The ethanol industry wants EPA to restore the lost ethanol volumes from the exemptions given to the oil industry. However, EPA recently proposed its 2020 blending requirements under the RFS, and the lost volumes were not addressed.
Meanwhile, the oil industry is also not happy with the 2020 requirements. Chet Thompson, president and CEO of the American Fuel and Petrochemical Manufacturers said “Simply put, these high mandates won’t help American farmers and will just cost drivers more at the pump.”
How have these events impacted the ethanol industry? The companies I mentioned in that 2017 column are all down double digits since President Trump’s inauguration, versus a 28% gain in the S&P 500:
The best performer of the group, REX American Resources, is only down 12% since then. However, Green Plains and Pacific Ethanol have respectively lost 60% and over 90% since Trump’s inauguration. Shares of Pacific Ethanol have fallen from $8 all the way down to 59 cents.
One final item I will note is that the oil industry is also down over this time period. The Energy Select Sector SPDR ETF (XLE) tracks stocks of large energy companies from different sub-sectors (e.g., integrated, oil production, equipment services). Since Trump’s inauguration, the XLE has fallen by nearly 20%.
Some of the factors behind the decline of the XLE are also weighing on the ethanol industry. Concerns about slowing growth and potentially lower fuel demand will influence the price of ethanol and gasoline alike.
Nevertheless, it’s hard to argue that President Trump’s policies have been beneficial to the ethanol industry. It’s a difficult task to please both the ethanol industry and the oil industry, but on this issue the administration has pleased neither.