The worst may be behind us, ethanol industry says

The biofuels sector is inching back from collapse after COVID kept roads empty

Reuters – The U.S. industry is showing some signs of recovery as governments ease stay-at-home orders that depressed fuel demand, while federal aid could be on the horizon for U.S. producers, industry officials said.

Fuel demand collapsed by about a third with the spread of the novel coronavirus this spring, and U.S. ethanol production capacity halved as around 150 facilities either idled or reduced rates. Now as restrictions ease and gasoline demand inches higher, about 140 facilities are idled or running at reduced rates, Renewable Fuels Association president Geoff Cooper said.

“It seems the worst may be behind us,” Cooper said in a call with reporters. “But make no mistake, we still have a very long way to go to climb out of the hole that COVID-19 put us in.”

U.S. production of ethanol has increased since the start of May, rising to 617,000 barrels per day in the week to May 8, U.S. Energy Information Administration data showed. Production bottomed at the end of April, at 537,000 bpd.

Output is still down more than 40 per cent from year-ago levels, though. And while inventories fell in the most recent week to 24.2 million barrels, stored supply is still nearly nine per cent higher than the same time last year, EIA data showed.

“We are seeing inventories come down, but we need to see frankly many more weeks of that to get this thing back into balance,” said Neil Koehler, chief executive of Pacific Ethanol.

The increased production comes as Congress readied a vote for a coronavirus relief bill that includes aid for the biofuels industry.

The bill, introduced by House Democrats, would reimburse producers who suffered unexpected market losses because of the pandemic from Jan. 1 through May 1.

“I’m confident it will get through today’s legislation, but after that, that’s another story,” Congresswoman Cheri Bustos, a biofuels advocate who represents Illinois, told Reuters. “More help will be necessary. We need help in the ag industry; we need help for our family farmers.”

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