Ethanol Market Research Articles

Biofuel Dynamics in Brazil: Ethanol–Gasoline Price Threshold Analysis for Consumer Preference

The global transition towards environmentally friendly energy sources plays a major role in addressing both energy security and climate change. Brazil is at the forefront of this transition due to its rich natural resources and increasing investments in biofuels. Therefore, this investigation examines the consumption patterns and interactions between ethanol, primarily sourced from sugarcane, and gasoline within Brazil’s energy framework. Ethanol’s renewability, reduced environmental impact, and superior combustion characteristics position it as a feasible substitute for traditional fossil fuels. Nonetheless, obstacles like competition for land use and inadequate distribution infrastructure impede its widespread acceptance. This study explores the economic interaction between ethanol and gasoline, focusing on pricing dynamics and regional influences. Using consumer preferences and the accessibility of ethanol, this research identifies a range of price ratios within which consumer preferences shift from gasoline to ethanol in various Brazilian regions. The study also classifies Brazilian states into three distinct ranges based on the ethanol-to-gasoline price ratio in 2023 for a granular analysis of the economic dynamics influencing fuel choice. The research identifies states with competitive and dominant ethanol markets by examining the interplay between ethanol market share, fuel prices, and the adoption of flex-fuel vehicles (FFVs) in the country. Lastly, the findings support the importance of regional economic conditions and the influence of price ratios on consumer behavior, highlighting that ethanol’s market share does not always correlate with favorable pricing.

Food-fuel nexus beyond mean-variance: New evidence from a quantile approach

This paper investigates the dynamic relationship between crude oil, ethanol, and corn markets across various quantiles of return distributions, as well as at higher statistical moments. Using a quantile vector autoregression model and data from 2007 to 2022, we find that the cross-market linkages are quantile dependent, with the strongest connections observed in the tails of the distribution. A shock to the oil market significantly impacts ethanol and corn returns under extreme bearish and bullish conditions. Positive shocks to the corn market reduce ethanol returns when the ethanol market is highly bullish, but this effect becomes positive in the left tail of the distribution. We also identify significant co-movement in higher statistical moments between these markets. Extreme excess kurtosis in the food-fuel nexus is more likely to occur with high financial market uncertainty, a bullish stock market, contracting industrial production, and a strong US dollar. In addition to these variables, credit spreads, futures market liquidity, futures term structure, and hedging pressure also influence kurtosis in individual markets within the nexus.

Potential solution to the sustainable ethanol production from industrial tail gas: An integrated life cycle and techno-economic analysis

Utilising industrial tail gas for ethanol production is a viable pathway to significantly mitigate CO2 emissions whilst simultaneously producing value-added fuels and chemicals, which has received great attention in recent years. While some technologies have been commercial deployed, new technological concepts continue to emerge in order to improve the life cycle and techno-economic performance. In this investigation, a novel ethanol production technology integrating tail gas-based ethanol (TG-ethanol) with electro-catalytic CO2 reduction (ECR), called TGEE technology, was first proposed to address the energy and carbon efficiency issues associated with the state-of-the-art TG-ethanol technologies. The process was modularly modelled for to accommodate different ECR integration scenarios for three typical industrial tail gas streams (steel, iron alloy and calcium carbide). In addition, life cycle & techno-economic analysis based on Monte Carlo simulation were employed to evaluate the environmental and economic performance of the TGEE process. Results show that ethanol capacity can be increased by 1.3–2.9 times with carbon efficiency up to 36–82%. Life cycle carbon footprints of TGEE-ethanol were estimated to be 1.77–3.93 t CO2eq/t ethanol, with a carbon reduction potential of 32–63% higher than the TG-ethanol. Minimum ethanol selling price is estimated to be 428–962 $/t ethanol, which is lower than the current ethanol market price (900–1080 $/t). Overall, the comprehensive analysis suggests that the TGEE process emerges as a more economically and environmentally benign next-generation technology for ethanol production from industrial tail gas.

