EIA: US ethanol production will fall sharply in Q2, Q3

By Erin Voegele | April 07, 2020

The U.S. Energy Information Administration on April 7 drastically lowered its outlook for 2020 ethanol production, predicting production will fall to 630,000 gallons per day during the second quarter and average 820,000 gallons per day for the full year.

The predictions were made in the EIA’s Short-Term Energy Outlook, released April 7. The monthly report reflects the expected impacts of the COVID-19 pandemic on fuel and energy markets. In the report, the EIA cautions that the April STEO is subject to increased levels of uncertainty because the impacts of COVID-19 on energy markets are still evolving.

The EIA currently predicts ethanol production will average 820,000 gallons per day in 2019, increasing to 990,000 barrels per day in 2021. In comparison, ethanol production averaged 1.03 million barrels per day in 2019. In the March STEO, the EIA predicted ethanol production would average 1.04 million barrels per day in 2020 and 1.03 million barrels per day in 2021.

EIA’s quarterly data shows ethanol production averaged 1.04 million barrels per day during the first quarter of this year. Production is currently expected to fall to 630,000 barrels per day during the second quarter, increasing to 740,000 barrels per day in the third quarter and reaching 860,000 barrels per day in the fourth quarter. In 2021, ethanol production is currently expected to average 960,000 barrels per day during the first quarter, before increasing to an average of 990,000 barrels per day in the second and third quarters, and reaching 1 million barrels per day in the fourth quarter.

The EIA currently expects ethanol consumption to average 840,000 barrels per day in 2020 and 910,000 barrels per day in 2021, down from 950,000 barrels per day in 2019. In the March STEO, EIA predicted ethanol consumption would average 940,000 barrels per day in both 2020 and 2021.

The April STEO also includes the EIA’s summer outlook for motor gasoline. According to that data, fuel ethanol blending is expected to fall to 702,000 barrels per day during the second quarter of this year, increasing to 821,000 barrels per day in the third quarter. At that rate, ethanol consumption for the second quarter would fall by 27.3 percent when compared to last year, while consumption for the third quarter would fall by 13.4 percent.

Ethanol isn’t the only liquid fuel to suffer from COVID-19-related impacts on demand. Overall, the EIA expects the largest impacts from COVID-19 will be occur in the second quarter, before gradually dissipating over the course of the next 18 months. Motor gasoline consumption for the second quarter is expected to average 7.1 million barrels per day, down 1.7 million barrels per day when compared to the first quarter of this year. For the full year, EIA forecasts that U.S. motor gasoline consumption will average 8.4 million barrels per day, down 9 percent from 2019.

For the April-September summer driving season, the EIA currently expects U.S. regular gasoline retail prices to average $1.58 per gallon, down from an average of $2.72 per gallon during the summer of 2019. For all of 2020, the EIA expects U.S. regular gasoline retail prices to average $1.86 per gallon.

The EIA’s most recently weekly ethanol data shows that many ethanol plants have begun to slow and idle ethanol production due to market factors primarily caused by COVID-19. Ethanol production fell to a six-year low of 840,000 barrels per day the week ending March 27, while weekly ending stocks hit a record high of 25.717 million barrels. New weekly data scheduled to be released April 8 will likely show additional drops in production.

The agency’s most recent monthly data shows the U.S. imported only 176,000 barrels pf ethanol in January, all from Brazil. The U.S. exported 3.602 million barrels during the same month, primarily to Brazil, Canada and India.