Ethanol

How to Invest in Ethanol

Ethanol is an alcohol that can be used as a fuel to power motor vehicles. Ethanol can be produced using both corn and sugar, and as such this fuel source has appeal because it burns cleaner than fossil fuels.

Brazil is a major producer of ethanol, though the industry has expanded considerably in the U.S. as well in recent years. Many vehicles in the U.S. now run on a blend of ethanol and oil. Ethanol-powered vehicles have been proven to lower emissions.

Investors seeking exposure to ethanol have multiple options for gaining exposure to this fuel source, including exchange-traded futures contracts and investing in companies whose operations focus on developing ethanol.

Ways to Invest in Ethanol

There are 2 ways to invest in Ethanol: Futures and Stocks. Click on the tabs below to learn more about each alternative.

What are Ethanol Futures?

Ethanol futures are traded on the New York Mercantile Exchange under the ticker QEN. Ethanol futures represent 1,000 U.S. barrels of the fuel, and trading is conducted in 36 consecutive months. Trading terminates on the last business day of the month preceding the delivery month.

How to Buy Ethanol Stocks

For investors who believe that ethanol usage will climb, one possibility for establishing exposure involves investing in the stocks of companies engaged in the production of ethanol. Many companies engaged in ethanol production also produce energy from other sources, diminishing the purity of exposure to this particular source. There are, however, some pure play ethanol stocks out there:

  • Pacific Ethanol (PEIX)
  • Xethanol Corporation (XNL)
  • Earth Biofuels Inc (EBOF)

See a complete list of publicly-traded ethanol companies.