Dr. John Huong - Former Shell Production Geologist of almost 30 years standing

(Photograph Courtesy of The Borneo Post)

(The following comments in the name of Dr John Huong were published prior to the defamation proceedings brought against him collectively by EIGHT companies in the Royal Dutch Shell Group. It is interesting to note the recommendation for the unification into a single company over  year before the merger into Royal Dutch Shell Plc)

EXTRACTS

I have integrated my personal insights as seen from the perspective of a former Shell employee – a Shell geologist for almost 30 years - who was unfairly axed by Shell management. I was punished because I insisted on working within the ethical boundaries of Shell’s “Statement of General Business Principles” (SGBP) which is supposed to protect shareholder, national and other stakeholder interests.

When I started with Shell all those years ago I was proud to be an employee of what I considered to be nothing less than the best company in the world; an internationally respected brand and an equally highly respected management. It is a matter of the deepest regret to me that the company has sunk so low with its management acquiring global notoriety for participating in a disgraceful scandal which ranks alongside the likes of Enron and WorldCom. 

Dr Huong quoting from an email:

“In my experience Shell directors” and Shell managers, “believe that truth is a precious commodity to be used as a last resort. It has to be squeezed out of them. They prefer to deceive, make empty pledges  (Shell’s code of ethics), intimidate,” ostracize, “hide information from their own shareholders”, employees, the government who gave them the license to operate and, and finally “retreating behind their army of lawyers” for shelter “whenever there is a prospect that management misdeeds will be exposed.”

I was not the only member of staff at Shell who was fired for up-holding Shell’s SGBP. That document had caused untold damage and suffering to many Shell employees. I strongly suggest that Shell suspends the SGBP until such time as Shell management is prepared to honour the noble pledges proclaimed therein. In other words, until the written pledges of integrity and transparency are matched by the actions of Shell management. 

Shell’s ethical code was and is not worth listening to unless top management becomes a role model for integrity and transparency. Under current circumstances what is the point of having an annual ritual performed for the CEO at operating companies, where it is a mandatory requirement for staff to sign off their ethical health forms (ie Conflict of Interest) irrespective of compliance with Shell’s Statement of General Business Principles”.  

If a company loses the trust and respect of its shareholders, employees, and customers, as Shell Management has done on a truly spectacular basis, then there’s only going to be a rather empty shell left.  It will obviously be a very long time before Shell could ever again use the famous advertising slogan “you can be sure of Shell”. 

More recently, I have also written numerous times to Mr. Jeroen van der Veer and Mr. Malcolm Brinded, of the Shell Group and other senior management under the umbrella of the Royal Dutch Shell Group. All of these letters were ignored. How could Shell management treat me so despicably, so shabbily, after I had worked for Shell so loyally and with such diligence for almost three decades?   

Not too long ago, I provided to Shell Management insights of my extensive knowledge of what actually goes on behind the wall of secrecy and intimidation imposed on Shell employees. This was in a letter entitled - “The Truth Behind the Royal Dutch Shell Group icon”.  

Dr Huong’s message to investors:

Investors - “You cannot be sure of Shell” growing your funds. Potential employees – do not trust your career and aspirations to Shell until you understand the true inside story.  If Shell is unwilling to undergo radical change at every level in the organization for the better, Shell’s negative and evil ingrained cultures will ultimately destroy the little which remains of its former reputation.  

It is ironic: If only Shell management had abided by its own ethical code – the SGBP, the humiliating reserves scandal, the results of which will inevitably drag on for many years with the investigations and ruinous class action law suits, could never have occurred. As God is my witness, that is the truth.  

I am finding it hard to come to terms with the con-artist mentality of a management which thought it could say one thing in speeches and advertising – pledging “Profits and Principles” - honesty, openness, integrity etc and actually get away and rewarded with doing the exact opposite.   

My recipe for recovery:  Every single member of Shell senior management who is implicated in or tainted to the least extent by the reserves debacle should do the honorable thing and resign immediately. That includes Mr van der Veer and Mr Malcolm Brinded.  Royal Dutch Petroleum and Shell Transport and Trading should be merged into one unified company – Shell with a single management structure.  It needs to have an entirely new management team and that will certainly have to think about  EXCLUDING  Mr. Jon Chadwick – consisting of individuals who have NO possible connection with past misdeeds and who possess the integrity and dedication essential to the considerable task of restoring Shell’s reputation; all of these ingredients are needed for a genuinely fresh start.  Only then would I be prepared to invest in Shell or to recommend anyone else to so.  

