15 May 2020 | 19:59 UTC — Houston

US Renewable Fuels Association officials see post-pandemic path for ethanol

Highlights

Ethanol production remains low

RFS challenged by oil interests

The US ethanol industry appears to have seen the worst of the coronavirus crisis' impact, but faces a long road back to pre-pandemic levels, Renewable Fuels Association officials said Friday.

"It seems like the worst may be behind us," said Geoff Cooper, RFA president, in a conference call. "We are seeing some plants come back online and some incremental increases."

Demand for ethanol plummeted from 16.2 billion gallons in annualized capacity in the last week of February to 8.2 billion gallons in late April. As states imposed shelter-in-place orders, driving fell sharply, pushing demand for motor gasoline and its blendstocks down as well.

The crumbling demand forced more than 140 plants to fully or partially idle. Recently, some plants have increased production or restarted. But Cooper said that more than 60 plants remain closed, with another 70 to 80 running at greatly reduced rates.

As shelter-in-place orders have expired, demand for motor gasoline has begun to rise. However, ethanol production is still below the demand needed for blending gasoline.

However, that is not a problem, according to Neil Koehler, RFA chairman and CEO of Pacific Ethanol. Prior to the pandemic, the ethanol industry was already plagued by large inventories that pushed down prices and lowered margins. Low production in the last three weeks has forced a large draw in stocks, although inventories remain high. The industry could stand to whittle down stocks for a bit longer, Koehler said.

"It's important as an industry that we do this slowly," he said about raising production. "We may need a few weeks of falling inventories before we get back in balance."

The ethanol industry, officials said, also faces challenges from Washington, where oil interests seek to undercut the federal Renewable Fuel Standard. Governors from six oil-producing states have asked the US Environmental Protection Agency to waive the biofuel blending requirements for refineries for 2020 due to the economic impact of the coronavirus.

"The refiners are clearly trying to put pressure on the EPA," Cooper said.

Also in the capital, ethanol and other biofuels industries are seeking economic assistance from the federal government as part of the next coronavirus aid bill. The Democrat-controlled House will vote on the package Friday, but it faces stiff opposition in the Republican-held Senate and a threatened veto from President Trump.

Cooper, however, said there is support from many lawmakers on Capitol Hill for direct assistance to the industry, regardless of what Congress does.


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