SREs and Biofuels Demand Destruction · 7/3/2019 · SREs and Biofuels Demand Destruction by Scott Irwin July 3, 2019 2 0.0 0.5 1.0 1.5 2.0 2016 2017 2018 2019 Billion Gallons Total

SREs and Biofuels Demand Destructionby Scott Irwin

July 3, 2019

1

Scott H. Irwin

SREs and Biofuels Demand Destruction

SREs and RFS Mandates

% standard = 100 X [RVO/(petroleum gasoline + diesel use – SREs)]

2017 Final EPA Conventional Standard:

8.32% = 100 X [(15BG)/(180.13BG – 0)]

2017 Actual Conventional RVO

13.887BG = (8.32%/100) X (166.9BG)

Why13.9BG instead of 15BG?

Fix the % standard and then drop the base of gasoline and diesel use retroactively


July 3, 2019

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0.0

0.5

1.0

1.5

2.0

2016 2017 2018 2019

Bill

ion

Gal

lons

Total Reduction in RFS Mandates due to SREs

Projected

Total Reduction in RFS Mandates due to SREs

Weekly (Thursday) D4 Biodiesel, D5 Advanced, and D6 Ethanol RINs Price, 01/25/2007 – 06/27/2019

0.00

0.50

1.00

1.50

2.00

Pri

ce ($

/gal

.)

Date

Weekly (Thursday) D4 Biodiesel, D5 Advanced, and D6 Ethanol RINs Price, 01/25/2007 - 06/27/2019

Source: OPIS

D4

D6

D5

Source: OPIS


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Weekly (Friday) Ethanol Price at Iowa Plants, 01/26/2007 – 06/28/2019

1.00

1.50

2.00

2.50

3.00

3.50P

rice

($/g

al.)

Date

Weekly (Friday) Ethanol Price at Iowa Plants, 01/26/2007 -06/28/2019

Source: AMS/USDA

Source: AM S/USDA

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Per

cent

Year

Monthly Refinery and Blender Net Input of Ethanol as a Percent of Net U.S. Production of Conventional and Reformulated Motor

Gasoline Blended with Ethanol, January 2007 - April 2019

Source: EIA

Source: EIA

Monthly Refinery and Blender Net Input of Ethanol as a Percent of Net U.S. Production of Conventional & Reformulated Motor Gasoline Blended with Ethanol, January 2007 – April 2019


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3

4

5

6

7

8

9

10

11P

erc

en

t

Year

Monthly Implied Domestic Consumption of Ethanol as a Percent of

U.S. Finished Motor Gasoline Supplied,

January 2007 - April 2019

Source: EIA

Source: EIA

Monthly Implied Domestic Consumption of Ethanol as a Percent of U.S. Finished Motor Gasoline Supplied, January 2007 – April 2019

9.33

9.61 9.65

9.75 9.83

9.91

10.02

10.14 10.07

10.21

9.00

9.25

9.50

9.75

10.00

10.25

10.50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

%

Year

Annual U.S. Implied Domestic Consumption of Ethanol as a Percent of U.S. Finished Motor Gasoline Supplied, 2010 - 2019*

Source: EIA *2019 through April

Annual U.S. Implied Domestic Consumption of Ethanol as a Percent of U.S. Finished Motor Gasoline Supplied, 2010 – 2019*

Source: EIA

*2019 through April


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Competitive Ethanol Prices in E10 Gasoline and the Blend Wall

Ethanol Market with Increasing Supply and Falling Prices


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13.3

13.9

13.2 13.3

14.3

14.8

15.4

15.9 16.1

12

13

13

14

14

15

15

16

16

17

2010 2011 2012 2013 2014 2015 2016 2017 2018

Bill

ion

Gal

lons

Year

Annual U.S. Production of Fuel Ethanol, 2010 - 2018

Source: EIA Source: EIA

Annual U.S. Production of Fuel Ethanol, 2010 - 2018

0

2

4

6

8

10

12

Mill

ion

Gal

lons

Year

U.S. Refinery and Blender Production of Conventional Motor Gasoline with Greater Than Ed55, January 2007 - April 2019

Sources: Iowa Deparment of Revenue Minnesota Commerce Department

Source: Iowa Department of RevenueMinnesota Commerce Department

U.S. Refinery and Blender Production of Conventional Motor Gasoline with Greater Than Ed55, January 2007 – April 2019


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0.0

0.5

1.0

1.5

2.0

2.5M

illio

n G

allo

ns

Year

Monthly Sales of E85 in Iowa and Minnesota, January 2007 - April 2019

Sources: Iowa Deparment of Revenue Minnesota Commerce Department

Minnesota

Iowa

Source: Iowa Department of RevenueMinnesota Commerce Department

Monthly Sales of E85 in Iowa and Minnesota, January 2007 – April 2019

BBD Demand and the RFS


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0.00

0.25

0.50

0.75

1.00

2016 2017 2018 2019

Bill

ion

Gal

lons

Total Reduction in BBD Demand Due to SREs

Projected

Total Reduction in BBD Demand Due to SREs


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Estimated Monthly Biomass-Based Diesel RIN Generation (annualized) Compared to Total Biomass-Based Diesel (BBD) Demand Pre-SRE, January 2014 – January 2019

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

Bill

ion

Gal

lons

Month

Estimated Monthly Biomass-Based Diesel RIN Generation (annualized) Compared to Total Biomass-Based Diesel (BBD)

Demand Pre-SRE, January 2014 - January 2019

BBD RIN GenerationTotal BBD Demand Pre-SRE

Estimates of the Economic Magnitude of Declines in U.S. BBD Demand Due to SREs

Total or Item 2016 2017 2018 2019 Average

(1) Total BBD Demand Decline Due to SREs (billion gallons) 0.362 0.739 0.937 0.778 2.817

(2) Average Iowa Plant Price of Biodiesel ($/gallon) 3.23 3.16 3.09 3.16 3.16

(3) Economic Magnitude of BBD Demand Decline ($) 1.17 2.34 2.89 2.46 8.86

Note: 2018 and 2019 are projected.


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11

U.S. Appeals Court in Americans for Clean EnergyJuly 28, 2017By requiring upstream market participants such as refiners and

importers to introduce increasing volumes of renewable fuel into

the transportation fuel supply, Congress intended the Renewable Fuel Program to be a “market forcing policy” that would create

“demand pressure” to increase consumption of renewable fuel. (pp. 20-21)

Thank you for attending Please submit questions

Scott [email protected]

@ScottIrwinUI

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SREs and Biofuels Demand Destruction · 7/3/2019 · SREs and Biofuels Demand Destruction by Scott Irwin July 3, 2019 2 0.0 0.5 1.0 1.5 2.0 2016 2017 2018 2019 Billion Gallons Total