@BGOV will regularly feature insight and background on the development of Bloomberg Government stories from the analysts and reporters behind them. Here, senior finance analyst Vijay Sankaran examines the amount of fuel ethanol blended into gasoline. To get access to this briefing and more, contact us for a free trial.
Ethanol is directly impacting how Republican presidential candidates jockey for position, and is emerging as one of the biggest geopolitical factors in the global energy markets.
This Bloomberg Government Chart of the Day compares, in logarithmic scale, consumption of U.S. fuel-based ethanol, derived largely from corn, with U.S. imports of crude oil from Saudi Arabia, based on data from the Energy Department’s Energy Information Administration. The gap between fuel-ethanol use and crude oil imports from Saudi Arabia totaled 45 million barrels in January of 2000. That gap has narrowed to 8.4 million barrels in April.
The U.S. government has supported the ethanol industry through a series of tax credits and tariffs. In addition President George W. Bush signed legislation in 2005 mandating how much ethanol should be in gasoline consumed in the U.S. The volume under this Renewable Fuel Standard was 9 billion gallons in 2008.
The mandated volume will reach 15 billion gallons by 2015, the same amount of crude oil the U.S. imported from Saudi Arabia in 2009. Saudi Arabia dropped from being the top single source of crude oil for the U.S. in 2000 to the third-biggest in 2010, behind Canada and Mexico, according to the Energy Information Administration.
U.S. ethanol policies are also figuring into the Republican primary process. Iowa is the leading U.S. corn producing state and former Utah Governor Jon Huntsman Jr. has announced that he won’t be competing there, citing his opposition to ethanol subsidies.
Vijay Sankaran is a Senior Financial Analyst on the energy team at Bloomberg Government. Prior to Bloomberg Government he was a Managing Director of a political risk firm, Dome Advisors, where he advised institutional investors on policy and political developments. Earlier in his career he was a political risk analyst at Deutsche Bank. He earned his Master’s in Business Administration (M.B.A.) from Columbia University.