Some relevant extracts from the Universal Declaration of Human Rights 1948 (United Nations)  (http://www.un.org/Overview/rights.html)

Article 1.

All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.

Article 5.

No one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment.

Article 12.

No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.

Article 19.

Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.

Article 23.

(1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.

This article is published under the universally recognised basic human rights of freedom of expression and freedom of speech. 

Dr. John Huong Yiu Tuong

10 June 2004

 

(The drawing of Alfred Donovan, 90 year old joint owner of the website Royal Dutch Shell Plc .com is reprinted with the kind consent of The Wall Street Journal)

FREE RESEARCH

We have the worlds largest online library of news articles and leaked documents about the oil giant Royal Dutch Shell and related matters. They are all available FREE for educational and research purposes.

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There are no charges of any kind.

Iran has discovered in-place reserves of 11.4 trillion cubic feet of sweet gas in a southern field, a senior official was quoted as saying.

Mahmoud Mohaddes, head of exploration of the National Iranian Oil Company, said the Sefid Zakhour field in Fars province would have a daily production capacity of more than 1.15 billion cubic feet once it had been developed, state television said.

He predicted 17 wells would be needed for the field, the report said. Recoverable reserves are lower than in-place estimates.

Iran has the world’s second-largest gas reserves after Russia. Sanctions, politics and construction delays have slowed its gas development, and analysts say Iran is unlikely to become a major exporter for a decade. Reuters
 
http://www.tradearabia.com/NEWS/newsdetails.asp?Sn=OGN&artid=131119

Sunday September 30, 2007

The president of Iran has stated publicly that it is his goal to attack the great Satan (referring to the U.S.), develop nuclear weapons and eliminate Israel from the face of the Earth.

We take him at his word, and more importantly, world leaders do, too. That’s why Americans should refuse to invest their taxpayer dollars in companies doing business with Iran’s defense and energy sectors.

To reduce the nuclear threat and stop the flow of American money to terrorism, local, state and federal governments should adopt “terror free investment policies” and divest public retirement funds from international companies that do business with Iran’s energy and defense industries.

The Islamic Republic of Iran tops the State Department’s list of state sponsors of terrorism. It supports groups like Hezbollah and Hamas, as well as terrorists, who are killing civilians. In 2000, President Bill Clinton imposed sanctions on Iran. By 2006, conditions worsened so much that the sanctions were renewed. U.S. law now mandates that NO American company may do business in Iran or any other country classified by the U.S. State Department as a state sponsor of terror.

However, America’s two largest public employee retirement funds - the California Public Employees Retirement System, or CalPERS, and the California State Teachers’ Retirement System, or CalSTRS, invest billions of taxpayers’ hard-earned dollars in foreign-owned companies that do business inside and with the Islamic Republic of Iran.

With ground-breaking state legislation, Assembly Bill 221, Californians can join the movement to fight nuclear proliferation and international terror by divesting California’s public retirees’ nest eggs from foreign companies that profit by violating or skirting U.S. and United Nations sanctions. Millions of taxpayer dollars, reserved to fund CalPERS and CalSTRS retirement plans, are in harm’s way, invested with foreign companies whose assets can be bombed, nationalized, and seized.

The Los Angeles City Council recently approved a new policy to divest city employees’ retirement funds from foreign companies that do business with Iran’s defense and energy sectors. The city’s firefighters, police, and other workers will no longer invest their publicly funded retirement savings in companies enabling the Islamic Republic of Iran’s efforts to obtain nuclear weapons or terrorist activities.

The Los Angeles and California measures affect 19 foreign companies and multinationals that continue to do business in Iran’s defense and energy sectors. They include Royal Dutch Shell, which has partnered with the National Iranian Oil Company to develop Iran’s oil fields and earlier this year entered into a joint project with Spanish company Repsol in a natural gas project reportedly valued at $10 billion. Companies based in Canada, Japan, Spain, Italy, India, South Korea, Chile, Norway and others around the globe continue to invest in Iran’s energy and defense industries.

