Refiners Shrug Off Hurricane Harvey; Will Report Huge Profits -- Bloomberg -- Oct 25, 2017

From Bloomberg via Rigzone:

• per-share profit gains from 48% to 154% among top five refiners

• Phillips 66
• Valero Energy
• Marathon Petroleum 
• Andeavor (formerly Tesoro)
• HollyFrontier

• crack spread is the reason; from the linked article:

Gasoline prices in the U.S. surged to the highest level in more than two years and distributors tapped storage tanks to keep deliveries flowing to filling stations. The crack spread, a rough measure of how profitable it is to process crude into fuels, jumped to $27.35 a barrel on Sept. 1, compared with $18.64 the day before Harvey’s landfall.

Bloomberg wrote the following, not me (don't blame me for this; again, this is from Bloomberg, and, if it's from Bloomberg, it must be true):

Still, one sticking point remains for some oil processors: federal biofuel mandates. Refiners are required to add ethanol and biodiesel to gasoline and diesel to satisfy annual quotas. Those that can’t blend the biofuels themselves must purchase credits known as renewable identification numbers, or RINs. Acquiring RINs can exact millions in extra costs for refiners.

The promise of relief for refiners faded when President Donald Trump was said to have directed the Environmental Protection Agency not to weaken the mandate. 

“RINs remain a mystery,” Brad Heffern, an analyst at RBC Capital Markets LLC, said in a research note. “Optimism on RINs has faded, but there are both potential negatives and potential positives on the horizon.”’

If Bloomberg says this ... 

Back To That Jump In US Gasoline Production For The Month Of March, 2016 -- June 4, 2016

This is really cool. Don has provided a possible explanation for the jump in US gasoline production reported in March.

Meanwhile, for those who think refiners are making money hand over fist with all this refining, think again. From FuelFix, a story sent to me by a reader some time ago (thank you):

Federally mandated ethanol blending is adding extra pressure to the faltering profits of U.S. refiners.

The worst crude oil downturn in a generation, which at first helped refiners’ profits, has now passed through to the fuel prices. Now, gasoline is cheaper than the ethanol that refiners have no choice but to use.

Ethanol averaged 30 cents above gasoline in Chicago during the first quarter, costing HollyFrontier Corp. $36 million. Chicago ethanol now runs at about a 2-cent premium to gasoline, while Los Angeles prices are 24 cents higher, David Hackett, president of energy consultancy Stillwater Associates said. Ethanol futures on the Chicago Board of Trade averaged 21.5 cents above gasoline contracts on the New York Mercantile Exchange in the quarter, compared with an average 48-cent discount in the same period during the previous five years.

The Renewable Fuel Standard program, introduced in 2005 under the Energy Policy Act by the Bush administration, mandates the use of about 18.11 billion gallons of renewable fuels this year, 80 percent of which is ethanol. For the first time, EPA this year mandated consumption targets that would exceed 10 percent of projected gasoline demand. EPA’s proposed biofuel targets for 2017 are currently under review at the White House’s Office of Management and Budget, according to a government filing.

Someone At The New York Times Must Be Reading This Blog -- January 31, 2016

Just a couple of days ago I asked: with a global glut of oil and gasoline that isn't going to end any time soon, and the price of oil / gasoline at record lows, "tell me again why we're adding ethanol to gasoline? Oh, that's right. The first presidential "primary" is held in Iowa." 

Someone at The New York Times must have been reading the blog, because tonight the newspaper has this story/headline:  Ethanol Mandate, a Boon to Iowa Alone, Faces Rising Resistance. LOL. What a coincidence!

From the story:

And now a powerful coalition including oil companies, environmentalists, grocery manufacturers, livestock farmers and humanitarian advocates is pushing Congress to weaken or repeal the mandate. As soon as this week, the Senate could vote on a measure to roll back the Renewable Fuel Standard, just days after the Iowa caucuses close and the issue largely goes to rest for another four years.

Even here, as Iowa urbanizes and diversifies, ethanol may be losing its once-powerful hold, some political consultants say. Senator Ted Cruz of Texas, one of the Republican front-runners in Iowa, has called for an end to subsidies for all forms of energy, as well as a five-year phasing out of the renewable fuel mandate that created the ethanol economy here.

