EIA revises short-term ethanol forecasts based on RFS proposal

By Erin Voegele | June 09, 2015

The U.S. Energy Information Administration has published the June edition of its Short-Term Energy Outlook, predicting ethanol production will remain at near current levels, averaging 936,000 barrels per day this year.

According to the EIA, ethanol production averaged 935,000 barrels per day in 2014. Production this year is expected to increase slightly, reaching an average of 936,000 barrels per day. In 2016, ethanol production is expected to fall to 933,000 barrels per day. According to the STEO, the updated liquid biofuels forecast was developed using the U.S. EPA’s recent proposed rule to set 2014, 2015 and 2016 volume obligations under renewable fuel standard (RFS). When compared to the May STEO, the forecast for 2015 production has been maintained. The forecast for next year, however, is down slightly from the 937,000 barrel per day prediction made last month. 

The June STEO also includes predictions for ethanol consumption. According to the EIA, consumption averaged 878,000 barrels per day last year, and is expected to increase to 891,000 barrels per day this year. In 2016, ethanol consumption is expected to increase to 896,000 barrels per day. At these levels, the average ethanol share of the total gasoline pool would be approximately 9.9 percent this year and next year. The EIA also indicated it does not expect measurable increases in E15 or E85 consumption over the forecast period. In addition, the administration noted the proposed RFS targets are expected to encourage imports of Brazilian sugarcane ethanol, which averaged just 3,000 barrels per day last year. Because of the increase in ethanol gross imports, the EIA said net exports of ethanol are expected to fall from 51,000 barrels per day last year to 44,000 barrels per day this year and 36,000 barrels per day in 2016.

The EIA also said it expects the biggest effect of the RFS targets to be on biomass-based diesel consumption. Biodiesel production averaged 81,000 barrels per day last year and is expected to increase to 90,000 barrels per day this year, and 98,000 barrels per day in 2016. The new forecast for 2015 is 9,000 barrels per day higher than the level forecast in the May STEO, with the 2016 forecast up 14,000 barrels per day when compared to the prediction made by the EIA last month. The EIA said net imports of biomass-based diesel are also expected to increase, from 16,000 barrels per day last year to 26,000 barrels per day this year and 35,000 barrels per day next year. When compared to the 2015 and 2016 import levels forecast in the May STEO, the new predictions are 9,000 barrels per day and 19,000 barrels per day higher, respectively.

According to the EIA, a combination of higher biomass-based diesel consumption, higher consumption of domestic and imported ethanol, and banked renewable identification numbers (RINS) are expected to help meet the newly proposed RFS targets through 2016.

Regarding gasoline prices, the EIA said average retail prices reached a 2015 high of $2.72 per gallon in May, up 25 cents per gallon when compared to April. The higher prices reflect rising crude oil prices and isolated outages at West Coast and Midwest refineries. According to EIA, gasoline prices are expected to average $2.43 during the second half of this year, with the full-year average for 215 expected to be $2.44 per gallon, 1 cent higher than the forecast made in the May STEO. The new forecast for 2016 prices is $2.55 per gallon, down 8 cents per gallon when compared to the forecast made by EIA last month.

The EIA’s most recent weekly fuel ethanol production data shows ethanol production averaged 972,000 barrels per day the week of May 29, up from 969,000 barrels per day the prior week.

The most recent monthly export data shows the U.S. exported nearly 2 million barrels of ethanol in March, with top destinations of Brazil, Canada, Oman, South Korea, and the Netherlands. March ethanol imports reached only 7,000 barrels, all of which was imported from Canada.