Is the Long Ethanol Boom Coming to a Close?

The implication of this analysis is that it is going to be quite difficult to expand or go around the current 10 percent blend wall for domestic ethanol consumption in the near future. Some loosening could occur further down the road if the issues impeding E15 implementation are resolved. However, it does appear that the long boom in U.S. ethanol production is coming to a close. It is important to keep in mind that this does not mean that ethanol production will fall, as the RFS mandate will keep production at least at the level implied by the 10 percent blend wall (as long as blending economics favor ethanol over other gasoline components). This conclusion also implies that the use of corn in the U.S. for ethanol production has reached a plateau for the time being.

Summary

Unless the blend wall is expanded much sooner than currently envisioned and/or ethanol exports are larger than anticipated, ethanol production is expected to stabilize near current levels. Usage of corn for ethanol production has therefore also reached a plateau. Implementation of E15 is crucial to expanding the blend wall and corn consumption in the future. Reaching the blend wall also has important implications for the future of the RFS. The increasing blending requirements for renewable biofuels cannot be met without expanding the blend wall. Meeting the advanced biofuel requirements with imports of Brazilian ethanol would be infeasible unless the blend wall is expanded. Thus, meeting the advanced biofuel requirements could fall to biodiesel.