Ethanol is getting very close to hitting the blend wall, according to economists with the Agriculture Department.
With four months in a row of record ethanol production and stagnant gasoline demand, ethanol stocks are increasing. “Margins have weakened a lot over the last few weeks,” said Joe Glauber, USDA chief economist.
“We’ve seen a sharp drop in ethanol prices,” Gerry Bange, USDA economist said. This has cut returns for ethanol producers dramatically.
The future for the ethanol industry may very well hinge on the decision the Environmental Protection Agency has yet to make—moving the allowable blend level for ethanol in gasoline up to 15 percent from the current 10 percent level.
“Given the fact that gasoline consumption in this country simply is not growing very rapidly and has essentially been flat for some time now, we are getting to the point where we simply have absorbed as much ethanol as we can under the current E10 legislation,” said Bange.