Hello, I'm Mark Pearson. The U.S. economy, which grew at the blistering pace of 5.3 percent during the first quarter of 2006, now appears to be slowing as consumers deal with higher fuel prices. **According to the Commerce Department, retail sales, which account for two-thirds of all economic activity, fell unexpectedly in June, dropping 0.1 percent after edging up by the same amount in May. ** Wall Street was expecting an increase of 0.4 percent for retail sales in June. And that, coupled with rising tensions in the Middle East this week sent stock prices sharply lower. **Meanwhile, the government reports America's trade deficit swelled to 63.8 billion in May. Economists blame surging oil prices for the widening trade gap, which is running at an annualized rate of a record $763 billion. **The May deficit figures include nearly $28 billion worth of foreign oil imports... up $4 billion from the previous month. **And the average price of foreign oil increased nearly $5 per barrel in May... its largest monthly increase since Iraq invaded Kuwait 16 years ago. Crude oil prices hit record highs again this week, and increasingly, motorists are looking for alternatives. Ethanol often is haled as a viable alternative fuel, but the industry is struggling to meet peak summertime demand. And that's prompting some experts to consider making ethanol out of everything from biomass to sugar.
As the average price of a gallon of regular unleaded fuel flirts with the $3 mark, ethanol continues to get more press. Barring the current shortage of ethanol brought on by the switching of fuel additives in eastern seaboard states, ethanol has traditionally been a money saver at the pump and a profitable market for corn producers.
This week, the focus shifted briefly to the type of plants -- or feed stocks-- used to make ethanol. While virtually all ethanol produced in the United States is made from corn, a USDA report released this week indicates that using sugar could be profitable as well.
According to USDA, at current prices, ethanol can be made for a dime less per gallon from molasses than corn. And the spot market recently put a gallon of pure ethanol at $4. Though the numbers look promising now, according to USDA, the practice will most likely be unprofitable in the near future.
According to USDA's Chief Economist Keith Collins, using sugar would only be profitable in the short term because ethanol prices are predicted to decline over the next year.
The report received mixed reviews from Congressional representatives. Minnesota Republican Senator Norm Coleman stated, "...producing ethanol from sugar is profitable at current prices, indicating a properly designed policy could serve as a complement, not a substitute, to the Farm Bill's existing sugar program."
But there was little agreement among the Minnesota Congressional delegation. The Ranking Member of the House Agriculture Committee, Representative Collin Peterson stated "Today, USDA released a study that confirmed what I've been saying all along – ethanol produced from sugar in the United States is not cost-effective."