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Can ethanol industry handle another round of COVID-19?

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The ethanol industry is starting to get its feet under itself. Of course, this is the second time that this has happened already in 2020. Earlier in the year, we were starting to see things start to look as though it would turn around for the industry. The tenth circuit court had ruled that the Environmental Protection Agency (EPA) had been illegally granting Small Refinery Exemptions (SREs). We also were seeing some trade deals getting ready to go into place. Things were finally on the upswing when we talked to Renewable Fuels Association (RFA) President & CEO Geoff Cooper back in February at Commodity Classic.

Then, only a week later, COVID-19 started its run across the United States and the ethanol industry would be one of its many casualties.

With the COVID-19 pandemic, stay at home orders were issued across the country. This led to a large drop in fuel consumption. Some places saw gasoline prices fall to under a dollar per gallon. Prices that hadn’t been seen in over 20 years. Since then, demand and prices have been climbing back to almost pre-COVID levels. However, RFA’s Geoff Cooper says production is still behind last year’s levels.

Cooper says the hardest part about the situation is not knowing when, or even if, ethanol consumption will return to what it once was.

There have been signs that fuel demand could be boosted, however, some states are slowing or shutting down entirely as a resurgence in the virus is starting to show up. As it stands right now, ethanol consumption is forecasted to be down 3.5 billion gallons because of the pandemic.

Cooper says we have never witnessed such a strong hit to demand in such a short period. This has further exacerbated the negative situation that the EPA waivers caused.

With the EPA considering granting gap-year waiver requests from oil companies, and the fears of a resurgence in COVID-19; the ethanol industry is looking down the muzzle of a pretty big economic cannon and praying nobody pulls the lanyard.