US fuel ethanol production, consumption growth slows: EIA

Houston (Platts)--14Sep2011/333 pm EDT/1933 GMT

During the first five months of 2011, US fuel ethanol production increased 59,000 b/d compared with the same period in 2010, the Energy Information Administration said Wednesday in analysis posted on its website.

The year-on-year January through May increase represented a slower rate of growth compared with 2010 when production during the first five months of the year was 194,000 b/d higher than the same period in 2009. Output for all of 2010 was 154,000 b/d higher than in 2009, EIA said.

In April, the year-over-year growth rate of ethanol production hit 4.7%, the lowest of any month since May 2001, it added.

The slowing growth in US fuel ethanol production is due partly to sluggish domestic demand for fuel ethanol. Consumption of fuel ethanol grew more slowly -- to the tune of 23,000 b/d -- than production during the first five months of 2011.

Consumption in April was 10,000 b/d lower than in April 2010, the first time a month registered a year-over-year decrease since July 2002.

Separately, the EIA said the gasoline market for ethanol was saturated, with lower overall gasoline consumption, and vehicle and related infrastructure issues as added reasons for slower growth in ethanol consumption.

Specifically, EIA said current ethanol production has nearly reached its saturation point as a blend mix with gasoline, currently a maximum of 10% ethanol by volume.

Overall US gasoline consumption was 161,000 b/d lower in January through May than in the same period in 2010. Lower gasoline demand reduces the amount of ethanol needed for gasoline blending at any given blending ratio.

In October 2010 and then again in January, the Environmental Protection Agency issued waivers allowing ethanol blends of up to 15% (E15) in vehicles manufactured after 2000.

However, barriers to the marketing of E15 may slow the transition to higher blends due to concerns over potential mis-fueling, associated liabilities, and other issues, the EIA said.

The only avenue for growth in ethanol would come from exports, the agency said, noting that since February 2010 the US has consistently been a net exporter of fuel ethanol.

Between January and May, ethanol exports averaged 62,000 b/d, it said, adding that exports during the same period in 2010 were only 22,000 b/d.

In its weekly petroleum report Wednesday, the EIA reported that US production dropped 17,000 b/d to 879,000 b/d for the week ending September 9.

The volume of conventional gasoline blended with ethanol dropped nearly 68,000 b/d on the week to 5.04 million b/d, while the amount of reformulated gasoline blended with ethanol decreased by 23,000 b/d, to 2.92 million b/d, it said. No imports were reported.

--Subhan Usmani, subhan_usmani@platts.com

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