American Road Trips Seen Boosting Ethanol as Production Recovers

Source: By Kim Chipman, Bloomberg • Posted: Sunday, June 13, 2021

Americans are going to drive this summer like the pandemic never happened, if U.S. ethanol production is any gauge.

Output rose last week to the highest level since February 2020, which was shortly before U.S. shelter-in-place orders began. The boost in production is going to help when consumers start hitting the road during the upcoming vacation season, according to Renewable Fuels Association President Geoff Cooper.

Ethanol production should remain strong as makers of the biofuel “try to catch up to where demand feels like it is moving,” Cooper said in an interview.

Oil refiners are required to mix the corn-based fuel into gasoline by law. Now, the increase in demand is helping to drawdown corn stockpiles in the U.S., the world’s biggest shipper of the grain.

U.S. ethanol production reaches 16-month high

As corn crops are largely used to feed livestock raised for meat, the tight supplies are stoking fears of inflation for shoppers that are already grappling with bigger grocery bills.

The U.S. on Thursday forecast lower-than-expected corn supply in part due to more of it being used to make biofuel. Spot ethanol prices have risen 38% in the past three months as vehicle traffic returns to pre-pandemic levels.

The gains are welcome news for an industry hit hard by plummeting fuel demand last year.

Ethanol producers also are seeing “strong export demand,” Cooper said. “Things are pretty bullish.”