Reply #9: I'm not sure what to think of the NREL study. They say about the ML analysis, that the methodology

[JohnWxy]

is 'not clear' (page 7).

on page 2 of the Merrill Lynch report they state:

"In particular, the surging ethanol output has contributed to temper prices
in the Midwest (by $32/bbl) and in the East Coast (by $24/bbl) due to the greater
availability of ethanol and the lower price elasticity of demand in these regions." (note lower elasticity means greater price flexibility or volatility. see how the prices in midwest and East coast were 'tempered', that is lowered, by a larger amount than the $21 they used for U.S. in general - of course they also stated there was a 'greater availability' of ethanol there too. But there again they are recognizing the supply relative to demand.).


The conventional way to predict the impact on the price of a commodity due to a change in supply or demand for that commodity is to use elasticity of demand or supply (as appropriate). This is the required methodology in any economic analaysis of demand andor supply and prices. IF you DON'T use elasticity of demand/supply in your analysis, you better have an explanation as to why you DIDN'T. (...usual excuse is insufficient sample data for a reliable estimate.)