Approximately 200 companies do business with Iran in other sectors, including Japan’s Honda Motor Co., Korea’s LG Electronics and Germany’s Siemens. They are not targeted in California’s AB 221, which is limited to energy and defense industries.

We all know that money is the mother’s milk of terrorism; that’s why terror-free investment policies have drawn support from all corners of the political universe. Democrats and Republicans partnered to pass this legislation in Los Angeles and are working together for AB 221. This California bill has united hundreds of diverse entities - Teamsters, taxpayers’ organizations, the Simon Wiesenthal Center, and Iranian-American groups, to name a few.

The California Assembly and the California Senate unanimously voted for AB 221, and now the governor has signaled his intent to sign the legislation. The bill has built momentum on both sides of the aisle and, hopefully, will become law by the end of this year.

Adopting terror-free investment policies gives workers in America’s towns, cities, and states a unique opportunity to make an impact on world affairs. By joining the national movement to stop the Islamic Republic of Iran’s campaign of terror, cities and states like California can lead the way to a more peaceful future for the Middle East and the world.

To learn more see: www.assembly.ca.gov/anderson

California Assemblyman Joel Anderson, R-San Diego, is the author of AB 221. Los Angeles Councilman Jack Weiss is the sponsor of the Los Angeles City Council’s resolutions to divest municipal pensions and support AB 221. Their column reflects their own opinions, not necessarily those of The Signal.

Copyright:The Signal

http://www.the-signal.com/?story_id=50912&module=displaystory

Sunday, September 30, 2007

The “black rush” for crude oil, which reminds us of the “gold rush” in the 19th century west, is now taking place in Sakhalin, Russia.

About 30 percent of Russian oil and natural gas have been reported to be buried under Sakhalin: 2.7 billion barrels of oil in 11 oil fields, 1.261 trillion square meters of natural gas in 18 gas fields and 2.5 billion tons of coal in 52 mines as confirmed until recently, according to the Korea Trade-Investment Promotion Agency (KOTRA)’s office in Vladivostok, Russia. Such quantity of oil and natural gas can satiate demand of South Korea for three years and sixty years, respectively.

Skyrocketing oil prices since 2000 have triggered global companies to dive into the oil and natural gas fields in Sakhalin. The so-called “black rush” was initiated by Exxon Mobil which started digging up 100,000 tons of oil a day in the Sakhalin Oil Field 1 in 2005. For discovery of the “black gold,” not only major global oil companies such as Exxon Mobil, Royal Dutch Shell and BP, but also government officials from countries around the globe including China, India, Japan and Turkey are paying frequent visits to Sakhalin.

The Korea National Oil Corporation is also set to deliver annual 1.5 million tons of liquefied natural gas (LNG) from Sakhalin back home starting from next year. It is the first time for Korean natural gas consumers to meet natural gas from Sakhalin.

Daewoo Engineering & Construction which is currently building LNG condensing facilities in Sakhalin and Poonglim in charge of laying underground pipelines in the region are other Korean players among the active participants in blooming oil & natural gas explorations in Sakhalin.

[Sun-young Park / KHS]
 
http://news.mk.co.kr/newsReadEnglish.php?wonNo=&sc=30800005&relatedcode=&no=526222&cm=General&selFlag=

September 30, 2007
Louise Armitstead

BP has launched a search for a new chairman in a move that will draw a line under the turmoil that has engulfed the British oil giant for two years.

BP, which has a market value of £107 billion, has appointed a headhunter to find a replacement for Peter Sutherland, who has chaired the company for the past decade.

Anna Mann, doyenne of British headhunting, will conduct the international search.

The company has been rocked by a series of disasters. It faces lawsuits over an explosion at a Texas oil refinery in 2005 which killed 15 people. It has been attacked for lax safety standards in Alaska and for missing production targets. On top of this, its former chief executive, Lord Browne, was forced out earlier this year after admitting he lied in a court case. He has been succeeded by Tony Hayward.

These events severely damaged the reputation of the company, once seen as a model of British corporate governance.

Company sources insist Sutherland will not step down until his retirement date of 2009. However, others say the handover could happen within a year if a suitable candidate is identified.