Optimization and benefit analysis of the supply chain for sweet sorghum bioenergy production in China

<p>Bio-liquid fuel is one of the effective ways to alleviate energy shortages and reduce greenhouse gas emissions. Sweet sorghum, as an energy crop used in fuel ethanol production, has enormous potential for development. However, due to seasonality, vulnerability, and logistical scheduling costs during transportation, the sweet sorghum ethanol supply chain faces significant difficulties and challenges in its development. To address the research gap, this paper proposes a multi-objective sustainable supply chain optimization model for Chinese sweet sorghum bioenergy based on mixed-integer linear programming. In this framework, the crop growth process model is first spatially extended to obtain the feedstock sources of the sweet sorghum ethanol supply chain. Then a site selection model for the feedstock collection stations and ethanol processing plants is constructed based on the geographic information system (GIS) to determine the candidate locations of the basic units of the sweet sorghum ethanol supply chain. Finally, a multi-objective supply chain optimization model based on the mixed-integer linear programming methodology is created to achieve the sweet sorghum ethanol supply chain layout and optimization at the national level. This framework takes into account the fuel ethanol market demand in China and the current state of the sweet sorghum ethanol supply chain industry, achieving national-level layout and optimization of the sweet sorghum ethanol supply chain. The total aboveground biomass (dry weight) of sweet sorghum on marginal land in China can be converted into approximately 37.212 million tons of fuel ethanol production, meeting the requirement to promote a nationwide 10% substitution rate for automotive ethanol gasoline. The lowest-cost supply chain layout scheme suggests establishing large ethanol processing plants near the Hu Huanyong Line, as this area benefits from abundant sweet sorghum yield on marginal lands and lower east-west direction transportation costs. However, the lowest carbon emission supply chain layout scheme recommends reducing the raw material supply area and increasing the ethanol transportation route to lower carbon emissions. The results of the sensitivity analyses indicate that lowering feedstock production and increasing ethanol demand increases the overall cost and carbon emissions of the sweet sorghum ethanol supply chain, while using rail transportation methods, increasing feedstock production, and decreasing ethanol demand reduces costs and carbon emissions.</p>

The Ethanol Market and Its Relation to the Price of Agricultural Commodities

In this article, we seek to present the synthesis of the global ethanol market in the United States (US) and Brazil by using caloric equivalence to empirically characterize the elasticity of supply and demand. We also seek to evaluate the relationship between world ethanol production and prices of agricultural commodities (wheat, rice, corn, soybeans and sugar) from 1981 to 2016 using climate-induced yield shocks as instrumental variables. The main results for the world market indicate that the production and demand for ethanol respond elastically to changes in commodity prices. The world ethanol production has no significant relationship with food prices. However, evaluation of the ethanol market and its interaction with the agricultural commodities market confirms the hypothesis that Brazilian ethanol is weakly related to the price of food.

The ethanol market in Brazil: price behavior and regional differences

AbstractThe conditions facing the Brazilian ethanol market have created a need to improve the industry's understanding of price formation, and to analyze the effects of mandatory policies and the interaction between Brazil's ethanol, agricultural, and fuel markets. In this context, this study sought to analyze the behavior of ethanol production and consumption at the national and regional levels in Brazil from 2012 to 2016; hence, the supply and demand functions are estimated at national and at regional levels using the two‐stage least squares method. Our findings indicated that gasoline and anhydrous ethanol blended gasoline were substitutes for hydrous ethanol on the demand side in Brazil. At the national level, the estimates also showed that the income elasticity of hydrous ethanol characterizes it as a normal good. At the regional level, the regions with the highest production and consumption (southeastern and central‐western Brazil) responded to price variations less elastically than the other regions (southern, northeastern, and northern Brazil).

