By Amanda Peterka
The “blend wall” and increased demand for biofuels overseas have helped the United States become the world’s largest exporter of ethanol, according to a new report from the Agriculture Department.
But future biofuels trade for the United States is uncertain due to low oil prices and doubts about where policy is headed, the USDA report released this week also found.
“The current state of biofuels in the United States is such that market conditions and policies make it difficult to project future biofuel trade,” wrote the Economic Research Service, which is USDA’s economic branch.
ERS examined historical trends in biofuels trade, focusing on the United States, Brazil and the European Union. The report relies on data gathered by USDA and the U.S. Energy Information Administration.
Globally, the report found, production and consumption of biofuels dramatically expanded between 2001 and 2011, spurred by national policies mandating the use of biofuels and favorable market dynamics such as low corn prices. Although production slowed after 2011 because of less favorable market conditions, global biofuels trade since then has skyrocketed.
Beginning in 2010, the United States became a net exporter of ethanol. In 2011, the nation exported more than 1 billion gallons of ethanol, or 8.6 percent of total production. Since then, exports have slightly dropped to 837 million gallons, but United States remains in the top position in the world for exports.
Biofuels trade has grown despite a recent anti-dumping duty that the European Union slapped on imports of U.S. ethanol.
The 10 percent ethanol “blend wall,” which refers to the technical constraints of blending more than 10 percent ethanol into gasoline, has been partly responsible for the growth in exports, the ERS report found. Because ethanol use in the United States has topped out at about 10 percent over the last few years, U.S. producers have focused on exporting fuel abroad.
At the same time, other countries have been demanding more ethanol, in many cases to comply with their own biofuel mandates. Brazil, formerly a top exporter of ethanol, has been increasing its own biofuel blending mandate, meaning there has been less Brazilian ethanol in the market to compete with U.S. product overseas, ERS found.
But the Agriculture Department’s economic agency found that the future was uncertain when it came to the U.S. role in biofuels trade.
U.S. EPA recently proposed to scale back biofuel blending mandates in 2014, 2015 and 2016 compared with levels that Congress wrote into law in 2007. In the short term, ERS said that the proposal could increase the amount of ethanol in the United States that’s available for producers to export. But in the long term, ERS said, the proposal could lead to less biofuels infrastructure in the United States.
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