What happened to ethanol producer prices after passage of the Renewable Fuel Standard?

July 22, 2016

The Renewable Fuel Standard program was designed by U.S. legislators to curb carbon emissions in transportation fuel. The program sets minimum requirements for refiners to produce transportation fuel using renewable sources. One of the main sources of renewable volume requirements is ethyl alcohol, commonly known as ethanol. Ethanol is produced by fermenting plant material, such as corn, sugar cane, or grasses.

The Producer Price Index (PPI) for ethanol measures the change in prices received by ethanol producers for the sale of their products. In 2006, the index jumped 24.8 percent after the implementation of Renewable Fuel Standard 1 (RFS1) in 2005, reflecting a surge in demand.

Producer Price Index for ethanol before and after enactment of the Renewable Fuel Standards (RFS1 and RFS2), 2005–14
Month Producer Price Index for ethanol

Jan 2005

100.0

Feb 2005

100.8

Mar 2005

101.3

Apr 2005

94.2

May 2005

93.4

Jun 2005

94.0

Jul 2005

97.9

Aug 2005

102.4

Sep 2005

112.2

Oct 2005

111.8

Nov 2005

104.8

Dec 2005

103.0

Jan 2006

101.7

Feb 2006

105.8

Mar 2006

109.1

Apr 2006

122.9

May 2006

126.3

Jun 2006

147.3

Jul 2006

152.2

Aug 2006

141.7

Sep 2006

131.2

Oct 2006

119.1

Nov 2006

122.8

Dec 2006

137.5

Jan 2007

139.2

Feb 2007

134.0

Mar 2007

141.0

Apr 2007

142.0

May 2007

142.4

Jun 2007

140.1

Jul 2007

137.9

Aug 2007

134.3

Sep 2007

128.6

Oct 2007

123.7

Nov 2007

126.9

Dec 2007

129.2

Jan 2008

133.1

Feb 2008

135.5

Mar 2008

139.1

Apr 2008

143.6

May 2008

146.4

Jun 2008

149.6

Jul 2008

161.1

Aug 2008

160.9

Sep 2008

157.9

Oct 2008

147.6

Nov 2008

149.3

Dec 2008

139.5

Jan 2009

133.0

Feb 2009

127.2

Mar 2009

129.9

Apr 2009

128.8

May 2009

132.1

Jun 2009

133.4

Jul 2009

134.3

Aug 2009

129.8

Sep 2009

127.0

Oct 2009

125.0

Nov 2009

120.3

Dec 2009

128.0

Jan 2010

120.4

Feb 2010

117.2

Mar 2010

113.5

Apr 2010

107.5

May 2010

105.1

Jun 2010

105.9

Jul 2010

108.3

Aug 2010

113.5

Sep 2010

123.8

Oct 2010

129.6

Nov 2010

143.8

Dec 2010

131.9

Jan 2011

141.7

Feb 2011

147.5

Mar 2011

149.8

Apr 2011

161.1

May 2011

164.4

Jun 2011

165.9

Jul 2011

166.2

Aug 2011

179.2

Sep 2011

176.6

Oct 2011

155.8

Nov 2011

163.3

Dec 2011

160.3

Jan 2012

147.2

Feb 2012

141.2

Mar 2012

141.7

Apr 2012

142.6

May 2012

140.4

Jun 2012

134.8

Jul 2012

145.6

Aug 2012

159.0

Sep 2012

158.9

Oct 2012

153.2

Nov 2012

146.1

Dec 2012

147.7

Jan 2013

144.6

Feb 2013

152.4

Mar 2013

154.6

Apr 2013

159.4

May 2013

163.8

Jun 2013

170.0

Jul 2013

158.6

Aug 2013

152.1

Sep 2013

154.4

Oct 2013

138.0

Nov 2013

128.3

Dec 2013

140.9

Jan 2014

139.6

Feb 2014

129.8

Mar 2014

143.2

Apr 2014

172.6

May 2014

147.4

Jun 2014

147.4

Jul 2014

141.0

Aug 2014

138.0

Sep 2014

141.6

Oct 2014

114.6

Nov 2014

122.0

Dec 2014

143.4

Note: The Environmental Protection Agency administers the Renewable Fuel Standard (RFS) program, setting minimum requirements for refiners to produce transportation fuel using renewable sources. RFS1 occurred in 2005; RFS2 occurred in 2007 and implementation a year later.

Source: Bureau of Labor Statistics.

 

Driven by tax credits and blending mandates, refiners sought to expand capacity in 2007. Despite the increase in capacity, the PPI for ethanol increased an additional 6.7 percent because of higher usage. The ethanol index rose 8.9 percent in 2008, following the Energy Independence and Security Act of 2007 (EISA) and the adoption of Renewable Fuel Standard 2 (RFS2) in 2007. It remained flat during the first half of 2009. However, in the latter half of 2009, the Great Recession tapered gasoline consumption, and ethanol prices decreased 12.2 percent for the year. In 2010, farmers earmarked an increasing share of corn for ethanol production, limiting the quantity available for food and feed use. As a result, ethanol prices fell 8.3 percent in 2010, while prepared animal feed prices climbed 7.3 percent. The ethanol index recovered sharply in 2011, rising 36.0 percent because of strong export demand from Brazil.

These data are from the Producer Price Indexes program. To learn more, see “What happened to ethanol producer prices after passage of the Renewable Fuel Standard?” by Wander Cedeño, Beyond the Numbers, July 2016.

SUGGESTED CITATION

Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, What happened to ethanol producer prices after passage of the Renewable Fuel Standard? on the Internet at https://www.bls.gov/opub/ted/2016/what-happened-to-ethanol-producer-prices-after-passage-of-the-renewable-fuel-standard.htm (visited September 15, 2019).

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