol assets and is positioning itself for a surge in demand that would come with economic improvement. It is also looking at federal mandates requiring ethanol be blended into the country’s gasoline supply to up its chances of succeeding in the biofuel market. However, media reports said industry experts seem skeptical of Valero’s strategy, saying it will have to ride out overcapacity problems and high feedstock costs that have crippled ethanol groups since gasoline prices began to fall in October. It will also have to need to learn to manage corn supply costs, which has proven to be a challenge for ethanol producers. It may also have to tread carefully around activist groups opposing the allocation of produce as feedstock instead of as food. (April 10, 2009)