The appointment of headhunters at this stage will be seen by many as a move to satisfy the appetite among some shareholders for a fresh start at the top. They also want a chairman who has a close knowledge of the day-to-day workings of a global oil giant.

One analyst said: “What they need is someone who can provide air cover to Hayward while he reshapes the structure of the company and tackles the opera-tional shortcomings.”

The search is being conducted internally by BP’s deputy chairman, Sir Ian Prosser. The internal frontrunner is thought to be Sir William Castell, one of Britain’s most senior industrialists.

Castell made his name in the City by transforming Amersham, a diagnostics firm, which he sold three years ago to America’s General Electric for almost £6 billion.

He then became one of the top directors at General Electric, a rare feat for a British businessman. He was appointed a nonexecutive director of BP in July last year.

Possible outsiders to take over from Sutherland include Sir John Parker, who is chairman of National Grid, and Sir Nigel Rudd, former chairman of Alliance Boots.

Sutherland, 61, originally joined BP’s board as a nonexecutive in 1990 and served for three years. He rejoined in 1995 and was appointed chairman two years later.

During Sutherland’s tenure, BP’s market value has soared from £20 billion to more than £100 billion. The seemingly unbeatable combination of Sutherland and Browne not only changed the nature of BP, then reliant on the North Sea and Alaska, but was also credited with modernising both the culture of the company and the image of the industry. But the two clashed last year when Browne, who at the time was dubbed the Sun King, carried out a public campaign to secure an extension to his contract beyond his 60th birthday.

The move backfired and split the BP board. Browne was later forced to accept a compromise deal.

Following his resignation, some leading shareholders suggested that it was time for a clean sweep of BP’s management, but agreed that it would be too desta-bilising for the company to lose both Sutherland and Browne.

Last week BP faced fresh embarrassment when a memo prepared for staff by Hayward was leaked.

It included a blunt warning to staff that third-quarter revenues would be “dreadful”.

Hayward said that BP’s financial performance was at its lowest since 1992-93.

Mann, who has had a long relationship with BP, founded Whitehead Mann with her husband more than 30 years ago.

They built it into one of Britain’s biggest headhunters, but she left three years ago. One of her last searches for the company led to the ill-fated nomination of BP’s Prosser as chairman of J Sainsbury. Institutional pressure led to Prosser’s humiliating withdrawal. It has emerged that Browne has signed a deal with Ed Victor, a London literary agent, to write a book. With a working title, The Nobility of Business, it is understood to be a wide-ranging look at the history of business and “a celebration of capitalism”, said Victor.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2557169.ece

30 September 2007

NEW YORK — Oman crude oil’s official price for November on the Dubai Mercantile Exchange Ltd. rose 7.5 per cent from October on concerns of lower supply.

Oman was set at $73.49 a barrel, up from October’s $66.34, based on a Bloomberg calculation of the average closing prices for the past month’s trading. The November contract closed at $76.49 at 12:30 p.m. Dubai time, the exchange said in an e-mail.

Middle East crudes climbed this month as refiners snatched up cargoes on concerns that maintenance at fields in Abu Dhabi would limit supplies for October and November. Royal Dutch Shell Plc’s buying of a record 310 Dubai partials contracts through the oil pricing system of Platts boosted prices.

“The market partly found strength on the back of Shell’s purchases,” said Ehsan Ul Haq, head of research at Vienna-based PVM Oil Associates GmbH. “The Abu Dhabi maintenance may take as much as 500,000 barrels a day out of the market.”

Crude oil from Oman, the largest Middle East producer that isn’t a member of the Organisation of Petroleum Exporting Countries, and Dubai are the benchmarks for other grades in the region. Saudi Aramco, the world’s largest state-owned oil company, sets its prices against the average of Oman and Dubai.

The open interest, or the number of futures that haven’t  been closed, liquidated or delivered, for November Oman was 3,791 contracts.

Oman crude oil futures for December delivery fell 57 cents to $76.10 a barrel on the Dubai Mercantile at 6:56 p.m. Singapore time with 428 lots traded. The open interest was 500 contracts.

The number of Oman contracts traded on the Dubai Mercantile surged this month following the completion of the first full delivery cycle of August cargoes, the Exchange said.

