U.S. Ethanol: Production, Consumption, and the Relevance of Increasing Exports
U.S. and State Current and Historical Ethanol Production
U.S. ethanol production increased 3.5% to 15.329 billion gallons in 2016 compared with 2015 (14.807 billion gallons). The growth rate of ethanol production in 2016 remained the same as in the previous year, but the level of production set another record high volume with ethanol biorefineries in 28 states and a total nameplate capacity of 15.998 billion gallons (RFA, 2017). The U.S. Energy Information Administration’s (EIA) State Energy Data System for ethanol production is current to 2014. 2015 and 2016 ethanol production data for the states included in this report was estimated based on each state’s historical data trend.
From 2010 to 2014, Iowa’s ethanol production accounted for about 27% (3.67 billion gallons, on average) of the U.S. fuel ethanol production (13.61 billion gallons, on average) during that period (see Figure 1). From 2015 to 2016, Iowa produced 26.1% (3.91 billion gallons, on average) of U.S. ethanol production (15.07 billion gallons, on average). In 2016 alone, Iowa’s ethanol production was estimated at 3.9 billion gallons. At this rate, Iowa continued as the country’s leader in ethanol production.
Other large ethanol producers are Nebraska (NE), Illinois (IL), Minnesota (MN), and Indiana (IN). From 2010 to 2014, ethanol production in NE and IL averaged 1.83 billion gallons and 1.28 billion gallons, representing 13.4%, and 9.4% of U.S. production, respectively, during this period. In addition, average 2010 to 2014 ethanol production in MN (1.12 billion gallons) and IN (0.93 billion gallons) represented 8.2% and 6.8% of the average 2010 to 2014 U.S. ethanol production, correspondingly.
Estimated 2016 ethanol production for these four states made up 36.7% of total 2016 U.S. production. The estimated ethanol production of Iowa along with these four states made up 62.2% of U.S. ethanol production in 2016. As Figure 1 indicates, except for 2012 when severe drought brought record high corn prices and a slow economy brought lower gasoline demand, U.S. ethanol production has grown consistently
Figure 1. Ethanol Production: United States and Selected States (Billion Gallons)
Gasoline and Ethanol Consumption
EIA’s data indicates U.S. monthly U.S. gasoline consumption averaged 390.4 million gallons per day (9.30 million barrels per day) in 2016, up 4.99 million gallons per day compared with the previous year (see Figure 2) and reaching a record high level. 2016 gasoline consumption average ranged from 364.14 million gallons per day in January, to 405.86 million gallons per day in June. Gasoline prices for most of 2016, except for December, stayed below 2015 price levels. 2016 unleaded gasoline (84 octane) rack price average (F.O.B. Omaha, Nebraska) was down 17% to $1.40/gallon year over year (see Figure 3). Data from EIA indicates 2016 average retail gasoline price of $2.15/gallon was $0.28/gallon below the 2015 average of $2.42/gallon. Overall, 2016 gasoline consumption average slightly surpassed the 2007 record high average of 389.9 million gallons per day.
Figure 2. 2015 and 2016 U.S. Gasoline Consumption
Figure 3. 2015 and 2016 Wholesale Gasoline Prices
U.S. ethanol consumption has increased particularly since 2007 because of the Renewable Fuel Standard mandate (RFS) (see Figure 4), as blending of ethanol into gasoline is one way of meeting the RFS regulation. Obligated parties can also acquire renewable identification numbers to comply with the RFS. The largest rate of growth in U.S. ethanol consumption occurred in 2008 when ethanol consumption increased 40.6% to 9.68 billion gallons (about 9.43 billion gallons, not including denaturant) from the previous year (6.89 billion gallons). However, in recent years the rate of growth has substantially declined. In 2016, U.S. ethanol consumption increased 3.2% to 14.4 billion gallons (about 14.04 billion gallons not including denaturant) compared with the volume consumed in 2015 (13.95 billion gallons). Gasoline blended with 10% ethanol (E10) is the main gasoline fuel consumed in the U.S. market, with a saturation point limiting domestic ethanol consumption (see Figure 6). In order to increase domestic ethanol consumption, higher blending such as E15 (15% ethanol blend) and E85 (EIA, 2017a) need to substantially grow. Infrastructural and other constraints severely limit consumption of these higher blends. Higher levels of blends such as E85 can only be used in flex-fuel vehicles. Higher average fuel efficient vehicles also contribute to a decline in domestic ethanol consumption.
Figure 4. U.S. Annual Gasoline Consumption and Estimated Ethanol Consumption Blended into Motor Gasoline
Figure 5. U.S. Ethanol Production, Consumption, and Net Imports
Figure 6. Percent Ethanol Blended into Gasoline
U.S. Ethanol Exports Increased in 2016
Despite accounting for a relatively small portion of U.S. ethanol production, given the constraints in domestic ethanol consumption growth, ethanol exports are an important outlet for U.S. ethanol production. In 2010, ethanol production exceeded ethanol consumption by about 0.439 billion gallons. That same year, the United States became a net exporter of ethanol (i.e., exports exceeded imports or negative net imports) (see Figure 5 above), exporting 0.399 billion gallons while importing 0.016 billion gallons of ethanol. In 2016, ethanol production surpassed consumption by 0.930 billion gallons while U.S. ethanol exports reached a volume of 1.05 billion gallons, increasing 26% from the previous year (0.83 billion gallons).
The United States imported 0.036 billion gallons of ethanol last year, declining 60% year over year. The share of U.S. ethanol export to U.S. ethanol production has increased from 3.0% in 2010 to 6.8% in 2016. The United States exported ethanol to 34 different foreign markets in 2016, with Brazil, Canada, and China as the top three destinations. Exports to Brazil (0.27 billion gallons), Canada (0.26 billion gallons) and China (0.18 billion gallons) made up 67.4% of total U.S. ethanol exports in 2016.
Outlook for 2017
In its latest Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA, 2017b) forecasts 2017 ethanol production will increase 2.9% to 1.03 million barrels per day (43.26 million gallons per day) from 2016 levels. 2017 fuel ethanol blended into motor gasoline, on the other hand, is forecast to remain at the 2016 level of 0.94 million barrels per day (39.48 million gallons per day). 2017 gasoline consumption is forecast to marginally decline (0.4%) to 9.29 million barrels per day (390.18 million gallons per day) year over year. Under this scenario, ethanol production would exceed consumption by 0.08 million barrels per day (3.56 million gallons per day) and ethanol exports would need to exceed 1.05 billion gallons, the level reached in 2016, to compensate for the ethanol surplus generated by growing ethanol production, combined with a stationary or slow-growing domestic consumption.
U.S. Energy Information Administration, 2017a. Ethanol as a transportation fuel. Last updated: April 3, 2017.
U.S. Energy Information Administration, 2017b. Short Term Energy Outlook. March 7.
Renewable Fuel Association, 2017. 2017 Ethanol Industry Outlook.