At the Mercy of the Markets

FROM THE DECEMBER ISSUE: Editor Lisa Gibson previews the magazine, including feature articles about how tariffs are affecting ethanol exports, a look at potential railroad congestion, year-round E15 sales, and more.
By Lisa Gibson | November 26, 2018

At first glance, it might look like we’ve put together a depressing issue of Ethanol Producer Magazine to end the year: Export markets are constricted? Oil production could congest railways again? The E15 Reid vapor pressure waiver could be delayed? Pause. Breathe.

In this edition, we cover some crucial topics that have been on everyone’s minds this past year and will remain important into 2019. There’s uncertainty, sure, but our sources assure us there is hope, and there are solutions.

For our cover story, I explored the foreign tariffs with the largest impacts on U.S. ethanol exports. Of course, those are China (70 percent) and Brazil (20 percent on all U.S. imports above 600,000 liters annually). Interestingly, those tariffs have affected us in different ways. China’s 70 percent includes retaliatory actions in the midst of the trade war and has effectively shut us out of that market.

Meanwhile, China also is implementing a policy of E10 nationwide by 2020 and will require about 5 billion gallons of ethanol. The term “missed opportunity” doesn’t seem to cover it. Still, we’re not losing export volumes. It’s simply being rerouted to other countries. U.S. ethanol is a low-cost octane and it’s economical, even without renewables mandates. 

In Brazil, we’re still sending record volumes. Today, it pencils out because Brazil’s oil prices have increased. But the demand surge caused by the high oil prices is much larger than what we’ve been able to take advantage of, because of the tariff. One source estimates the missed sales at $1 billion.

But focus on this: We’re still sending ethanol to Brazil, more markets are opening for U.S. ethanol and experts are hoping for an end to the trade war, sooner rather than later. Find out about the details on these tariffs and the new market opportunities, starting on page 16.

In the next feature article, Associate Editor Matt Thompson did some intense research on the 2014 rail congestion that cost ethanol producers time and money. Many say the railroads favored Big Oil because it paid more per car, but the railways deny that. With predictions of another surge in oil production, we’ve talked to producers and railways to find out what lessons learned in 2014 could alleviate transportation headaches in another oil boom. Find out what they have to say on page 24.

Finally, we’ll likely get our E15 Reid vapor pressure waiver. I was skeptical it would happen—and am still expecting some pushing and compromises, as the U.S. EPA says it’ll also examine renewable identification number certification—but it seems the waiver is on the way. The rule-making will begin in February, with a final rule published in May, EPA says. That’s just in time for the 2019 RVP season.

With Growth Energy’s new branding campaign for E15 to become Unleaded88 across the country, the timing and potential for the blend could be enormous. We’ll be watching the progress as closely as you will. Find out what we know so far, starting on page 30.

The outcomes of the topics we cover this month are unpredictable. Some sources are hesitant to speculate on the record, so we’ll watch as things unfold. The U.S. ethanol industry will keep churning out its products and sending it to the best markets, as that list continuously evolves and grows. The markets are changing, for better or worse, and we’re at their mercy. The U.S. ethanol industry will just have to continue finding the hot spots. 

Author: Lisa Gibson