Demand For Ethanol Plummets Amidst COVID-19 Pandemic and Gas Price War

Photo: Carbon Green Bioenergy

It’s not only conventional oil and gas that is suffering due to the pandemic and gas price war — the demand for corn-based ethanol fuel has also plummeted by 20% — the lowest since the Energy Information Administration began publishing weekly data in 2010, according to the Houston Chronicle.  Ethanol producers are looking for help in the next round of stimulus funding from Congress because they can no longer profitably make ethanol — approximately 100 ethanol plants across the midwest have shut down or slowed in recent weeks.

Why This Matters:  The Clean Air Act requires every gallon of gas sold during the summer to contain about 10% ethanol. But with a glut of gas in the market and the U.S. and other nations cutting production (as was apparently agreed yesterday), less ethanol will be needed and that will hurt American corn producers.  Currently, about 30% of the corn crop is used to make ethanol.  Plus, according to Forbes, many ethanol plants produce and sell CO2 as a byproduct — for example, the U.S. meat industry uses it as a refrigerant and is now scrambling to find replacement supplies.  In addition to wasted crops that cannot be sold due to the pandemic, this drop in the ethanol market is another blow to farmers.

COVID-19 and Ethanol Production

According to the Kansas Corngrowers Association, “The decline in ethanol production represents an almost linear correlation with the decline in unleaded gasoline demand. Nationwide, 44 ethanol plants have idled production representing 3.6 billion gallons per year of production. Another 62 have reduced output rates 10% to 50%, representing another 1.7 billion gallons per year of production. Ethanol inventory levels are at the highest ever levels.”  According to a press release by Senator Tina Smith of Minnesota, some experts are projecting a steep reduction in corn used for ethanol production of 120 to 170 million bushels, further eroding the price farmers get for their crops.

Ethanol Producers Already Hurting Due to EPA Waivers of the Reformulated Gas Requirement

Earlier this year a federal appeals court held that the EPA had abused the provision in the Clean Air Act allowing hardship waivers for small refinery under the RFS, thus eliminating the demand for billions of gallons of renewable fuels and hurting rural communities, farmers, clean energy producers, and agribusinesses. The Trump administration is deciding whether to appeal the decision. This despite the fact that the Trump administration last fall also promised new rules to increase the mandates for ethanol in order to increase the sale of biofuels beyond the current requirement of 15 billion gallons annually.

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