EIA outlook predicts increased ethanol production through 2040

By Erin Voegele | April 15, 2015

The U.S. Energy Information Administration has released its Annual Energy Outlook 2015 (AEO2015), which presents updated projections for U.S. energy markets through 2040 based on six different cases that reflect updated scenarios for crude oil prices. The six cases include the reference case, low and high economic growth, low and high oil price, and high oil and gas resource.

Regarding ethanol, the reference case predicts that a modest penetration of E85 and a small increase in renewable liquids blended into diesel fuel will result in a slight increase in consumption of renewable fuels liquid fuels for transportation. This increase is expected to occur despite a smaller pool for ethanol blending as a result of a projected overall decrease in motor gasoline consumption.

In the reference case, ethanol consumed in motor gasoline and E85 is expected to increase from 1.12 quadrillion Btu in 2013 to 1.27 quadrillion Btu in 2040, an annual growth rate of 0.5 percent. Motor gasoline consumption is expected to decrease from 16.36 quadrillion Btu in 2013 to 12.96 quadrillion Btu in 2040, an annual growth rate of -0.9 percent. Of that volume of motor gasoline consumption, the EIA’s reference case predicts the share of E85 will increase from 0.02 quadrillion Btu in 2013 to 0.28 quadrillion Btu in 2040, a 10 percent annual growth rate.

According to the reference case, the supply of ethanol is expected to increase from 830,000 barrels per day in 2013 to 950,000 barrels per day in 2040, an annual growth rate of 0.5 percent. Domestic production of ethanol is expected to increase from 850,000 barrels per day in 2013 to 930,000 barrels per day in 2040, an annual growth rate of 0.4 percent. The supply of biodiesel is expected to increase from 100,000 barrels per day in 2013 to 110,000 barrels per day in 2040, a 0.4 percent annual growth rate. Domestic production of biodiesel is expected to increase from 90,000 barrels per day in 2013 to 100,000 barrels per day in 2040, a 0.4 percent annual growth rate.

The reference case also assumes the wholesale price of ethanol will increase slightly, from $2.37 per gallon in 2013 to $2.64 per gallon in 2040. The price of E85 will also increase, from $3.14 per gallon in 2013 to $3.38 per gallon in 2040. Motor gasoline prices are expected to increase from $3.55 per gallon in 2013 to $3.90 per gallon in 2040.

In the industrial sector, ethanol used in gasoline blending is expected to remain fairly steady, from 0.06 quadrillion Btu in 2013 to 1.05 quadrillion Btu in 2040. Ethanol used in E85 is expected to increase from 0.01 quadrillion Btu in 2013 to 0.19 quadrillion Btu in 2040, an annual growth rate of 9.9 percent.

The reference case also indicates the majority of ethanol is expected to continue to be produced using corn and other forms of starch, with production from those sources increasing from 0.09 quadrillion Btu in 2013 to 1.19 quadrillion Btu in 2040. Production from cellulose is expected to increase from 0.00 quadrillion Btu in 2013 to 0.01 quadrillion Btu in 2040.

For the other six cases, the volume of ethanol consumed in motor gasoline and E85 is projected to range widely. In the low economic growth cases, ethanol consumption could be as low as 1.16 quadrillion Btu in 2040, compared to the reference case of 1.27 quadrillion Btu. In the high economic growth case, ethanol consumption could be as high as 1.34 quadrillion Btu. In the low oil price case, ethanol consumption could be 1.12 quadrillion Btu in 2040, down from the 1.27 quadrillion Btu reference case. Under the high oil price case, ethanol consumption is expected to reach up to 1.28 quadrillion Btu. Under the high oil and gas resource case, ethanol consumption could reach 1.30 quadrillion Btu by 2040, up from the 1.27 quadrillion Btu reference case.

A full copy of the report can be downloaded from the EIA website.