That position drew an unusual repudiation from Iowa’s governor, Terry E. Branstad, a Republican who has not endorsed any candidate. “It would be a big mistake for Iowa to support him,” Mr. Branstad told reporters at a forum held by the Iowa Renewable Fuels Association.

At the same forum, the other front-runner, Donald J. Trump, said he was “100 percent” behind the ethanol mandate and would even support increasing it further.

At least now, on this single wedge issue I know who I support. LOL. 

EPA Ready To Announce New Ethanol-Gasoline Blend Rules -- November 19, 2015

Americans are paying attention but can't do anything about it. This is downright scary. Oil & Gas Journal reports that EPA is ready to announce new ethanol-gasoline blend rules despite overwhelming concern that such a blend will damage almost every conventional internal combustion gasoline engine.

Growing numbers of US voters are concerned about possible adverse impacts as the US Environmental Protection Agency prepares to issue new ethanol quotas under the federal Renewable Fuel Standard, the American Petroleum Institute said.

It cited a Harris Poll telephone survey it commissioned of 1,021 registered voters nationwide Nov. 5-8 in which 78% said they were concerned that new ethanol quotas could breach the so-called blend wall, the point at which the mandate exceeds the level of ethanol in the nation’s fuel supply.

By party, API said that concern was expressed by 91% of respondents identified themselves as Republicans, 80% of independents, and 73% of Democrats.

“The results are telling,” API Downstream Group Director Bob Greco told reporters in a Nov. 19 teleconference. “Across the political spectrum, voters are concerned about the significant damage the RFS-mandated higher ethanol blends could cause to automobiles, motorcycles, and almost every type of gasoline powered engine.

“We would not be surprised if the rule came out next week, and will operate under that assumption,” Greco said. “EPA continues to insist it will be out by Nov. 30 despite the Thanksgiving holiday and Paris climate talks. We’ve heard from EPA that there’s interest in bumping the mandate up and testing the blend wall. We think that’s a bad idea.”

The government is running amok.

Corn Ethanol Produces 20% More CO2 Than "Standard" Gasoline; 10% More Than Tar Sands -- Don't Confuse Me With The Facts -- June 3, 2015

This is really cool. I posted this story last December:

Ethanol More "Polluting" Than Gasoline -- U of Minnesota Peer-Reviewed Study

Coal-Powered Cars Not Much Better, Either

CBS Local is reporting: 

One of the most surprising findings is that ethanol might actually be worse for air quality than conventional gasoline fueled transportation.

Researchers looked not only at the end result at the tailpipes but also took into account the full cycle of energy production. For instance, the authors calculated the entire pollutant stream, meaning everything generated from the growing of the corn to the process used to turn it into ethanol.

In addition, they extrapolated the pollutants of electric vehicles when the electricity used to recharge the batteries is generated by the burning of coal.

“And we found that some options available to us, like corn ethanol or electricity from coal used in electric vehicles, actually make the air much worse,” assistant professor Jason Hill said.

The source for that story: the University of Minnesota.

Actually it's even worse -- worse than fossil fuel. Bloomberg View is reporting:

For years, environmental activists have opposed the Keystone XL pipeline, claiming that development of Canada’s oil sands will be “game over for the climate.” But if those same activists are sincere about climate change, why aren’t they getting arrested outside the White House to protest the use of corn ethanol? 

That’s a pertinent question, given a new analysis from the Environmental Working Group, which finds that corn ethanol produces more carbon dioxide than Keystone XL would -- presuming, of course, that the pipeline ever gets built. Making the issue even more relevant, last Friday, the EPA outlined new requirements for the minimum amounts of ethanol that retailers must blend into their gasoline. 

In a May 29 report, Emily Cassidy, a research analyst at EWG, says that “last year’s production and use of 14 billion gallons of corn ethanol resulted in 27 million tons more carbon emissions than if Americans had used straight gasoline in their vehicles.” [Don't confuse me with the facts.]

She continues, “That’s worse than Keystone’s projected emissions.” (Another environmental group, Natural Resources Defense Council, has estimated that Keystone XL would increase carbon dioxide emissions by about 24 million tons per year.)  [Don't confuse me with the facts.]

