Quantifying the Volume of U.S. Corn for Ethanol Use in Declining Gasoline Consumption
S. Patricia Batres-Marquez
Decision Innovation Solutions
11107 Aurora Avenue, Urbandale, IA 50322
Based on data from the Annual Energy Outlook 2018 published by the U.S. Energy Information Administration (EIA), this report presents expected U.S. corn use in ethanol consumed in U.S. motor gasoline and E85 (85 percent ethanol and 15 percent gasoline blend) for the 2018 to 2028 calendar years.
On February 6, 2018, EIA published the Annual Energy Outlook 2018 (AEO 2018) report, which provides long term projections to 2050 for the U.S. energy markets. According to EIA, the projections include a Reference case (baseline) and side cases with different assumptions about macroeconomic growth, world oil prices, technological progress, and energy policies. Detailed information about the assumptions used in developing these projections will be available until April 2018. As indicated by EIA, the Reference case projections assume trend improvement in known technologies. The Reference case also includes economic and demographic trends indicating current views of leading economic forecasters and demographers. In addition, this case assumes current laws and regulations affecting the energy sector, including sunset dates for laws that have them, remain in place during the projection period. The potential effect of proposed legislations, regulations, and standards are not included in the Reference case. As a caveat, EIA indicated these projections should be interpreted with clear understanding of the assumptions underlying them and the limitations in any modeling process.
Reference case data for U.S. motor gasoline and E85 consumption, as well as ethanol consumed in these two fuels during the 2018 to 2028 calendar years, were used to estimate corn use in ethanol consumed in U.S. motor gasoline and E85 for the 11-year period. The original fuel consumption data expressed in British thermal units (BTUs) was converted to physical units using EIA projected conversion factors for the Reference case. For motor gasoline, the conversion factor ranges from 5.056 million BTUs per barrel in 2018 to 5.048 million BTUs per barrel in 2028. The conversion factors for denatured ethanol and E85 are 3.558 million BTUs per barrel and 3.991 BTUs per barrel, respectively, throughout the projected period. EIA’s long-term projections assumed an annual average ethanol content of 74 percent in E85 due to seasonal variation. The estimation of ethanol content in E85 consumption is based on this assumption. Estimated corn use in ethanol consumed in motor gasoline and E85 is based on the assumption that all ethanol consumed during the projected period would be corn-based ethanol. An average conversion factor of 2.8 gallons of ethanol per bushel of corn is assumed throughout the 2018 to 2028 period.
Expected U.S. Motor Gasoline and E85 Consumption(2018-2028 Calendar Years)
As Figure 1 indicates, U.S. motor gasoline consumption (including ethanol and ethers blended into gasoline, but not E85) declines 22.4 percent between 2018 (144.1 billion gallons) and 2028 (111.9 billion gallons) in response to increases in fuel economy. This decline is not offset by the increase in U.S. vehicle miles traveled. For light-duty vehicles, the number of miles traveled increases 2.8 percent, from 2.835 trillion miles in 2018 to 2.914 trillion miles in 2028. Figure 1 also shows E85 consumption for the 2018 to 2028 calendar years. Although U.S. E85 consumption represents a small proportion of total motor gasoline consumption, from 0.28 percent in 2018 to 2.4 percent in 2028, E85 consumption is expected to increase by 566 percent between 2018 (0.411 billion gallons) and 2028 (2.738 billion gallons) (see Figure 1).
