USDA predicts ethanol blend wall is near, future of industry hinges on EPA's E15 decision

Ethanol has been blended with gasoline for years now in a fuel typically called E10 (which is made with 10 percent ethanol). E15 could soon become the new norm if, as industry experts predict, the U.S. reaches the "blend wall" and changes come soon.
What's this blend wall term that's tossed around in the corn fields of this country? Basically, ethanol demand is maxed out at the current 10 percent blend rate and production has hit a ceiling. So, unless either gas demand increases or the blend rate goes up, there's just no need for any more ethanol at the pump.

Four straight months of record-breaking ethanol production has led to an oversupply of the gasoline additive and a sharp decrease in prices, as is usually the case when supply exceeds demand. But the U.S. Department of Agriculture (USDA) has an answer to falling prices that could make farmers happy and it's a simple controversial one: increase the blend rate. According to economists with the USDA, the blend wall is drawing close and the future of the ethanol industry now rests in the hands of the Environmental Protection Agency, which holds the power to increase ethanol content in gasoline up to 15 percent.

We see an even easier solution that would be utilized in most other industries and it boils down to simple economics. If production exceeds demand, stop making so much. We think we're on to something here. Maybe we could fix the ethanol problem by buying more gas. How's that sound for a really ingenious dumb solution?

[Source: DomesticFuel | Image: Drewzhrodague - C.C. License 2.0]

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