In a graphic comparing corn ethanol with standard gasoline and fuel produced from the oil sands, Cassidy shows that the carbon intensity of corn ethanol is about 120 grams of carbon-dioxide equivalent per megajoule of energy produced. That’s about 20 percent more than standard gasoline and about 10 percent more than that produced by the oil sands.

The Ethanol Legacy; What Goes Around, Comes Around; North Dakota To Help Solve The Global Warming Problem -- November 17, 2014

I posted this earlier as part of a multi-story post. I can see that it is getting more attention than I thought it would so I've moved it here for a stand-alone post.

For background, it is important to read this over at bigpictureagriculture: 

The amount of land enrolled in the Conservation Reserve Program (CRP), at 27.1 million acres, is down by 26 percent, or 9.7 million acres in the past five years, to a 25 year low. [It puts the Chevrolet story below into perspective: GM is "buying" 6,000 acres for CRP.]

During this same time period, corn acreage has increased by 13 million acres.

Farmers are once again planting crops on marginal lands “fencerow to fencerow” to cash in on today’s high commodity prices. CRP payments haven’t risen to compete with crop returns, and the program itself is being whittled away by Congress. 

Again, the amount of land enrolled in the Conservation Reserve Program (CRP), at 27.1 million acres, is down by 26 percent, or 9.7 million acres in the past five years, since the ethanol mandate, to a 25 year low.

North Dakota To Help Solve The Global Warming Problem

Update: what goes around, comes around. A writer suggests that a lot of this newly plowed farmland in North Dakota was grassland for ranchers until the government provided incentives to turn the farmland into ethanol-producing grain. And, thus another reason why I love to blog.

Original Post

ABC News is reporting:

Chevrolet has become the first corporate participant in a public-private initiative that pays farmers NOT to convert natural prairie to large-scale crop production, which would release gases that are warming the planet.

The automaker, a division of General Motors, said it has bought more than 39,000 metric tons of carbon credits from North Dakota ranchers in the prairie pothole region, a broad expanse of grasslands and wetlands reaching across the northern Great Plains and parts of Canada.

"The amount of carbon dioxide removed from our atmosphere by Chevrolet's purchase of carbon credits equals the amount that would be reduced by taking 5,000 cars off the road," U.S. Agriculture Secretary Tom Vilsack said.

Grasslands store huge volumes of carbon dioxide, one of the gases most responsible for climate change. Tilling the soil for agriculture releases the gases into the atmosphere. Preserving grasslands keeps carbon bottled up and preserves habitat for waterfowl and other wildlife.

Near the end of the article:

Participating ranchers place their property in conservation easements that guarantee it will permanently remain grassland, although they can continue grazing livestock and growing hay, which can be planted without tilling the soil.

Chevrolet purchased its credits as part of a 2010 commitment to invest up to $40 million in carbon reduction programs with a goal of keeping 8 million metric tons out of the atmosphere, spokeswoman Sharon Basel said.

The credits Chevy bought in North Dakota will preserve 5,000 to 6,000 acres of grasslands.

I would suggest that oil-millionaire-farmers in western North Dakota quit farming completely, turning their farmland back into natural plains. It's a win-win for everyone.

The farmers no longer complain about the roads, the dust, the oil companies. Oil companies could also buy carbon credits to offset their other sins. Even wind farms could co-exist with the natural plains. And eventually back to the buffalo commons interrupted with a few pumpers.

Readers may be able to help me on this, but I don't think this changes the reality of what has always occurred on the range, where the buffalo roam, and the antelope play all day. Instead of the US government (i.e, the US taxpayer) paying the ranchers not to farm land they wouldn't farm anyway (cattle are now selling for some of the highest prices on record, and ranchers -- by definition -- ranch, and don't farm), a private corporation is paying the ranchers not to farm land they wouldn't farm anyway.

One error in the above, I suppose. I suggested that GM was a private corporation. I believe the "GM" stands for "government motors."

Additional comments: when I first heard of Drs Deborah E and Frank J Popper, my knee-jerk reaction was to resist their proposal. What has happened over the past five years, particularly the ethanol mandate, makes me think the Poppers were more correct than I gave them credit for.

For Those Who Favor Ethanol Over Shale Oil

For anyone who tells you we don't have enough water for fracking....

