Released April 15, 2022 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--President Joe Biden announced on April 12 that the EPA would issue a national emergency waiver to allow distribution of E15--gasoline that uses 15% ethanol--throughout the summer months from June 1 to September 15.
One question raised by this is whether ethanol producers will have to delay plant turnarounds to make ethanol during a season they otherwise would have throttled back production.
Industrial Info is tracking 129 ethanol plant maintenance turnarounds in the U.S., worth $108.6 million, that are presently planned to kick off through the end of this year. Subscribers to Industrial Info's Global Market Intelligence Alternative Fuels Project Database can click here for a list of detailed project reports.
Most U.S. gasoline is blended with 10% ethanol. E15 is sold at only about 2,300 stations nationwide, in pumps marked as E15. To put this in perspective, there are more than 150,000 gasoline fueling stations across the nation, according to the American Petroleum Institute (API).
Per the 2007 Renewable Fuel Standard (RFS) Act, E15 is normally discontinued during warm months in about 75% of the nation due to concerns that in warmer weather a 15% blend actually contributes to pollution.
The reason given by the White House for this action is that ethanol is cheaper per gallon than gasoline. Gasoline with 15% ethanol sells for about 15-25 cents per gallon less than a mix with 10% ethanol, according to the Renewable Fuels Association. However, the U.S. Energy Information Administration (EIA) estimates that ethanol delivers about 33% less mileage than gasoline.
So while the administration's announcement is buoyant about saving Americans money, the reality is less clear.
Further down in the announcement is the flip side--the price of corn feedstocks and ethanol itself. The administration pledges $700 million to help growers of corn intended for ethanol through the new Biofuels Producer Program (BPP). The statement relates, "The Program will support agricultural producers that rely on biofuels producers as a market for their agricultural products. By making payments to producers of biofuels, the funding will help maintain a viable and significant market for such agricultural products." This would also include growers of soybeans for biodiesel or renewable diesel, and other ag-to-fuel crops.
The U.S. Department of Agriculture estimates that 90 million acres are planted in corn in the U.S., with about 40% of the corn yield going to ethanol. The standard conversion rate is 2.8 gallons of ethanol output per bushel of corn input. Corn used for ethanol also yields dried distillers grains a key protein-rich ingredient in animal feeds.
The concern of the BPP is to ensure that producers of corn for ethanol do not switch to other crops when prices fall, a change that could limit the supply of ethanol.
Eastern Iowa corn prices hit a low in May 2020 at well under $3.00 per bushel, but have been on a strong upward drive since then. They peaked at just over $7.50 per bushel in late June, dropped to about $5.00 in late December and have risen to just under $7.50 again in recent weeks, reflecting a two-year high.
Click on the image at right for a look at U.S. corn prices.
The price of corn is one of two factors in ethanol pricing, the other being demand. During the COVID-19 pandemic, sales of all fuels dropped drastically as Americans--like the rest of the world--stopped using motor fuels. In early 2021 the price of ethanol had dropped to $1.843 per gallon, compared to the March 2, 2022, price of $2.407, the latter being a more than 30% jump, according to grains.org, as drivers return to the road.
However, current prices are actually down from the November 24, 2021, high of $3.4055 per gallon. From December 31, 2021, to January 12, 2022, ethanol dropped by almost one-third, from $2.9988 on the earlier date to $2.1567 on the 12th. Prices are according to tradingeconomics.com.
Ethanol producers were especially squeezed for profits in January as product price drops coincided with feedstock cost jumps. It is interesting that the administration is offering $700 million to feedstock growers when corn prices are equaling two-year highs.
With this announcement, the administration is trying to tiptoe down a tightrope between reducing pump prices and boosting corn and ethanol profits. Whether this move will be sufficient for either remains to be seen, but the fact that ethanol blends cost drivers in reduced gas mileage may mean the only advantage is to growers and refiners.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
One question raised by this is whether ethanol producers will have to delay plant turnarounds to make ethanol during a season they otherwise would have throttled back production.
Industrial Info is tracking 129 ethanol plant maintenance turnarounds in the U.S., worth $108.6 million, that are presently planned to kick off through the end of this year. Subscribers to Industrial Info's Global Market Intelligence Alternative Fuels Project Database can click here for a list of detailed project reports.
Most U.S. gasoline is blended with 10% ethanol. E15 is sold at only about 2,300 stations nationwide, in pumps marked as E15. To put this in perspective, there are more than 150,000 gasoline fueling stations across the nation, according to the American Petroleum Institute (API).
Per the 2007 Renewable Fuel Standard (RFS) Act, E15 is normally discontinued during warm months in about 75% of the nation due to concerns that in warmer weather a 15% blend actually contributes to pollution.
The reason given by the White House for this action is that ethanol is cheaper per gallon than gasoline. Gasoline with 15% ethanol sells for about 15-25 cents per gallon less than a mix with 10% ethanol, according to the Renewable Fuels Association. However, the U.S. Energy Information Administration (EIA) estimates that ethanol delivers about 33% less mileage than gasoline.
So while the administration's announcement is buoyant about saving Americans money, the reality is less clear.
Further down in the announcement is the flip side--the price of corn feedstocks and ethanol itself. The administration pledges $700 million to help growers of corn intended for ethanol through the new Biofuels Producer Program (BPP). The statement relates, "The Program will support agricultural producers that rely on biofuels producers as a market for their agricultural products. By making payments to producers of biofuels, the funding will help maintain a viable and significant market for such agricultural products." This would also include growers of soybeans for biodiesel or renewable diesel, and other ag-to-fuel crops.
The U.S. Department of Agriculture estimates that 90 million acres are planted in corn in the U.S., with about 40% of the corn yield going to ethanol. The standard conversion rate is 2.8 gallons of ethanol output per bushel of corn input. Corn used for ethanol also yields dried distillers grains a key protein-rich ingredient in animal feeds.
The concern of the BPP is to ensure that producers of corn for ethanol do not switch to other crops when prices fall, a change that could limit the supply of ethanol.
Eastern Iowa corn prices hit a low in May 2020 at well under $3.00 per bushel, but have been on a strong upward drive since then. They peaked at just over $7.50 per bushel in late June, dropped to about $5.00 in late December and have risen to just under $7.50 again in recent weeks, reflecting a two-year high.
Click on the image at right for a look at U.S. corn prices.The price of corn is one of two factors in ethanol pricing, the other being demand. During the COVID-19 pandemic, sales of all fuels dropped drastically as Americans--like the rest of the world--stopped using motor fuels. In early 2021 the price of ethanol had dropped to $1.843 per gallon, compared to the March 2, 2022, price of $2.407, the latter being a more than 30% jump, according to grains.org, as drivers return to the road.
However, current prices are actually down from the November 24, 2021, high of $3.4055 per gallon. From December 31, 2021, to January 12, 2022, ethanol dropped by almost one-third, from $2.9988 on the earlier date to $2.1567 on the 12th. Prices are according to tradingeconomics.com.
Ethanol producers were especially squeezed for profits in January as product price drops coincided with feedstock cost jumps. It is interesting that the administration is offering $700 million to feedstock growers when corn prices are equaling two-year highs.
With this announcement, the administration is trying to tiptoe down a tightrope between reducing pump prices and boosting corn and ethanol profits. Whether this move will be sufficient for either remains to be seen, but the fact that ethanol blends cost drivers in reduced gas mileage may mean the only advantage is to growers and refiners.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
