Ethanol prices uncompetitive against gasoline, says Rystad Energy

Oil&Gas Materials 21 September 2021 10:53 (UTC +04:00)
Ethanol prices uncompetitive against gasoline, says Rystad Energy

BAKU, Azerbaijan, Sept.21

By Leman Zeynalova – Trend:

Ethanol prices are uncompetitive against gasoline, Claudio Galimberti, Senior Vice President, Analysis, Rystad Energy, told Trend.

“The price of sugar has been historically high lately, which implies that ethanol prices must have been uncompetitive against gasoline. From this I could infer that the IEA forecast is based on increasing biofuels commitments by governments, which makes total sense to me. Yet, we don’t have the capability to capture and track that granularity for biofuels, as I pointed out above,” he said.

Galimberti noted that biofuels consumption is driven overwhelmingly by regulatory commitments in pretty much all the countries where it is relevant, which include in decreasing order of consumption China, Brazil, US, India, Thailand, Canada, Russia, Argentina, Indonesia, Japan and then the European countries. “Take into account that the big three alone, i.e. China, Brazil and US, account for roughly 2/3 of the global biofuels consumption.”

Yet, Brazil is also a case on its own, as on top of the regulatory commitments set by the federal government for biofuel consumption, the consumption of hydrous ethanol is driven by the price spread between sugar, ethanol and gasoline, he added.

“In other words, the consumption of 100 percent ethanol in Brazil can increase dramatically, and at the same time the consumption of gasoline decrease equally dramatically, when the price of hydrous ethanol drops below 70 percent of the price of gasoline, due to the lower energy content of ethanol. It also works the other way round, when the price of hydrous ethanol increases above 70 percent of gasoline price. Most of the Brazilian fleet of ICE can run on both fuels, which means that the Brazilian consumers can decide when to use 100 percent ethanol (hydrous ethanol) or gasoline blended with ethanol (which is mandated by the government at 27 percent blend) based on the price spread,” said the analyst.

Global biofuel production is expected to increase from 2.804 million barrels per day in 2021, as compared to 2.584 mbpd in 2020, according to the International Energy Agency (IEA). As such the production volume will exceed the 2019 levels of 2.779 mbpd.


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