The Hill.com is reporting:

In order to meet the excessive ethanol mandates in the RFS, more and more land has been converted to grow corn for fuel — not food. In the 16 years prior to RFS implementation, corn acreage in the U.S. rose by just 6 percent. By contrast, in the seven years since the mandate was enacted, corn acreage has spiked by 22 percent — quadruple the growth in half the time. The Environmental Working Group estimates that more than 23 million acres of America's wetlands and grasslands — an area the size of Indiana — have been converted to industrial cropland since 2008, encroaching on our wildlife habitats and gobbling up enough conservation land to cover Yellowstone, Everglades and Yosemite National Parks — combined. [And a lot of those cornfields are making North Dakota farmers rich. Hoo-ah!]

But it's not just our land that's under attack. By 2030, nearly one of every 10 gallons of water consumed in the U.S. will be used for biofuels production. That's more than is cumulatively used by every household in the country. Let that sink in.

Making matters worse, fertilizer runoff resulting from the increase in corn production to make ethanol has contributed to an alarming growth of the dead zone in the Gulf of Mexico, leaving marine life asphyxiated and surrounding industries suffering in its wake.

And what about our air? Studies have found that corn ethanol nearly doubles emissions over a 30-year period. According to the EPA, the lifecycle emissions of corn ethanol are higher than that of gasoline. So much for being a cleaner fuel.

The environment is not the only victim. Food producers and anti-hunger activist groups, including Oxfam and ActionAid, have been warning us for years of the policy's impact on food prices and security. In the U.S., the average American family of four saw an increase of $2,000 in their grocery bills during 2012.

The RFS is slated to further increase the price of staple commodities like corn, wheat, rice and soybeans by 20 percent. And policy-driven land grabs by global corporations seeking to capitalize on the crop-for-fuel craze have forced family farmers and local citizens off their land, taking access to affordable food away from the world's neediest populations.

Sylvia Nasar's Grand Pursuit puts a lot of this in perspective. But you don't have to read much more to know how bad the president's ethanol program is. But if activist environmentalists are happy, that's fine with me. I don't have a dog in this fight, but I love North Dakota corn farmers getting rich off this, and North Dakota entrepreneurs getting rich with ethanol plants in the state. 

The USSR, Central Planning, Five-Year Plans, Cellulosic Ethanol, And RINs

Updates

October 27, 2014: update on ethanol, ethanol blending, RINs as reported by 24/7 Wall Street:

Another bit of fallout from the diving demand for gasoline is just about to hit the front pages. U.S. ethanol producers are approaching the so-called blend wall, a term that describes a situation where the 10% blend of ethanol with gasoline reaches its mandated limit. At that point, the value of ethanol collapses and producers begin agitating for a higher blending limit.

The four-week rolling average blending rate for ethanol in the United States reached 9.94% in the week ending October 10. The 10% blend rate was surpassed for one week in mid-September.Ethanol blenders, including major independent refiners like Valero Energy Corp. and Tesoro Corp., in general like the low price of ethanol, which dropped below $1.60 a gallon earlier this month, less than half the price of a gallon of ethanol at its peak in August. 

Blenders took a beating in 2013 when corn prices skyrocketed, demand was falling and blenders bought renewable energy credits called RINs, bidding the price up from a few cents to more than $1.00. 

The producers want the federal government to raise the federally mandated blending amounts for 2014. Refiners and blenders oppose raising mandated limits and sent a letter to the U.S. EPA outlining its case for leaving the mandated levels where they are.

November 16, 2013: RINs trading as low as 16 cents/RIN just after 2014 proposal.

US corn-based ethanol RINs traded as low as $0.16/RIN just after 2014 RFS proposal released, down from $0.26/RIN before.

November 13, 2013: [Note: this story is about corn-based ethanol; the original post was about cellulosic ethanol.] The US corn-ethanol mandate is about to take another hit. MSN Money is reporting:

This week, the Environmental Protection Agency is expected to announce changes to the ethanol mandate, a 2007 law that requires energy companies to mix billions of gallons of ethanol into gasoline and diesel fuels.

After six years in the mix, corn-based ethanol has lost its popularity, and a diverse group of critics is calling for the law's repeal.