An Analysis of Dynamic Correlations among Oil, Natural Gas and Ethanol Markets: New Evidence from the Pre- and Post-COVID-19 Crisis

After the economic shock caused by COVID-19, with relevant effects on both the supply and demand for energy assets, there was greater interest in understanding the relationships between key energy prices. In order to contribute to a deeper understanding of energy price relationships, this paper analyzes the dynamics between the weekly spot prices of oil, natural gas and benchmark ethanol in the US markets. The analysis period started on 23 June 2006 and ended on 10 June 2022. This study used the DMCA cross-correlation coefficient in a dynamic way, using sliding windows. Among the main results, it was found that: (i) in the post-pandemic period, oil and natural gas were not correlated, in both short- and long-term timescales; and (ii) ethanol was negatively associated with natural gas in the most recent post-pandemic period, especially in short-term scales. The results of the present study are potentially relevant for both market and public agents regarding investment diversification strategies and can aid public policies due to the understanding of the interrelationship between energy prices.

Post-RFS supports for cellulosic ethanol: Evaluation of economic and environmental impacts of alternative policies

Cellulosic ethanol is a sustainable and low-emission transportation fuel, but production has been low in the past years. Existing policies, including the Renewable Fuel Standard (RFS) and producers’ tax credit, have been driving the market for cellulosic ethanol. But they are expected to expire at the end of 2022 and their efficacy is compromised by multiple waivers and exemptions. This study models potential regulatory and financial policy instruments and evaluates their cost-effectiveness in supporting cellulosic ethanol in the post-RFS era using the National Energy Modeling System (NEMS), a hybrid computational general equilibrium model of the U.S. energy market. The analysis suggests that the high volumetric mandate and financial subsidy will increase cellulosic ethanol production from 20.78 million liters (ML) to 57.84–65.94 ML in 2050. When policies are bundled, they will boost production reaching 63.29–65.94 ML more quickly than a singular policy. Finally, cost-benefit analysis and sensitivity analysis were employed to study the tradeoff of economic cost and environmental benefits of the policies. The result finds that the high mandate scenario has the greatest net benefit, which is more cost-effective than other policy instruments.

Ethanol production in the United States: The roles of policy, price, and demand

Assessments of the impact of the U.S. renewable fuel standard (RFS) should inform consideration of future biofuels policy. Conventional wisdom suggests the RFS played a major role in stimulating the ten-fold expansion in ethanol production and consumption in the United States from 2002 to 2019, but evidence increasingly suggests the RFS may have had a smaller effect than previously assumed. Price competitiveness, federal and state policies such as reformulated gasoline requirements, and octane content in ethanol also affect ethanol market attractiveness. This study explores the roles of policy and economic factors by comparing historical data with results from scenarios simulated in a system dynamics model. Results suggest price competitiveness may explain much of the growth in the ethanol industry from 2002 to 2019. The Volumetric Ethanol Excise Tax Credit and phaseout of the oxygenate methyl tert-butyl ether contributed to earlier growth relative to expected timing of growth based on fuel price alone. The RFS (modeled through observed Renewable Identification Numbers) contributed to increased ethanol production in later years and may have increased production in the earlier years if risk of investment was decreased by the RFS Program.

Techno-economic assessment of bioethanol production from lignocellulose by consortium-based consolidated bioprocessing at industrial scale

