Our early ancestors first used ethanol, which is basically fermented sugar, as a very intoxicating alcoholic beverage. Today, if we were to compile a list of modern uses of ethanol, we would quickly see that this substance has come a very long way in the past few millennia. Government and private sector research funds have been pumped into ethanol development as a biofuel, but its long-standing popularity as a feedstock, solvent, and liquor has kept traders and speculators interested in the energies markets for decades.
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Ethanol Facts
Ethanol is considered to be a bioenergy, meaning that it is a biofuel derived from a biomass. Much interest has been gained in ethanol and other bioenergy sources because of the soaring costs of oil within the past decade. When blended with gasoline, ethanol can be used as an effective fuel source. The rising production and use of ethanol can be positively correlated with corn production as well, possibly having an impact on the agricultural market. For instance, while ethanol only contributes to around 10% of the overall U.S. gasoline market, the corn used to produce it can represent up to 40% of the corn crop used.
Ethanol futures can allow traders to address price risk of the commodity as well as the opportunity for arbitration with the price of corn futures. Ethanol and other gasoline products allow traders to participate in a liquid market as well.
Source: USDA
Last updated September 2015.