A proposal for the EPA's changes, leaked in October, would significantly scale back the ethanol-gas blend requirement to 2012 levels.

"If approved, the proposed cut in the biofuel mandate in 2014 to 15.21 billion gallons from 18.15 billion would mark an historic retreat from the ambitious 2007 Renewable Fuel Standard (RFS) law that charted a path toward ever-greater use of clean, home-grown fuel," said Reuters at the time.

But many think such a "historic retreat" would be not nearly enough. An extensive investigation by the Associated Press, published by accident Monday, outlined a variety of ways the mandate is "badly hurting the environment."

Though ethanol fuel releases less carbon dioxide than other kinds of gas, many question if the side effects of production are worth it. "[I]n the president's push to reduce greenhouse gases and curtail global warming, his administration has allowed so-called green energy to do not-so-green things," says the AP.

Original Post

A reader must have remembered that I could never understand RINs.  I think I finally understand them.

This is how I think it works. I sometimes incorrectly use "RIN" where I should be using "REC." The "RIN" is simply the number; the "REC" is the actual piece of paper, the certificate.

I make a gallon of gasoline in my garage using the leftover corn stalks from my garden, so it is "renewable energy."

• I send in the application to the RIN/REC authority requesting a certificate with a RIN on it (a "REC") for my one gallon of gasoline which I certify was made from corn stalks.
• The REC authority issues me a certificate with a unique 38-number code (the RIN) for that gallon of gasoline; I place the unique 38-number code on the metal container holding the gasoline.
• That gallon of gasoline is then worth a) the going price someone will pay for the gallon of gasoline PLUS b) the market value of that piece of paper holding the unique 38-number code.
• According to wiki, refineries are only interested in the certificate: "These certificates can be sold and traded or bartered, and the owner of the REC (the certificate) can claim to have purchased renewable energy."

Don't you just love that "can claim to have purchased renewable energy" bit? If the federal government doesn't require very much renewable energy to be used in any given year, the RECs lose value (could become worthless); but if the federal requirement increases the requirement for renewable energy, the RECs gain value. This is exactly why Mr Dimon of JP Morgan buys these certificates, betting the roulette wheel will be green.

This seems to be very similar to the "Fed" printing money to stimulate the economy. But I digress.

Regardless of whether I have the details correct, in my mind I now understand RINs and RECs. The key to understanding how this scheme works is that the owner of the REC "can claim to have purchased renewable energy."

***************************

I remember tenth grade social studies. It was the first time I read about "central planning" and "five-year plans" while studying the USSR. [For newbies: that was a "country" prior to the Reagan presidency.]

Years ago I wrote a paper for some class suggesting that the USSR/Russia would eventually become more capitalistic, looking more and more like the US of the 1950s; while simultaneously, the US would eventually become more and more like the USSR of old, with "central planning" and "five-year plans.

With the EPA and ObamaCare it seems my thesis wasn't too far off.

I was reminded of that by this story sent to me by a reader: cellulosic ethanol off to a delayed, boisterous start, as reported in The Washington Post.

Central Planning & Five-Year Plans: US Cellulosic Ethanol As A Case Study

First, the "central planning" part:

The Energy Independence and Security Act passed by Congress in 2007 with rare bipartisan support. The law provided a road map for increasing the use of renewable agricultural byproducts in the U.S. motor fuel supply.

Now, the "five-year-plan" part: the EPA's initial quota (back in 2007) was one billion gallons, with annual increases.

Penalty: the EPA would impose penalties on refiners who would not contribute their fair share of cellulosic ethanol to their finished products.

Reality: even if the refiners wanted to comply, they couldn't. There was "no" cellulosic industry in the US.

Some Statistics

One billion gallons sounds like a lot. Refiners were up in arms. They said the US industry could not supply a billion gallons.

How much gasoline is consumed each year in the US? About 150 billion gallons-- US EIA.

In percent, how "much is" one billion gallons out of 150 billion gallons? 1/150 = less than a percent (about 0.6 percent actually).

Where Are "We" Now With Regard To Cellulosic Ethanol?

The EPA dialed back the original quota from one billion gallons to "a paltry" 14 million gallons earlier this year, and now has been forced to dial back again, this time to only 6 million gallons.

