A lot of people in the nascent ethanol industry have been more than a little concerned about the falling price of oil - just take a look at the daily WTI price here. No on has an exact universal figure, but they are worried because US-based ethanol production from corn is only in a profitable range when oil reaches $45 - $50 a barrel.

At a recent OPEC meeting in New Delhi, the Saudi Oil Minister said that no additional cuts in production were planned and this sent oil prices down still further. But reading between the lines of what he divulged, it would appear that he may think that the already planned for 500,000 barrel a day cut due to start on Feb. 1st 2007 will do the job to take oil prices up again.

So could it be that the oil selloff has overshot and that ethanol stocks may be on the way up again?

Today after a quick glance (and I haven't looked at all of the ethanol stocks - see here for those) , Pacific Ethanol is trading up over 4%, Andersons is up nearly 5%, Aventine Renewable Energy Holdings is up 2.45% and this while WTI does not appear to be going south of $51.

Meanwhile, last Friday, Pacific Ethanol was upgraded to neutral by a Bank of America analyst.

The oil ethanol relationship fascinates me. Oil has been so volatile in the last year so timing is everything. For example, if one had bought WTI crude at the end of 2005 ($61.04) and sold exactly at the end of 2006 ($61.06), your total return would have been just 0.03% !

One way or another, I'm sure that the next couple of months in oil prices and the underlying performance in biofuel stocks could prove to be very interesting indeed.