IEA Lowers U.S. Biofuel Production Forecast

Source: By Mario Parker, Bloomberg • Posted: Wednesday, May 15, 2013

The outlook for ethanol production growth in the U.S. is dimmed because of the growing debate on whether the country should abandon or revise the biofuels policy, the International Energy Agency said today.

Last year’s drought, which damaged corn crops and raised costs for livestock farmers, provided fodder for those who oppose the Renewable Fuels Standard, or RFS2, which calls for the U.S. to use escalating amounts of biofuels in petroleum. The mandate is also under attack from petroleum industry advocates who say stagnant gasoline demand makes the law unworkable, the IEA said in its Medium-Term Oil Market Report.

“Though there is no clear indication the RFS2 will be amended, growing market perception of policy uncertainty introduces an additional downside risk to our medium-term forecast,” the Paris-based organization said.

The U.S. is the world’s largest biofuels producer, accounting for 48 percent of global output, IEA data show. Brazil is second-largest.

The IEA forecast that the U.S. will produce 937,000 barrels a day of biofuels in 2013, down 35,000 from its estimate of a year ago. The global output estimate is 1.95 million barrels a day, down 80,000 from the previous estimate, as output in Argentina and Europe is expected to weaken.

Denatured ethanol for June delivery climbed 6.5 cents, or 2.5 percent, to $2.671 a gallon yesterday on the Chicago Board of Trade. Prices have gained 27 percent in the past year.