The trading volumes for the October future when it was the so-called front month, or closest to delivery, averaged about 110 contracts. November climbed to an average of about 676, according to Bloomberg calculations of Dubai Mercantile data.

“People were waiting for the August contract to go physical,” said Gary King, Dubai Mercantile chief executive in a Sept. 27 telephone interview. “That’s the piece of the puzzle that differentiates us from other initiatives that have taken place in the past. That has given the market confidence.”

Activity in the Oman contract has extended beyond the delivery month underlying the expanded interest in the exchange, said King. The bourse currently has open interest in the future for December 2008 delivery.

The higher volumes may attract a greater number of participants who may believe the exchange has a high level of liquidity, or a number of buyers and sellers taking part.

“I’m really happy to be honest. I was really concerned for awhile,” said Anthony Nunan, assistant general manager for risk management at Mitsubhishi Corp. in Tokyo during a Sept. 26 telephone interview. “Speculators wanted to get in but it was so illiquid that they couldn’t get out but with more liquidity they’ll be looking to get in.”

Shell purchased another 22 Dubai partial cargoes on the oil trading system operated by pricing service Platts yesterday, said traders who witnessed the transactions. The sellers included Sempra Energy Trading, Phibro Inc., Chevron Corp., Vitol Corp., SK Energy Ltd., PTT Pcl and Total SA.

China International United Petroleum & Chemicals Corp., or Unipec, sold five Oman partials to Shell, the traders said.

Shell has bought Dubai partial cargoes totalling about 7.75 million barrels on the system operated by Platts, based on  information provided by the company. The deals must be consolidated into one cargo when the same buyer and seller agree to trade 19 or more of the 25,000-barrel lots.

Phibro Inc. declared that it would deliver an Oman cargo to Shell in lieu of Dubai, while China International United Petroleum & Chemicals Corp., or Unipec, declared delivery of two Oman cargoes in lieu of Dubai, traders said.

Shell has now taken four Dubai, 10 Oman and three Upper Zakum cargoes this month through the Platts system. The oil company also offered Abu Dhabi’s Murban crude at a premium of 45 cents a barrel to the crude’s official selling price, traders said.

Oman oil for immediate loading gained $1.48, or 2 per cent, to $76.94 a barrel, according to Bloomberg data. Dubai crude for November rose $1.38, or 1.8 per cent, to $76.64 a barrel at 5:33 p.m. in Singapore. Murban crude climbed $1.38, or 1.7 per cent, to $81.86 a barrel.

The Brent-Dubai exchange for swaps for November widened to $4.97 a barrel from $4.64 a barrel yesterday. The December differential was at $4.90 a barrel from $4.62 a barrel previously. A premium of less than $3 for Brent compared with Dubai typically attracts cargoes to Asia from Europe and Africa.

http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/business/2007/September/business_September752.xml&section=business&col=

Lincolnway Energy, a midsize distillery in Iowa, was once virtually alone in the region. Today, though, competing distilleries are operating and pouring even more ethanol onto the market.
 
By CLIFFORD KRAUSS
Published: September 30, 2007

NEVADA, Iowa, Sept. 24 — The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.

A Glut of Ethanol

Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.

But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.

“The end of the ethanol boom is possibly in sight and may already be here,” said Neil E. Harl, an economics professor emeritus at Iowa State University who lectures on ethanol and is a consultant for producers. “This is a dangerous time for people who are making investments.”

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil.

And if the bust becomes worse, candidates for president could be put on the spot to pledge even more federal support for the industry, particularly here in Iowa, whose caucus in January is the first contest in the presidential nominating process.

Many industry experts say the worst problems are temporary and have been intensified by transportation bottlenecks in getting ethanol from the heartland to the coasts, where it is needed most. And even if some farmers who invested in the plants lose money, most of them are reaping a separate bounty from higher prices for corn and other commodities, which are expected to remain elevated for some time.

Even so, companies are already shelving plans for expansion and canceling new plant construction. If prices fall more, as many analysts predict, there is likely to be a sweeping consolidation of the industry, and some smaller companies could go out of business.

