US ethanol growth driven by low prices

Ethanol's lower-than-petrol pricing meant the amount put into fuel went up in 2015.

US ethanol production increased for the four years leading up to 2015, according to data from the United States Department of Agriculture (USDA) and the US Energy Information Administration (EIA).

Made mostly from corn, production in the US grew to 14.8 million gallons in 2015, a 3.5 percent increase over the previous year. An analyst for the USDA said the increase was largely due to the price advantage ethanol maintained over petrol in much of 2015. Ethanol prices finally topped petrol prices in November 2015.

The liquid’s primary use in the US is as an additive to petrol. The amount of ethanol producers blend into petrol (gasoline in the US) is determined by how much can be safely used in vehicles, and requirements from the Renewable Fuels Standards Program.

“We had a slight increase in miles driven and we also had a slight increase in the inclusion rate for ethanol in US petrol production. So they’re putting a greater percentage of ethanol in the [petrol],”  Thomas Capehart, an analyst with the USDA told Agri Investor.

He added that the price difference between the two determines how much ethanol is blended into conventional petrol:

“If ethanol is running cheaper, then [producers] are going to put as much ethanol as they can in the gasoline. Right now, [petrol] is very cheap, but they still have to include some ethanol because of the renewable fuel standard.”

Even if petrol prices remain below ethanol prices throughout the year, Capehart said he doesn’t expect to see much of a slow down in ethanol production:

“Even though margins are not that great for ethanol plants, we’re seeing them continue to produce at a pretty strong rate. So I don’t think we’re going to see a large decline,” he said, adding that this was not necessarily the USDA’s official stance.

Source: USDA/EIA.

Source: USDA/EIA.