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Plan to expand ethanol sales would have limited impact, analysts say

Published 10/16/2018, 12:38 PM
© Reuters.  Plan to expand ethanol sales would have limited impact, analysts say
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  • Analysts say the Trump administration’s plan to allow year-round sales of higher-grade corn ethanol would have limited impact on the depressed U.S. ethanol market, with record supplies and prices for the fuel hovering near the lowest in a decade.
  • Even if the plan moves forward by next summer and hundreds of mostly small and rural gasoline station chains install new dispensers to sell E15, overall sales likely would rise only slightly; currently only ~1,300 stations have pumps that can dispense E15, little more than 1% of the 122K stations in the U.S.
  • “The likely impact on U.S. ethanol and corn demand in the foreseeable future is immaterial,” as the infrastructure needed to dispense E15 is insufficient, says J.P. Morgan's Ann Duignan.
  • A service station would need to spend $250K to add fuel pumps, tanks and other equipment, investments that could take about six years to pay off with sales of E15, says an exec at pipeline and terminal operator Pro Petroleum.
  • Analysts also say large oil refiners are unlikely to build new infrastructure for E15.
  • Potentially relevant tickers include PEIX, GPRE, REGI, ADM, REX
  • ETFs: PBW, QCLN, FUE, PUW, HECO
  • Now read: Green Plains, Inc. Continues Its Transition Away From Ethanol


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