Six million gallons represents 0.004 percent of the amount of gasoline consumed annually in this country.

Heritage has a great graphic showing the original quota, the revised quota, and the actual production. 

But "cellulosic ethanol" factories are now coming on-line and although they won't contribute much to the US energy supply, a lot of folks could make a lot of money if the EPA increases the quotas over time. See the Washington Post article linked above.

So, I am brought up to speed on where we stand with cellulosic ethanol.

Seriously, for those interested, the linked article is excellent.

Wall Street Helping North Dakota Farmers, Ethanol Refiners

North Dakota ethanol refiners, farmers helped by Wall Street.

The New York Times is reporting:

It was supposed to help clean the air, reduce dependence on foreign oil and bolster agriculture. But a little known market in ethanol credits has also become a hot new game on Wall Street.

he federal government created the market in special credits tied to ethanol eight years ago when it required refiners to mix ethanol into gasoline or buy credits from companies that do so. The idea was to push refiners to use the cleaner, renewable fuel, or force them to buy the credits.

A few worried that Wall Street would set out to exploit this young market, fears the government dismissed. But many people believe that is what happened this year when the price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts. 

A reminder of what we are talking about:

Every time they mix ethanol into gas, or import fuel already blended with ethanol, energy companies get a credit from the government, and that credit can be sold to other companies that don’t blend ethanol to help them meet federal requirements. If refiners fall short of their obligation, they can face fines of $32,500 a day. To monitor compliance, each gallon of ethanol is assigned a 38-digit Renewable Identification Number, or RIN. Six billion of them were generated in the first six months of this year. 

File Under "Predicted"

Politico is reporting:

Congressional committees are taking note of a massive spike in the price of corn ethanol credits that refiners use to meet the Environmental Protection Agency’s renewable fuels mandate — amid concern it could increase gasoline prices.

House and Senate energy panels are eyeing the price of ethanol renewable identification numbers, or RINs, which have skyrocketed from pennies a gallon to more than $1 per gallon in recent weeks. That could cost the refining industry $7 billion this year, according to a Barclays analyst as cited by the Financial Times.

But not to worry. The cost of ethanol will only increase the price of gasoline by about 10 cents/gallon.

The volatility and price hike have set Wall Street abuzz and become the top issue for refiners — some of whom are buying millions of RINs on any given day. Industry officials are also using the price spike as additional ammunition to try to get Congress to either scrap or significantly modify the existing annual renewable fuels production mandates.

At a public meeting March 8 in Michigan on EPA’s proposed 2013 volume requirements for the renewable fuels mandate, Marathon Petroleum testified that corn ethanol RINs prices could amount to a 10-cent increase in gasoline prices.

But refiners are going to take a beating. Unless they pass the cost of ethanol unto the consumer. Let me guess.

EPA-mandated ethanol production reminds me a lot of USSR's central planning back in the day. That worked out well, too.

Life Gets More Complicated Every Day

Remember the old days when you could just pull into a gas station, get your gas, and get on down the road?

After reading the WSJ article on E15 (15% ethanol-gasoline blend): my two cents worth -- dead on arrival.

All agree: E15 is not safe for automobiles with a model year of 2001 and later. The EPA and the ethanol industry says E15 is safe for newer cars .... but ... and it's a big "but":

Auto makers have said they don't recommend using E15 even in post 2001-models, although General Motors Co. and Ford Motor Co. say E15 is safe for their 2013 fleets. 

General Motors --> Government Motors --> EPA.

Even the EPA agrees that E15 may be more corrosive than other fuels AND emits a hotter exhaust, which could cause leaks or increased wear in vehicles that weren't designed to handle it.

You still want E15 in that $50,000 Volt?

Then this little bit of anxiety-causing trivia: if E15 and E10 are being dispensed from the same hose, the EPA requires anyone buying E10 to buy at least four gallons. The minimum of four gallons is to dilute out any E15 that will still be in the hose, the E15 that will damage your engine or exhaust system.

Then, this little nugget for the service station owner: many owners have underground storage tanks that aren't certified to hold fuel with more than 10% ethanol, meaning it would take an investment of tens of thousands of dollars to replace them with tanks that can store E15. My hunch: before this is all over, the EPA will retroactively certify E10 storage tanks for E15.  And then when the tanks corrode and leak, the EPA will sue the service station owner.

