Surplus of U.S. Ethanol Grows

By law, U.S. gasoline suppliers are supposed to blend 13.2 billion gallons of ethanol to fuel this year, up almost 5% from 2011.

But that goal may not be met as fuel purchases continue to decline, according to the U.S. Dept. of Energy. Retail sales of gasoline this year are running 6% below year-earlier levels, mainly because of higher fuel prices, according to MasterCard Inc.

Average U.S. gasoline prices are at $3.94 per gallon, up 18 cents in four weeks according to the AAA Daily Fuel Gauge Report. Over the past 12 months, gasoline futures have risen 4% to $3.34 per gallon, but ethanol prices have dropped almost 7% to $2.27 per gallon, Bloomberg News notes.

Distillers currently are allowed to add 10% biofuel to gasoline (E10) for the American market. This week the Environmental Protection Agency agreed to allow the sale of 15% ethanol (E15) for vehicles built after the 2000 model year.

Bloomberg estimates that ethanol distillers are now losing 11 cents on every gallon they produce. A year ago, they were earning more than 4 cents per gallon. The news service notes that ethanol producers are now doing business without the help of a 45-cent-per-gallon government subsidy that expired last year.