Figure 1. Projected U.S. Motor Gasoline and E85 Consumption(Billion Gallons, Calendar Year)
Ethanol Consumed in Motor Gasoline and E85 through 2028 Calendar Year
Most motor gasoline sold in the United States has an ethanol content of 10 percent by volume (E10). The shrinking effect on the amount of corn-ethanol use in the declining U.S. motor gasoline consumption projected from 2018 to 2028 calendar years is shown in Figure 2. Domestic ethanol consumption (excluding the amount consumed in E85 consumption) would fall 20.4 percent, from 14.391 billion gallons in 2018 to 11.457 billion gallons in 2028. On the other hand, due to the projected gradual increase in U.S. E85 consumption during the 2018 to 2028 calendar years, ethanol consumed in the E85 blend would increase from 0.341 billion in 2018 to about 2.273 billion gallons in 2028. Overall, total amount of ethanol consumed in U.S. motor gasoline and E85 together would fall 6.8 percent, from 14.732 billion gallons in 2018 to about 13.730 billion gallons in 2028.
According to these projections, total ethanol content in the total gasoline pool would increase from 10.19 percent (9.96 percent from ethanol in E10 plus 0.24 percent from ethanol in E85) in 2018 to 11.98 percent (9.99 percent from ethanol in E10 plus 1.98 percent from ethanol in E85) by 2028. Despite the decline in ethanol consumed over the next decade, the share of ethanol in the gasoline pool would increase slightly due to a projected increase in E85 consumption during the same period.
Figure 2. Projected Ethanol Consumed in Motor Gasoline and E85(Billion Gallons, Calendar Years)
E85 Consumption Growth May Offset Some Losses in Corn Used in Ethanol
As Figure 3 indicates, the projected decline in U.S. motor gasoline consumption (excluding E85) and consequently in ethanol, would result in a reduction of 1.05 billion bushels of corn use by 2028 compared with 2018, from 5.14 billion bushels in 2018 to 4.09 billion bushels in 2028. On the other hand, with the projected increase in U.S. E85 consumption, corn use in ethanol for this gasoline blend would increase during the projected period. The amount of corn in ethanol consumed in E85 would increase from 0.12 billion bushels in 2018 to 0.81 billion bushels, up by 0.69 billion bushels. The net effect in the total amount of corn use for ethanol consumed in motor gasoline and E85 would be a decline of 0.36 billion bushels of corn between 2018 (5.26 billion bushels) and 2028 (4.9 billion bushels). The share of corn use in ethanol consumed in E85 relative to total corn used in the consumption of total gasoline (motor gasoline and E85) would increase from 2.3 percent in 2018 to 16.6 percent in 2028 (see Figure 3). This indicates that despite the projected small proportion of E85 in gasoline consumption in 2028, because of the larger content of ethanol in E85, the increase in E85 by 2028 would have a larger contribution in the overall corn usage.
Figure 3. Projected Corn Usage in U.S. Ethanol Consumed in Motor Gasoline and E85 (Billion Bushels, Calendar Year)
EIA’s Annual Energy Outlook 2018 projected decline (Reference case) in motor gasoline consumption from 2018 to 2028 indicates an overall drop in corn use in ethanol consumed in motor gasoline. The relatively small projected increase in E85 consumption assumed in the Reference case indicates a larger potential impact on corn used in E85 consumed during the 2018 to 2028 period. Corn use in E85 consumption would approach 17 percent of total corn use in ethanol consumed in both motor gasoline and E85 by 2028. Given the Reference case projected decline in U.S. gasoline consumption, substitution of ethanol consumed as E10 with higher blend fuels (e.g., E15 or E85) would be needed to keep corn use in ethanol from dropping.
Data used in this analysis is based on EIA’s Reference case modeled projections for the U.S. energy markets of what may happen given particular assumptions and methodologies included in the AEO 2018. EIA indicated these projections should be interpreted with clear understanding of the assumptions underlying them and the limitations in any modeling process. In addition, we assumed all ethanol consumed in gasoline blending would be corn-based ethanol over the next decade, which does not account for other feedstocks being used during the projected period. Our results should be understood in light of these fundamentals.
Batres-Marquez, S. Patricia. 2018. “Quantifying the Volume of U.S. Corn for Ethanol Use in Declining Gasoline Consumption Over the Next Decade." Renewable Energy Report, Agricultural Marketing Resource Center, Iowa State University. February 2018.