The falling price of ethanol comes in sharp contrast to the rise in crude oil prices. Lower ethanol prices help reduce gasoline prices at the pump, where ethanol is available, but because it constitutes 10 percent or less in most blends, the impact for the consumer is marginal.

Congress essentially legislated the industry’s expansion by requiring steadily higher quantities of ethanol as a gasoline blend, a kick-start that was further spurred by the proliferation of bans on a competing fuel additive used to help curb air pollution.

But the ethanol industry, which is also heavily subsidized by federal tax incentives, got far ahead of the requirements of the law, rapidly building scores of plants and snapping up a rising share of the corn harvest. Many of those plants have gone into operation in recent months, and many more are scheduled for completion by the end of next year.

The resulting ethanol oversupply is buffeting the market. Here in northern Iowa, deep in the corn belt, newly cautious farmers and ethanol executives are figuring out how to cut costs and weighing their options should the situation get worse.

“We don’t know what, ultimately, the marketplace will price ethanol at,” said Rick Brehm, president and chief executive of Lincolnway Energy, a midsize distillery here. “It could go lower.”

Since construction crews broke ground on the Lincolnway plant in 2005, the price of ethanol on the local market has fallen to $1.55 a gallon from about $2, Mr. Brehm said. Over the same period, the price of corn, representing 70 percent of production costs, has risen to $3.27 a bushel from $1.60. “We’re trapped between two commodities,” he said.

Lincolnway was once virtually alone in the region, but now a handful of new competing distilleries are operating and pouring even more ethanol onto the market, offering blenders more options to negotiate lower prices and driving up demand for corn.

“Obviously, I’m concerned about where we’re going,” said Bill Couser, chairman of Lincolnway Energy, though he added that his company is still making money and he is optimistic about the future.

The ethanol boom was set off when Congress enacted an energy law in 2005 that included a national mandate for the use of renewable fuel in gasoline, obliging the market to consume 7.5 billion gallons a year by 2012, compared with 3.5 billion gallons in 2004.

Already, ethanol producers are poised to outpace that mandate, with capacity expected to reach 7.8 billion gallons by the end of 2007 and 11.5 billion gallons by 2009, although some in the industry are now predicting that the expansion could slow.

The number of ethanol plants in the country has increased to 129 today from 81 in January 2005, according to the Renewable Fuels Association, while plants under construction or expanding have mushroomed to about 80 from 16 during the same period.

“As ethanol supply increases over the next 12 months, the challenge will be to find a home for it,” said Mark Flannery, head of energy equity research at Credit Suisse. “The ethanol surplus is here already.”

Because ethanol is corrosive and soaks up water and impurities, it cannot be shipped through the country’s fuel pipeline network. So it must be transported by train, truck and barge, a more expensive transportation network that is suddenly finding it hard to keep up with the surge in ethanol production.

There is a long backlog in orders for specialized ethanol rail cars to ship the surplus production. Many rail terminals at the ethanol plants do not have spurs large enough to accommodate the long trains that ethanol promoters like to call “virtual pipelines.” And pumps from the storage tanks to the rail cars at the terminals often do not have sufficient capacity to load trains quickly and efficiently.

Phillip C. Baumel, economics professor emeritus at Iowa State University, said that in many cases ethanol producers ramped up their production so rapidly that they gave “inadequate attention to meeting transportation and distribution needs.”

Gasoline wholesale marketers have been slow to gear up ethanol blending terminals, in part because they had to invest simultaneously in equipment to manage low sulfur diesel and tougher product specifications.

Prices of ethanol range widely around the country, even differing from one county to the next in the same state on a daily basis. [The average rack, or wholesale, price reported by the DTN Ethanol Center on Tuesday was $2.42 a gallon in New York and $1.77 in Iowa.] Generally, prices are highest in states farthest away from the Midwest farm belt and in ones that have federal or state clean-air requirements that encourage the use of ethanol.

In a new study, the Agriculture Department warned of “several supply chain issues that could inhibit growth in the ethanol industry,” including a backlog in rail tank car orders that grew to 36,166 rail cars by the end of the first quarter in 2007 from about 10,000 in the third quarter of 2005.

“You just can’t scale it up overnight,” said Chuck Baker, vice president and executive director of the National Railroad Construction and Maintenance Association.