Lignocellulose-based biofuels are of major importance to mitigate the impact of international traffic and transport on climate change while sustaining agricultural land for food supply. Highly integrated systems like consolidated bioprocessing (CBP), where enzyme production, enzymatic hydrolysis and fermentation of the released sugars are carried out in one reactor, offer the highest potential to save costs and to make lignocellulose-based biofuels economically competitive. The work described here showed that CBP based on a microbial consortium operated at full-scale (2000 t/d) saves up to 27.5 % of the total ethanol production costs compared to conventional ethanol production from lignocellulose in individual process steps. The cost savings are mainly achieved through lower CAPEX due to less apparatus requirements because of the integrated process, as well as through lower OPEX since no glucose is needed for enzyme production. A comparison with literature estimations of cost savings of CBP based on genetically modified microorganisms results in approximately the same range. As a result of a detailed sensitivity analysis, scale and yield were identified as the main cost-pushers from a process point of view, whereas the price level of the plant location has the highest impact on the investment conditions. In the EU, CBP yields enough margin for profitable production and the possibility to decentralize biomass valorization, whereas in the world’s largest ethanol market, the U.S, profitable production of lignocellulosic ethanol can only be achieved by CBP combined with other cost saving techniques, such as utilization of cost-free waste feedstocks, since ethanol has undergone a considerable price slump.

Local irrigation response to ethanol expansion in the High Plains Aquifer

Global ethanol production has grown rapidly due to national renewable fuel programs. Concern has grown over impacts that land conversion and crop displacement driven by ethanol feedstock production might have on water resources. In this paper, we examine irrigation decisions of agricultural producers in the Kansas portion of the High Plains Aquifer in response to local ethanol market expansion. To identify the effects of ethanol expansion on irrigation decisions, we examine field-level data on irrigation water use, irrigated acreage, and crop decisions for the years 2003–2017 for nearly 23,000 fields in Kansas. We measure the response of three irrigation decisions, (i) irrigated acreage, (ii) irrigation per acre, and (iii) total water use to the introduction and capacity expansion of an ethanol plant. We find that ethanol market expansion did lead to increases in irrigation water use. Specifically, a 10 % increase in ethanol capacity within 50KM increases annual water use by 0.22 % per field (4.8 acre-inches/field). We predict that ethanol markets accounted for about 4% of total irrigated water use in 2017.

Volatility spillovers between food and fuel markets: Do administrative regulations affect the transmission?

The rapid growth of biofuel production has led to the food versus fuel dilemma, with studies showing that the use of crops as inputs drives up prices, volatility and volatility spillovers in food and fuel markets. Renewable identification numbers (RINs) are fuel credits that track and enforce compliance with U.S. renewable energy mandates, and may ameliorate price volatility disruptions and reduce spillovers. However, existing studies have largely ignored the relationship between RINs and price volatility. Using weekly spot price data over the period 2008–2018, we examine the impact of RINs on the volatility and market interdependence between the corn, ethanol, and oil markets. Through an asymmetric multivariate GARCH model, we find that the RIN market contributes to a reduction of volatility in the ethanol market, and also reduces volatility spillovers between corn and ethanol markets. Lastly, RINs weaken the market interdependence between ethanol and corn and ethanol and oil.

Structural Break and Causal Analyses of U.S. Corn Use for Ethanol and Other Corn Market Variables

The causal basis for many of the relationships in models used to estimate the indirect effects of U.S. biofuels on global agricultural markets has not been adequately established. This paper addresses this gap by examining causal interactions among corn market variables through which the indirect effects of U.S. corn use for ethanol would be transmitted. Specifically, structural break and causal analyses of U.S. corn supply, uses, trade, and price are performed using quarterly data for marketing years 1986 to 2017. The structural break analysis identifies three breaks in corn use for ethanol that reflect the policy-driven evolution of U.S. corn ethanol production and other market factors. The causality analysis finds that U.S. corn use for ethanol is not a driver of the corn price and net corn exports. Changes in corn supply and domestic corn use are found to be the key factors in accommodating the large increase in corn use for ethanol between 2003 and 2010. These results mean that common assumptions linking U.S. corn ethanol production to large reductions in corn availability and exports, and higher global corn prices merit reconsideration.

