Valero’s Ethanol Business Turns a Profit

Sometimes profitability can come from the most unlikely places. As the San Antonio Express-News reported on Thursday, Valero Energy Corp. may have had a tough year in the refining business, but is seeing unexpected gains in its production of ethanol.

The company is making money with the green fuel after buying seven corn ethanol plants for $477 million. While Valero posted losses for its total business, its ethanol business reported earnings of $49 million for one quarter, and $71 million for the next.

Valero officials have seen an increase in demand for ethanol, most likely due to low prices of corn and government mandates to boost usage. The government does subsidize ethanol production, and producers are more likely to make a profit these days because of cheaper prices of corn and natural gas.

While the sustainability of Valero’s profits is subject to debate, it is prompting further action from producers, who are asking the EPA to allow for a higher blend of ethanol in gasoline. The current blend is 10 percent, while ethanol producers are shooting for 15 percent by next year. The EPA will rule on the matter on Dec. 1, and will likely start out with a compromise of 12 percent.

Valero isn’t the only large company getting into the biofuels game. As HeatingOil.com reported last week, oil giant BP is set to begin commercial production on several different types of biofuel as early as next year. Middlebury College has found alternative uses for willow trees as energy, and an increasing number of commercial jets are turning to biofuel as their power source. Valero itself is looking into the production of biodiesel from algae in addition to their current ethanol production business.

The success of Valero’s ethanol arm of the company is great news for green industry. If the corn-based fuel can prove profitable, it could pave the way for other industries, like the heating oil industry, to use more biofuels in their own dealings. The use of ethanol and other biofuels is a positive development because they burn cleaner and reduce our dependence on foreign oil. This, in turn, likely helps to lower costs for home heating oil and other energy consumers.

source: heatingoil