But this is the nub: it doesn't matter whether service station owners offer E15 or whether consumers buy it. The EPA has set federal mandates for blending increasing amounts of ethanol in gasoline. So, even if the E15 is not sold, it has to be produced (or a lot more folks have to buy E10 to soak up all that mandated ethanol). One way or another, increasing amounts of ethanol have to be blended:  it's mandated by the EPA.

But there is a solution: export more E15 to Europe and Asia.

Saudi Burns Record Amount of Oil To Generate Electricity For Air Conditioners

Link here.

Saudi Arabia burned record monthly volumes of oil in June and July, official government figures show, contrary to the top crude producer's plan to temper its summer oil burning spree this year with more gas. 

The world's leading oil exporter burned an average of 743,500 barrels per day (bpd) of crude in June and July, up 82,000 bpd from the same months last year, mainly to make electricity to keep the population cool, data issued under the Joint Oil Data Initiative (JODI) showed on Wednesday. 

The kingdom had hoped that more supply from Saudi gas fields being made available for power generation would save millions of barrels of valuable crude for export this summer.

Meanwhile, on an unrelated note, the US EPA raised biofuels (converting food [corn] into fuel [ethanol]) targets for 2013.

And so it goes.

Ethanol To Increase in Price? Most Likely

Updates

August 13, 2012:  data point regarding 2012 corn/ethanol following news of worse corn crop in 17 years:

About 42 percent of the much diminished corn crop this year is expected to go to ethanol, according to the U.S. Department of Agriculture. The USDA Friday said it now sees U.S. ethanol use at 4.5 billion bushels, of the total expected 10.8 billion bushel crop this year. Ethanol is the biggest user of corn, followed by livestock, which is expected to consumer 4.1 billion bushels.

Andrew Lipow, president of Lipow Oil Associates, said ethanol probably added about six cents a gallon to gas prices since the middle of June. In that time, ethanol futures have gone from about $2 a gallon to around $2.60. Ten percent of gasoline is ethanol, and the rise in corn prices has stirred speculation that the Environmental Protection Agency might be encouraged to temporarily drop the mandate.

My hunch: the EPA will make a major announcement to temporarily drop the mandate, but they will do it at the most politically opportune moment. It's a tricky situation: it could cause Iowa to vote for someone other than the incumbent (or not vote at all).

Original Post

Ya gotta love central planning.

And it gets increasingly difficult for me to keep up with data points.

First, this one. I was not aware that back in January they were talking about the price of ethanol increasing due to the end of subsidies; the price increase will contribute slightly to the price of gasoline.

Now this news: China is going to be buying more American corn this year. And it won't be a trivial amount. Well, the article doesn't say that directly but it's not hard to figure this one out. The article was posted just after midnight EST, Thursday, March 8, 2012. It will be interesting to see what corn futures do later today.

Beijing and the influential U.S. agriculture department may have overstated China's corn crop by as much as 14 percent, pointing to higher imports from the world's second-largest consumer of the grain that could squeeze already tightening global supplies.

If China plugs the gap between projected and actual domestic supply with additional corn imports, it would drive up international prices already near four-month highs. Wheat markets could feel the impact too if Beijing snaps up the grain as a substitute to corn for animal feed.

Interestingly, this was posted "yesterday," March 7, 2012:

Corn also slumped on speculation that China, the world’s biggest consumer of the commodity, will reduce imports of the grain and boost planting to feed expanding hog herds and chicken flocks, said Rich Nelson, the director of research for Allendale Inc. in McHenry, Illinois.

So, the perfect storm continues. Not only is crude oil increasing in price, but now ethanol, due to the loss of subsidies, will increase in price. Yup, ya gotta love central planning. BusinessWeek from 2007:

Corn is caught in a tug-of-war between ethanol plants and food, one fo the first signs of a coming agricultural transformation and a global economic shift. Ever since our ancestors in the Fertile Crescent first figured out how to grow grains, crops have been been used mainly to feed people and livestock. But now that's changing in response to the high price of oil (remember, this was written in 2007), the cost in lives and dollars of ensuring a supply of petroleum imports, and limits on climate-warming emissions of fossil fuels.