This biofuel giant sees more driving than before in post-coronavirus era
- The U.S. ethanol industry has in recent years been battered by oversupply, a trade war with China and waivers given to small oil refineries exempting them from blending requirements.
There’s light at the end of the tunnel for the battered American ethanol market, according to producer Green Plains Inc.
For now, coronavirus stay-at-home measures are keeping cars off the road, slashing demand for biofuels. But as economies reopen and people settle into post-pandemic life, they will likely avoid mass transportation and drive more, according to Todd Becker, chief executive officer of the Omaha-based company.
That will help the beleaguered industry, which was already struggling with negative margins even before the virus hit. Add to that an oil price war between Russia and Saudi Arabia that sent crude prices crumbling, and plants across the nation idled or slowed production rates.
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“We believe the future could look a little different as companies and individuals look for ways to avoid mass transit and air travel and drive more, which could be a potential tailwind," Becker said in an earnings call with analysts on Monday. “Biofuels will continue to be an important and strategic part of the fuel supply."
Ethanol is used as an octane booster and blended into gasoline in the U.S., mostly at the rate of 10%. Production has already fallen to a record low as companies from Valero Energy Corp. to Andersons Inc. and Archer-Daniels-Midland Co. shuttered or slowed production.
40 kWh
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The recovery in output could be slower this time around, as many producers have furloughed employees, Becker said. That means it would take them around six weeks to restart instead of the one-week time frame the industry has experienced in the past.
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The U.S. ethanol industry has in recent years been battered by oversupply, a trade war with China and waivers given to small oil refineries exempting them from blending requirements. While President Donald Trump has allowed a 15% ethanol blend rate, the Environmental Protection Agency still has to take some steps to facilitate adoption.
“We continue to wait for China to re-engage in the ethanol market," Becker said. “We will work to drive this EPA administration to push for the continued roll-out of E15, as we need better labeling and a final EPA ruling to allow E15 through E10 pumps."