Although ethanol production reached a low in the end of April, numbers have rebounded in July inching closer to the five-year average set out by the EIA. Our short-term data sample of natural gas delivered directly to industrial end users is a strong indicator of total ethanol production and other closely related industries including fertilizer manufacturing and refining. Read on for our short-term insights into current production levels in the US.
Fuel ethanol production in the US dropped off a cliff beginning in late March as restrictions were put in place to combat the coronavirus, and America’s demand for gasoline plummeted. Ethanol production reached a low on the week ending April 24, with production coming in 45% lower than the previous five-year average according to EIA data. Since then, production has rebounded sharply, and the most recent EIA report has production only 5.4% lower than the previous five-year average for the week ending July 24. Our preliminary data shows a slight decline in deliveries of natural gas to ethanol producers for the week ending July 31.
Ethanol plants use natural gas as the primary fuel for the heat and power necessary during the biorefining process that converts a feedstock, usually corn, into ethanol. Most of this ethanol ends up as an additive in gasoline, although a small portion of higher-grade ethanol is used in the pharmaceutical and food industries. Recently, some production facilities have converted to making ethanol for sanitizers to meet the demand spike prompted by the Covid-19 pandemic; however, demand for sanitizer pales in comparison to the nearly 16 billion gallons produced for fuel annually in the US, according to the EIA.
Our sample of ethanol plants receiving gas directly from interstate pipelines averaged 500 MMcf/d in 2019 and accounts for around 90 plants. This is 45% of the 199 total operating US ethanol plants according to the Renewable Fuels Association. This implies 1.1 Bcf/d of total natural gas demand for fuel ethanol production or 4.8% of total US industrial demand for natural gas.
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