A version of this Spotlight from S&P Global Platts Analytics was first published June 29.
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In September, the UK is slated to move to E10 as its standard gasoline blend. While most people assume that E10 means 10% ethanol in gasoline, the UK's proposed regulations allow a blend as low as 5.5% to suffice. Ethanol groups are currently advocating for the UK government to raise this minimum requirement, though Platts Analytics believes a last-minute change is unlikely.
Gasoline in the UK currently contains up to 5% ethanol. E5 (97+ octane) will continue to be sold at service stations that offer two grades of gasoline for sale. Further, some rural, remote and small stations will be allowed to sell E5 as standard. Therefore, despite the government's heavy push toward E10, forecasts that the UK will double its ethanol consumption over the next year are misguided.
E10's introduction as the national fuel standard is part of the UK's goals to reduce the country's greenhouse gas emissions. In terms of mandates, the country does not have a separate ethanol volume requirement. Instead, the UK has set a total biofuels mandate under the Renewable Transport Fuel Obligation. This is currently set at 10.1% by 2021 and is scheduled to increase progressively to 12.4% by 2032.
According to data from the UK's HM Revenue and Customs, approximately 10,000 b/d of fuel ethanol were consumed in 2020, down from 13,000 b/d in 2019, mostly due to COVID-induced travel restrictions. Ethanol has made up between 4.6% and 4.8% of the total gasoline pool for the past eight years. Last year's estimated percentage was 4.78%. Provisional data from January and February 2021 shows that the percentages were only 4.23% and 4.49% respectively, well below the normal range.
The local gasoline market continues to gradually improve as lockdown measures ease but the recovery to pre-pandemic norms will take time. In 2021, Platts Analytics projects 2021 gasoline demand averaging 245,000 b/d. This is a 25,000 b/d increase over 2020 but 40,000 b/d lower relative to 2019. More improvement is expected in 2022, where we see demand reaching 265,000 b/d on average, still some 20,000 b/d below 2019.
We expect ethanol consumption to rise to nearly 14,000 b/d in 2021, supported by a jump in the fourth quarter as E10 use spreads. We forecast demand will exceed 17,000 b/d in 2022 as gasoline consumption increases and E10 will be standard blend the entire year.