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U.S. Ethanol Market: Prices Are Soaring, Bioethanol Displaces Synthetic Alcohol

ethanol
Archives, Global Trade Daily, Imports/Exports, News

U.S. Ethanol Market: Prices Are Soaring, Bioethanol Displaces Synthetic Alcohol

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IndexBox has just published a new report: ‘U.S. – Ethyl Alcohol – Market Analysis, Forecast, Size, Trends and Insights.‘ Here is a summary of the report’s key findings.

In November 2021, U.S. ethanol prices hit over $3.2 per gallon, doubling against the same period in 2020. Despite this, the last factory in the U.S. producing synthetic ethanol announced ceasing operations because it cannot compete with bioethanol in terms of costs. Government investments worth $26M will drive U.S. biofuel infrastructure development. A conflict between biofuel producers and the Environmental Protection Agency is coming to a head because the agency delayed issuing the 2022 Renewable Volume Obligation (RVO). This document was expected to propel the bioethanol market by elevating the standards for the biofuel percentage used in blends with traditional gasoline and diesel.

Key Trend and Insights

According to the USDA, the Eastern Cornbelt average ethanol price grew from $1.4 per gallon in January to more than $3.2 per gallon in November 2021. The most significant gains were seen past month when prices for the alcohol leapt up by more than 30%.

In the U.S., ethanol fuel production has rebounded since its downturn the previous year. According to the EIA, throughout the first eight months of 2021, there were 3.9M barrels of ethyl alcohol produced. In the same period of 2020 and 2019, 3.7M barrels and 4.0M barrels were manufactured, respectively.

Global demand for American ethanol is growing. In the first nine months of 2021, U.S. exports of ethyl alcohol consisted of $1.83B, which is 5.8% more than the same period in 2020. During the twelfth Ministerial-level meeting of the India-U.S. Trade Policy Forum, the Indian side expressed interest in obtaining a massive supply of the alcohol from the US. India’s national goals call for increasing the amount of ethanol blended with petrol to 20% by 2025.

Even though the growth in demand and increased prices are beneficial for U.S. ethanol producers, the last synthetic ethanol facility in the U.S., Tuscola Plant, owned by petrochemical giant LyondellBasell, announced that it would close at the end of 2021. Faced with rapidly increasing costs for resources and energy, specifically ethylene and natural gas, synthetic ethanol cannot compete with bioethanol. Meanwhile, prices for corn, which is widely used to produce the alcohol, have gone down this year: Eastern Cornbelt average corn price decreased from $7.60 per bushel in May to $5.60 in November.

Government policies will stimulate development in the bioethanol market. The U.S. Agriculture Department announced that it would invest $26M into building biofuel infrastructure in 23 states as part of the ‘Higher Blends’ program. The subsidies will stimulate replacing old-style fuel pumps and storage tanks with blended pumps and tanks suitable for E15 and E85 fuels, as well as biodiesel. The USDA projects that the grants will help increase potential sales for biofuels by 822M gallons per year.

The relationship between biofuel producers and government bodies worsens, threatening to become a severe conflict. Growth Energy, the leading American trade association advancing biofuel usage, submitted a notice of intent to sue the Environmental Protection Agency (EPA) for failing to issue on time the 2022 Renewable Volume Obligation (RVO), which regulates the blending standards of biofuels with traditional automotive fuels. By retaining the status quo for the RVO, current standards won’t be reevaluated to increase the percentage of green energy sources used and thus hinder growth in the biofuel market.

U.S. Ethyl Alcohol Exports

In 2020, exports of ethyl alcohol from the U.S. reduced to 6.5B litres, falling by -7.7% against the year before. In value terms, ethanol exports contracted to $2.4B (IndexBox estimates) in 2020.

Canada (1.5B litres), Brazil (946M litres) and India (898M litres) were the main destinations of ethanol exports from the U.S., together comprising 52% of total exports. South Korea, Mexico, the Netherlands, Colombia, the Philippines, Peru, Nigeria, the UK and China lagged somewhat behind, together comprising a further 37%.

In value terms, Canada ($596M), Brazil ($318M) and India ($312M) appeared to be the largest markets for ethanol exported from the U.S. worldwide, with a combined 51% share of total exports. South Korea, the Netherlands, Mexico, Colombia, Peru, the Philippines, Nigeria, the UK and China lagged somewhat behind, together accounting for a further 37%.

