Ethanol Hits the Blend Wall
Declining gasoline consumption has pushed ethanol up against the "blend wall" of 10 percent additive and forcing the Environmental Protection Agency to lower its mandates for 2014. The top line shows gasoline consumption, which has been declining steadily since 2006 due to improved gas mileage and the economic recession. The bottom line shows ethanol's climb up the ladder of production since the mandates from the Alternative Fuel Act of 2007 have gone into effect. The two trends have now collided. Last year, the EPA mandated more ethanol than refiners could accommodate without pushing beyond the blend wall, the point where auto manufacturers will no longer honor warrantees on cars manufactured before 2006. This set off a bidding war for the substitute Renewable Fuel Credits, which started driving up the price of gasoline. Now EPA has relented. Farmers are complaining of a plot by Big Oil and Iowa Governor Terry Brandstat calls it a "war on ethanol." But it just seems like government regulation trying to force technology too far too fast.