EIA STEO predicts increasing U.S. ethanol production

By Erin Voegele | July 11, 2013

The U.S. Energy Information Administration has released the July edition of its Short-Term Energy Outlook, noting that ethanol production has been increasing since April. The EIA attributes the growth, in part, to increasing renewable fuel standard (RFS) targets and strong demand for renewable identification numbers (RINs).

While ethanol production dropped from an average of 900,000 barrels per day during the first half of 2012 to an average of 820,000 barrels per day from July 2012 through March 2013, the industry is rebounding. According to the EIA, ethanol production is expected to remain near its June 2013 production level of 870,000 barrels per day through September, before recovering to pre-drought production levels. The administration currently predicts the average daily production level for all of 2013 will be 870,000 barrels per day. In 2014, production is expected to increase, averaging 920,000 barrels per day.

The STEO report also addresses RIN prices. According to the report, D6 renewable fuel RINs increased again in June, averaging more than 90 cents per gallon. D6 RIN prices were as low as 5 cents per gallon at the beginning of the year, and spiked to as high as $1.05 per gallon in March.

According to the EIA, increases in ethanol RIN prices do not appear sufficient to make E85 an economical fuel choice. However, higher ethanol RIN prices do tend to lower the market price of E85 relative to E10. In addition, the EIA notes that ethanol RIN prices near the price of biodiesel RINS may lead to higher blending of biodiesel, exceeding the 2013 target set by the U.S. EPA under the RFS.

The latest weekly ethanol statistics published by the EIA show that ethanol production for the week ending July 5 averaged 881,000 barrels per day. This is an increase over the 863,000 barrel per day average for the prior week. Production for the same period of 2012 averaged 821,000 barrels per day.

Regarding oil and gas prices, the STEO report projects that Brent crude oil spot prices will average $102 per barrel during the second half of 2013, and $100 per barrel in 2014. U.S. gasoline prices increased from $3.52 per gallon on April 29 to $3.66 per gallon on June 10. By July 1, the average retail price had dropped to $3.50 per gallon. During the second half of 2013, the EIA expects gasoline prices to average $3.38 per gallon.