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JimMeade
Veteran Advisor

Ethanol

I'm the first to admit the ethanol business is over my head.  I'd figured that with export and feed usage being pressed down, that ethanol usage was important in corn prices.

 

Here's a short snippet from a University of Illinois paper on ethanol price and demand.  Please read the entire article.  https://farmdocdaily.illinois.edu/2019/04/revisiting-the-value-of-ethanol-in-e10-gasoline-blends.htm...

 

"The contentious debate about the impact of small refinery exemptions (SREs) on the physical demand for ethanol shows no signs of letting up.  The ethanol industry continues to argue forcefully that there has been substantial destruction of demand in the physical ethanol market due to the SREs. "

 

"We can roughly estimate that adding ethanol to gasoline saves U.S. drivers 6.8 cents per gallon of finished gasoline (10 percent of $0.68).  Most importantly, we find no evidence that the net value of ethanol in the E10 gasoline blend has declined since 2017, which supports the argument that waiving the conventional mandate below the blend wall will not change the amount of ethanol consumed in the form of E10 because ethanol remains a price competitive component.  "

 

The authors are careful to point out this analysis is only for E10, not E15 or E85, etc.

 

Does this mean we should quit worrying about SREs and fight over something else?

2 Replies
WCMO
Senior Advisor

Re: Ethanol

I thought the SRE's were supposed to be based on "hardship", and part of the debate was that some were granted even though using ethanol would have been advantageous relative to other substitute enhancers, some were given to small refineries that were quite profitable, and some were granted to small refineries that were perhaps subsidiaries of bigger fish that were also quite profitable.  Not sure if the oil companies or refineries really care if US drivers are saving 6.8 cents per gallon.  As a price component, ethanol might be competitive right now, yet it has not always been so, and there is no future guarantee.

RJG640v8
Advisor

Re: Ethanol

looks as though daddy giveth and taketh away at the same time. Giveth bailout monies for soy and taketh money away from corn by issuing RIN waivers. Rock and a hard place.