US President Joe Biden announced April 12 plans for an emergency waiver to allow summertime sales of gasoline blended with 15% ethanol, in the latest attempt to ease domestic fuel prices contributing to sky-high inflation.
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The move could initially do more to bolster political goodwill in farm states than it does to boost fuel supply or ease pump prices, as infrastructure for higher-ethanol blends remains limited to about 2,300 stations centered in the Midwest.
"We obviously expect an uptick in E15 sales this summer due to greater overall gasoline consumption, greater availability of E15, and E15 selling at a discount to E10 at the pump," said Corey Lavinsky, global manager of biofuels analytics at S&P Global Commodity Insights.
"But the additional ethanol volumes sold from June 1 to Sept. 15 if rules are changed to allow E15 to be sold during that period should be relatively small, roughly 25 million gallons," he added.
Biden visits Iowa ethanol plant
The White House estimates US drivers can save 10 cents/gal on E15. But given the slightly lower energy content of the blend, "motorists will see lower mileage per gallon than usual and might end up needing to fill up their tanks more frequently," said Lenny Rodriguez, an oil analyst at S&P Global.
Biden announced the emergency waiver during a visit to POET's Menlo, Iowa, bioethanol plant that produces 150 million gallons/year.
Earlier April 12, the US government reported that inflation surged 8.5% in the year ending in March, the highest in 40 years, with gasoline prices jumping 18.3% from February as global oil markets reacted to Russia's invasion of Ukraine. March gasoline prices soared 48% from a year earlier.
Crude futures rose back above $100/b April 12 as the market eyed rising supply risks and signs of a return of lockdown-stunted Chinese crude demand.
NYMEX May WTI settled $6.31 higher at $100.60/b, while ICE June Brent rallied $6.16 to $104.64/b.
Fuel supply emergency
The Environmental Protection Agency plans to declare a fuel supply emergency as a result of the Ukraine war to justify the emergency E15 waiver, a senior Biden administration official told reporters when asked how the policy would withstand court challenges that have reverse similar moves in the past.
While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, E15 cannot be sold in conventional gasoline markets from June 1 to Sept. 15 due to EPA restrictions on air pollution from gasoline.
That blackout period was lifted by the Trump administration, but the DC Circuit Court of Appeals last year vacated the 2019 EPA rule that extended a summertime waiver of Reid Vapor Pressure requirements to biofuel blends containing more than 10% ethanol.
The summertime sales ban impacts about 80% of existing E15 retail locations. It does not impede year-round E15 sales in reformulated gasoline markets, representing about 30% of the US gasoline market.
E15 pumps, canola pathway
The White House said it would work with states to ensure the expanded E15 access has no significant air quality impacts this summer.
The EPA is considering additional action to spur E15 use, including continued talks with states that have expressed interest in year-round access and modifications to E15 fuel pump labeling, the White House said.
The EPA is also set to propose April 12 a new approval for canola oil that will add new pathways for fuels to participate in the Renewable Fuel Standard as feedstock for renewable diesel, jet fuel and other biofuels.
US ethanol traders said April 12 that they expect little market impact over the coming months.
"The headline reads as though we are gonna start blending 15% in all US gasoline sales tomorrow, and it's just not the case," one ethanol trader said.
Ethanol prices during morning trading April 12 increased nearly 10 cents, or 4%, from the previous session, but sources attributed the rise to NYMEX RBOB gasoline futures climbing more than 4.5%.
"I actually think it's more buying versus RBOB than anything," another ethanol source said. "We have well outpaced corn at this point. It doesn't seem like many think the E15 thing is actually a big deal."
Sources said the modest bump in ethanol blending could provide some support to the industry, but that the incremental gain in blended volumes pales in comparison to high inventories.
"We have an ethanol problem right now," said the first source. "That waiver helps, it certainly helps, but it doesn't solve the problem of 26 million barrels of stocks."
There were 25.903 million barrels of US ethanol inventory in the week ended April 1, according to Energy Information Administration data released April 6.
An additional 25 million gallons of ethanol blending would translate to about 595,000 barrels. Though a significant volume, US stocks fell by more than 600,000 barrels in the week ended April 1, while the additional volume from E15 would be spread over several months.
Refiners, biofuel makers react
The Fueling American Jobs Coalition of independent refiners, fuel retailers and union workers predicted Biden's E15 waiver would get overturned by a court challenge.
"The Trump administration's illegal E15 waiver allowed the fuel to be sold year-round for three years before it was struck down in court," the group said. "During that three-year period, the percentage of ethanol blended in the fuel supply did not change."
Biofuel advocates in recent months expressed dismay that they were being overlooked by the Biden administration in its plans for addressing higher fuel prices and meeting ambitious climate objectives.
Renewable Fuels Association President and CEO Geoff Cooper, who joined Biden at the POET facility, applauded the president "for recognizing that low-cost, low-carbon ethanol should be given a fair opportunity to strengthen our energy security and reduce record-high pump prices."
Growth Energy CEO Emily Skor touted the action as a win for drivers, farmers, energy security and the environment.
"American biofuels like ethanol reduce greenhouse gas emissions by 46% compared to regular gasoline and are key to achieving the nation's climate goals," she said. "We look forward to working with this administration and leaders in Congress to deliver a permanent fix to restore year-round access to E15 in the years ahead."