EIA June STEO report predicts further ethanol rebound in 2013

By Erin Voegele | June 17, 2013

The U.S. Energy Information Administration has published data showing that ethanol production has partially recovered since last year’s drought. In the June issue of its Short-Term Energy Outlook, the EIA noted ethanol production fell from an average of approximately 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 production level has partially recovered since April, averaging approximately 870,000 barrels per day in May. The EIA said this increase has been driven in part by increasing renewable fuel standard (RFS) targets and strong demand for renewable identification numbers (RINs).

According to the EIA, ethanol production is expected to remain near current levels through the third quarter of this year, followed by a return to pre-drought production levels. The administration predicts ethanol production will average 870,000 barrels per day in 2013. In 2014, ethanol production is expected to increase, averaging 930,000 barrels per day.

The STEO report notes that the 2013 statutory RFS target of 16.55 billion ethanol-equivalent gallons of total renewable fuels would require obligated parties to obtain RINs equivalent to 9.63 percent of the gasoline or diesel they sell domestically.  

In the report, the EIA also addresses high RIN prices. According to the administration, present ethanol RIN prices, which averaged 80 cents per gallon in May, do not appear to be 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. The EIA also points out that ethanol RIN prices equal to or near the price of biodiesel RINs may lead to blending of biodiesel that exceeds the requirement set by the EPA in its proposed 2013 rulemaking. The EIA said that on the retail level, diesel fuel prices are expected to be the most impacted by higher RIN prices.

The STEO report also addresses near-term projections for gas prices. According to the EIA, it expects the Brent crude oil spot price to average $102 per barrel during the second half of 2013, falling to $100 per barrel in 2014. The price of regular gasoline is expected to average $3.53 per gallon through September. The overall annual average retail gas price is projected to be $3.49 per gallon in 2013, a decrease from $3.63 per gallon last year. The EIA currently predicts gas prices will fall further next year, averaging $3.37 per gallon in 2014.

Weekly ethanol plant production data published by the EIA demonstrates ethanol production has continued its upward trend, reaching 884,000 barrels per day the week of June 7. The production level was nearly equal to the prior week’s 885,000 barrel per day production level, and a significant increase over the 843,000 barrels per day reported for the week of May 3.