In 2020, the average ethanol export price amounted to $0.4 per litre, rising by 6.1% against the previous year. Prices varied noticeably by the country of destination; the country with the highest price was the Netherlands ($0.5 per litre), while the average price for exports to the Philippines ($0.3 per litre) was amongst the lowest. In 2020, the most notable rate of growth in terms of prices was recorded for supplies to the Netherlands, while the prices for the other significant destinations experienced more modest paces of growth.

Source: IndexBox Platform 

oil production
Archives, Global Trade Daily, Special Reports, State Spotlight

U.S. States Producing the Most Oil

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With gasoline prices reaching their highest levels since 2014 this fall, consumers, policymakers, and economic experts have lately turned their attention to the state of oil production in the U.S. and worldwide.

The COVID-19 pandemic has been an uneasy time for oil, as with many other products and sectors of the economy. The price of oil futures briefly turned negative in the first months of the pandemic, and remained at relatively low levels through most of 2020 and the first part of 2021, a product of reduced demand for fuel and a price war between Russia and Saudi Arabia. While demand has recovered the longer the pandemic has gone on, oil production has been affected by the global supply chain struggles that many other industries are experiencing as well. As a result, oil prices have rebounded to their highest levels in more than half a decade.

The volatility of the oil markets during the COVID-19 pandemic highlights the challenges of having a critical product like oil be part of a complex globalized economy. Even before the pandemic, many political and economic leaders had been seeking to lessen U.S. dependence on foreign sources of oil to make the country more self-reliant in its energy mix.

The U.S. has had success on this front in recent years. The U.S. saw a steady decline in oil production from the late 1980s to the mid-2000s, a product of a range of factors including decreased demand, the growth of the environmental conservation movement, and increased involvement in the Middle East. Oil production in the U.S. bottomed out at 5 million barrels per day in 2008. Since then, as policymakers have prioritized domestic production and the rise of techniques like fracking have reduced the cost of extracting petroleum, U.S. production has boomed. In 2018, the U.S. surpassed Russia and Saudi Arabia to become the world’s leading producer of crude oil.

The result of this growth in domestic production has been a sharp decline in petroleum imports. Imports have fallen since their peak of 13.7 million barrels per day in 2005, dropping to only 7.85 million in 2020. After taking exports of 8.5 million into account, the U.S. actually became a net exporter of oil for the first time last year.

In the U.S., as is the case globally, oil reserves are not evenly distributed, and some states produce significantly more than others. Texas is far and away the leading oil producer in the U.S. at nearly 1.8 billion barrels annually—more than four times the total for runner-up North Dakota. States in the Plains and Mountain West fare best, along with Alaska and Gulf Coast states like Louisiana and Mississippi.

The data used in this analysis is from the U.S. Energy Information Administration. To determine the states producing the most oil, researchers at Commodity.com calculated the total annual crude oil production in 2020. In the event of a tie, the state with the higher 10-year change in annual crude oil production was ranked higher. Researchers also included the latest statistics on proven oil reserves, the number of operable petroleum refineries, and per capita oil consumption.

Here are the states producing the most oil.

State      Rank      Total annual crude oil production (thousand barrels) 10-year change in annual crude oil production Crude oil reserves (million barrels)           Number of operating refineries Per capita oil consumption (barrels)
Texas     1      1,776,449 +316.3% 18,622 31        53.6
North Dakota     2      434,889 +286.4% 5,897 1        46.8
New Mexico     3      370,402 +464.9% 3,456 1        24.1
Oklahoma     4      171,740 +144.7% 2,047 5        25.0
Colorado     5      167,832 +407.5% 1,414 2        18.2
Alaska     6      163,852 -25.1% 2,680 5        53.2
California     7      143,114 -28.6% 2,213 14        16.8
Wyoming     8      89,091 +65.3% 1,013 4        49.9
Louisiana     9      36,708 -45.7% 389 16        80.9
Utah     10      30,951 +25.5% 275 5        18.5
Kansas     11     28,260 -30.2% 313 3        23.2
Ohio    12      23,819 +399.1% 88 4        18.1
West Virginia     13      19,059 +934.7% 13 1        22.9
Montana     14      18,985 -25.1% 298 4        31.4
Mississippi     15      14,166 -40.9% 114 3        24.9
United States     –      4,129,563 +106.3% 44,191 129        22.8

 

For more information, a detailed methodology, and complete results, you can find the original report on Commodity.com’s website: https://commodity.com/blog/states-producing-oil/