New data from the Energy Information Administration (EIA) and analyzed by the Renewable Fuels Association (RFA) reveals ethanol demand in 2018 was negatively impacted by EPA granting dozens of small refinery exemptions (SREs).
Former EPA Administrator Scott Pruitt granted 48 refiners waivers from their legal blending obligations under the Renewable Fuel Standard (RFS), resulting in a flood of Renewable Identification Numbers (RIN) into the market and a subsequent collapse in RIN prices. According to RFA, the wave of surplus RINs reduced the incentive to expand ethanol blending beyond the so-called E10 “blend wall,” while low RIN prices pressured ethanol values and margins throughout 2018 and the resulting demand destruction hurt ethanol producers, farmers and consumers.
According to the Renewable Fuels Association’s (RFA) analysis of the new EIA data:
U.S. ethanol consumption declined to 14.42 billion gallons in 2018 from 14.50 billion gallons in 2017. Based on the EIA’s forecast in January 2018 (i.e., before the market became aware of rampant SREs), U.S. ethanol consumption was expected to reach 14.66 billion gallons—237 million gallons more than what actually occurred; and
The U.S. ethanol blend rate fell to 10.07% in 2018 from 10.13% in 2017. The blend rate began to drop in February 2018, as rumors and press reports regarding SREs made their way into the market. This was far below expectations at the start of 2018, when EIA had forecasted an implied ethanol blend rate of 10.26% for 2018. For the February-December period, the blend rate averaged just 10.01%.
“This was the first year-over-year decline in U.S. ethanol consumption since 1998, breaking a 20-year trend of annual increases in domestic ethanol demand. Similarly, the blend rate slid backward for the first time since EIA began offering more robust ethanol blending data in 2010,” said RFA President and CEO Geoff Cooper. “As newly confirmed EPA Administrator Andrew Wheeler considers the 37 petitions now before him for small refiner exemptions from 2018 RFS requirements, we urge him to take a more measured, constrained, and reasonable approach that remains faithful to the spirit and intent of the RFS.”