Cheap gas and the effect on ethanol - Trade Only Today

Cheap gas and the effect on ethanol

Author:
Publish date:

We paid the cheapest quarterly gas prices in 12 years during the January-March quarter of 2016 and it’s fueling expectations that boats will see much more running time during this boating season. Meanwhile, ethanol continues to be a curse on boating and we might just be losing the war against it.

First, the good news. According to the American Automobile Association, consumers saved a handsome $10 billion on gas in the first quarter compared to the same quarter in 2015. The national average price was $1.86 per gallon this year, making it the cheapest quarter for gasoline since January through March 2004.

While experts concede the average price could rise up to 25 cents per gallon by Memorial Day, overall prices will remain low compared to recent years. Specifically, the national average price as of March 31 was $2.06 for a gallon of regular gas, which was the lowest average going into April since 2009.

Notably, an estimated 59 percent of U.S. gas stations are selling gas for less than $2 per gallon with the most common price at $1.999 per gallon. In other words, gas prices are about 36 cents per gallon cheaper than one year ago.

The nearly $10 billion that we’ve kept in our pockets so far this year amounts to about $45 per licensed driver. It’s important to note that these savings are on top of the $120 billion saved in 2015 over 2014, or about $565 per licensed driver.

In stark contrast, these savings are even more significant compared to several years ago. The most expensive first quarter ever was in 2012, when prices averaged $3.58 per gallon. Compared to that nasty quarter, consumers have saved about $50 billion during the first three months of this year.

The recent rise in gas prices is mainly due to higher oil costs, increased demand, refinery maintenance and the change to summer-blend gasoline. What it isn’t attributable to is ethanol.

While our industry continues to push for revisions of the Renewable Fuel Standard that mandates ethanol be blended into our gas supplies in increasing amounts, we see more and more E15 hitting the market, increasing the political difficulty of getting justifiable revisions.

For example, the convenience chain Kum & Go recently became the first retailer to offer E15 in Missouri. The Renewable Fuels Association and the Missouri Corn Growers Association were successful in changing Missouri’s law that previously capped ethanol in fuel at 10 percent, currently considered traditional petroleum as defined under the blend wall.

E15 is now sold in 22 states, according to the RFA. Eight Kum & Go outlets immediately started selling E15 in Missouri with many more to come. Kum & Go is based in Des Moines, Iowa, and has more than 430 convenience stores in 11 states. RFA president and CEO Bob Dinneen noted: “We look forward to the fuel blend being sold across this country.”

Here’s an interesting look at today’s political perspective. Nearly every Republican who won the Iowa caucuses since 1980 strongly backed the idea of ethanol. Bob Dole in 1988 and 1996 was dubbed “Senator Ethanol.” George W. Bush promised to “strongly support” the corn-for-energy industry, creating the Renewable Fuel Standard we so need to change now. Even Rick Santorum won the caucus in 2012 by supporting corn ethanol.

But this year, along came Ted Cruz, who’s been unabashedly critical of federal support for ethanol, including the fuel standard, which he sees as “market-distorting corporate welfare.” (Of course, his being from Texas could influence his view.) Nevertheless, in spite of a big corn-industry-funded campaign to stop Cruz, claiming he was an existential threat to the special benefits corn receives from the government, he actually won the caucus. (Disclaimer: this is not an endorsement of Cruz).

Where do the rest stand? Donald Trump had no position initially, but now supports a "higher ethanol mandate." John Kasich likes the fuel standard “the way it is.” Hillary Clinton says she plans to “boost the production of fuels like corn-based ethanol.” And Sanders favors a “robust” renewable fuel standard.

So now you know.

Related

Territory Sales Manager- Central States - HydroHoist

HydroHoist Marine Group, Inc. (HMG), founded in 1964, is the world’s leading hydro-pneumatic boat lift company specializing in the manufacture, sale and service of boat lifts, power pedestals through our innovative HyPower division and other marine related products.