Eficiência de mercado: uma aplicação no setor sucroalcooleiro da Paraíba

Objetivo – Este artigo tem como principal objetivo analisar a eficiência do mercado de açúcar e etanol da Paraíba, mediante o teste de cointegração.Design/metodologia/abordagem – Para tanto, utilizaram-se séries históricas do açúcar e etanol do mercado paraibano, coletados na BM&FBOVESPA e na CEPEA. Quanto aos métodos, aplicaram-se as métricas de Estatísticas Descritiva para descrever os comportamentos das séries, o Teste Raiz Unitária Aumentado de Dickey-Fuller para verificar a estacionariedade, e por fim o Teste de Cointegração, para analisar a relação a longo prazo.Resultados – Os resultados indicaram um comportamento com diversos movimentos oscilatórios nos preços das séries. Quanto a estacionariedade das séries, as variáveis à vista e futuro do mercado paraibano, apresentou-se processo não estacionário. Por fim, as séries estimaram-se que não há cointegração. Podendo assim, concluir que o setor sucroalcooleiro do mercado paraibano é ineficiente, ou seja, as commodities desviar o valor real de mercado.Implicações/limitações da pesquisa – No desdobramento desta pesquisa, ficou evidente uma limitação no decorrer da fase exploratória, como: Restrições no período dos dados do açúcar e etanol hidratado disponíveis na CEPEA e BM&FBOVESPA, principalmente no que se refere as variáveis de preço à vista e futuro do mercado paraibano.Implicações práticas – Nesta pesquisa, podem-se constatar que o mercado paraibano seria considerado eficiente se refletisse as informações disponíveis nos preços das commodities, impossibilitando ganhos anormais.Originalidade/valor – Estudo sobre eficiência de mercado é relevante, pois possibilita identificar padrões de comportamento dos preços de ativos no mercado. Isto é, podem avaliar se os preços dos ativos sendo supervalorizadas e como isso afeta o investidor e a economia brasileira.

The Major Driving Forces of the EU and US Ethanol Markets with Special Attention Paid to the COVID-19 Pandemic

Ethanol is a widely produced fuel, as well as a fuel additive. Its price is closely related to the price of gasoline, its major substitute. This paper focuses on the impacts of the related variables on regional ethanol prices. Additionally, the length of the price dataset made it possible to isolate the impacts of COVID-19 on the ethanol prices. Using multiple regression and Confirmatory Factor Analyses, we found no significant correlation between the European and US ethanol prices because the major influencing factors were regionally different. In the case of the European ethanol markets, the positive factors were wheat, maize, and potassium chloride prices, while the European sugar and diammonium phosphate prices were negative. In the US markets, gasoline, sugar, and most of the artificial fertilizer prices were positive, while wheat prices were negative. Based on factor analysis, artificial fertilizers and maize factors proved to be important to the European markets, while US ethanol prices were driven by the crude oil-gasoline and raw materials factors. The COVID variable showed no significant connection with the EU prices, but negatively affected the US ethanol prices. This is explained by the different market characteristics, as the US is not only the major consumer, but also the major producer of the different oil products. Therefore, COVID-19 had a double effect on their oil and ethanol markets.

Forecasting ethanol price volatility under structural breaks

AbstractThe use of ethanol as a vehicle fuel has reduced greenhouse gas emissions significantly. The introduction of ethanol has also led to a decrease in crude oil prices. Considering the economic and environmental significance of the biofuel markets, a strand of literature investigates the price and volatility dynamics of US ethanol prices. In this paper, in contrast to previous studies, we investigate whether information on structural breaks plays an important role in predicting US ethanol market volatility. Our findings reveal that generalized autoregressive conditional heteroskedasticity (GARCH) models incorporating these breaks improve the prediction of US ethanol market volatility. Furthermore, the persistence of volatility tends to decline when structural breaks are included in the GARCH models. We further note that the influence of good and bad news is properly assessed under such breaks. Our results suggest that ignoring such breaks could mislead the risk assessment procedure for the US biofuel industry. © 2020 Society of Industrial Chemistry and John Wiley & Sons Ltd

Understanding the failures in developing domestic ethanol markets: Unpacking the ethanol paradox in Guatemala

