Total Ethanol Consumption and Average Blend Rate Both Saw Year-Over-Year Declines Data released today by the Energy Information Administration (EIA) reveal the extensive damage to 2018 ethanol demand that resulted from former EPA Administrator Scott Pruitts egregious abuse of small refinery exemptions (SREs). Pruitt excused 48 refiners from their legal blending obligations under the Renewable Fuel Standard (RFS), resulting in a flood of unneeded RINs into the market and a subsequent collapse in RIN prices. The wave of surplus RINs reduced the incentive to expand ethanol blending beyond the so-called E10 blend wall, while low RIN prices pressured ethanol values and margins throughout 2018. The significant destruction in ethanol demand harmed ethanol producers, farmers and consumers. According to the Renewable Fuels Associations (RFA) analysis of the new EIA data:
- U.S. ethanol consumption declined to 14.38 billion gallons in 2018 from 14.49 billion gallons in 2017. Based on the EIAs forecast in January 2018 (i.e., before the market became aware of rampant SREs), U.S. ethanol consumption was expected to reach 14.66 billion gallons276 million gallons more than what actually occurred; and
- The U.S. ethanol blend rate fell to 10.07% in 2018 from 10.13% in 2017. The blend rate began to drop in February 2018, as rumors and press reports regarding SREs made their way into the market. This was far below expectations at the start of 2018, when EIA had forecasted an implied ethanol blend rate of 10.26% for 2018. For the February-December period, the blend rate averaged just 10.01%.