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EIA predicts higher RIN prices could stimulate E85 sales

By Erin Voegele | April 11, 2013

The U.S. Energy Information Administration has released the April 2013 issue of its Short-Term Energy and Summer Fuels Outlook. The report addresses projected gasoline prices, ethanol production levels, blending, and the impact of higherrenewable identification number (RIN) prices.

 According to the report, regular gasoline retail prices are expected to average $3.63 per gallon during the April-though-September summer driving season, with the monthly average price falling from $3.69 per gallon in May to $3.57 per gallon in September.

The EIA also predicts regular gasoline prices to average $3.56 per gallon in 2013, falling to $3.39 per gallon in 2014. The average 2012 per-gallon price was $3.63.

During the summer season, the EIA said gasoline consumption is expected to decline by 20,000 barrels per day (bbl/d), or 2 percent from last summer’s average. Highway project is expected to increase by 0.3 percent, but will be offset by an increase in fleet-wide fuel efficiency. Fuel ethanol blending into gasoline is expected to increase by 5,000 bbl/d compared to last summer’s level of 985,000 bbl/d.

According to the EIA, ethanol production is expected to remain near the current level of 800,000 bbl/d through mid-2013, before recovering to pre-drought levels. Overall, the administration expects ethanol production to average 850,000 bbl/d in 2013. Production is projected to increase to an average of 920,000 bbl/d in 2014.

In the report the EIA also said it expects the drawdown of banked renewable identification numbers (RINs) despite the forecast increase in ethanol production. The EIA also noted that higher ethanol RIN prices, which have averaged close to 70 cents per gallon over the previous two weeks, provide incentive for two changes in the market. First, the EIA said that higher RIN prices should lower the market price of E85 relative to E10, stimulating E85 sales. Second, ethanol RIN prices near the price of biodiesel RINs may motivate increased biodiesel blending.

According to the report, regular gasoline retail prices are expected to average $3.63 per gallon during the April-though-September summer driving season, with the monthly average price falling from $3.69 per gallon in May to $3.57 per gallon in September.

The EIA also predicts regular gasoline prices to average $3.56 per gallon in 2013, falling to $3.39 per gallon in 2014. The average 2012 per-gallon price was $3.63.

During the summer season, the EIA said gasoline consumption is expected to decline by 20,000 barrels per day (bbl/d), or 2 percent from last summer’s average. Highway project is expected to increase by 0.3 percent, but will be offset by an increase in fleet-wide fuel efficiency. Fuel ethanol blending into gasoline is expected to increase by 5,000 bbl/d compared to last summer’s level of 985,000 bbl/d.

According to the EIA, ethanol production is expected to remain near the current level of 800,000 bbl/d through mid-2013, before recovering to pre-drought levels. Overall, the administration expects ethanol production to average 850,000 bbl/d in 2013. Production is projected to increase to an average of 920,000 bbl/d in 2014.

In the report the EIA also said it expects the drawdown of banked RINs despite the forecast increase in ethanol production. The EIA also noted that higher ethanol RIN prices, which have averaged close to 70 cents per gallon over the previous two weeks, provide incentive for two changes in the market. First, the EIA said that higher RIN prices should lower the market price of E85 relative to E10, stimulating E85 sales. Second, ethanol RIN prices near the price of biodiesel RINs may motivate increased biodiesel blending.

 

 

 

3 Responses

  1. jim

    2013-04-12

    1

    We could use some good news for E85 consumers like me. Yes, I'd like to use it all the time- so yes, it is good when RIN pricing makes the pump price of E85 fall in relation to gasoline. We need at least 15% better than E10 in order to make E85 financially worthwhile to use. Make it 20% cheaper and I'll drive out of my way to fill up on E85.

  2. jeffreyp

    2013-04-15

    2

    I agree with the previous post that the price differemce is too high.

  3. RenewableFan

    2013-04-15

    3

    wholesale ethanol price per gallon is $2.42. Per gallon gas/diesel is $2.80/$2.88. Ethanol should be under $2 per gallon and no more than $2.50 at the pump (state taxes).

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