Fostered by environmental and economic drivers, liquid biofuels are expanding in the global energy matrix. However, many countries with biofuel potential, such as Guatemala, have yet to develop domestic biofuels markets. During the last decade, ethanol production in Guatemala has increased significantly, yet a domestic market does not appear to be in the horizon. It is a kind of paradox: a world class sugarcane producer and ethanol exporter does not use any blend of ethanol and gasoline in vehicles. This paper presents a techno-economic analysis and review of barriers that have delayed ethanol-gasoline blends in Guatemala. The cost assessment considers data from an existing distillery in Guatemala. Results show that Guatemala could produce annually a maximum of 250 million liters of ethanol from molasses, more than the amount required to introduce E10. For the current conditions, results from the modelling indicate that the cost of ethanol has minimal impact on the price of E10, but taxes could represent one third of the cost of E10 at the retail level. Since supply conditions are favourable and technical barriers are not relevant, strong government intervention and a coherent price structure for ethanol-gasoline blends is needed to create an ethanol market in Guatemala.

Modelling the Coevolution of the Fuel Ethanol Industry, Technology System, and Market System in China: A History-Friendly Model

The interaction among the fuel ethanol industry, the technology system, and the market system has a substantial effect on the growth of the fuel ethanol industry which plays a key role in the formation of a sustainable energy system in China. However, we know little about the relationships among them and it is difficult to explore the nexus using econometric method due to the lack of statistics on China’s fuel ethanol industry. This paper develops a history-friendly coevolutionary model to describe the relationships among the fuel ethanol industry, the technology system, and the market system in China. Based on the coevolutionary model, we further assess the impacts of entry regulations, production subsidies, R&D subsidies, and ethanol mandates on the growth of the fuel ethanol industry in China using a simulation method. The results of historical replication runs show that the model can appropriately reflect the multidirectional causalities between the fuel ethanol industry, the technology system, and the market system. We also found that entry regulation is conducive to weakening the negative economic impacts induced by the growth of the grain-based fuel ethanol industry without affecting the long-term total output of the industry; production subsidies to traditional technology firms are helpful for the expansion of the fuel ethanol industry, but they also impede technology transfer in the industry; only when firms inside the industry are not in the red can R&D subsidies promote technological progress and then further accelerate the growth of the fuel ethanol industry; the ethanol mandate has a significant impact on industrial expansion only when a production subsidy policy is implemented simultaneously. Our findings suggest that more attention could be paid to consider the cumulative effects caused by coevolutionary mechanisms when policymakers assess the effects of exogenous policies on the growth of the fuel ethanol industry. More attention also could be paid to the conditions under which these policies can work effectively.

Are ethanol markets globalized or regionalized?

This study investigates whether the US and Brazilian ethanol markets are globalized or regionalized (i.e., whether they are interdependent or independent) using weekly frequency data from July 2006 to December 2017. The empirical results indicate that the US ethanol market is unlinked to the Brazilian one in the short-run, however in the long-run they are globalized (interdependent) and co-influence each other. Asymmetric effects are identified between both ethanol markets and the Brazilian ethanol market Granger causes the US ethanol market. The findings help us understand the asymmetric dependence of the US ethanol market.

Are global ethanol markets a ‘one great pool’?

The main objective of this empirical work is to test whether the global ethanol markets move together. To serve this purpose, prices of the US and Brazilian ethanol sectors have been analyzed. Employing the asymmetric multivariate GARCH model, we document significant price and volatility spillover effects between the ethanol markets under study. Such findings indicate that world ethanol markets move together and they are not regionalized. These results have important implications. For example, given that ethanol markets are codependent, information flow across ethanol markets could guide policymaking and the formulation of hedging strategies for contagion risk prevention during ethanol market downturns. In addition, this type of information on ethanol markets is also crucial for investors to maintain well-diversified portfolios, and for opening (closing) investment positions.