COVID-19 causes first contraction in biofuel output in 20 years

November 17, 2020 |

In Arizona, a just released International Energy Agency report shows that the biofuels industry has been strongly impacted by the Covid19 pandemic with global transport biofuel production in 2020 anticipated to be an 11.6% drop from 2019.

Global transport biofuel production in 2020 is anticipated to be 144 billion litres (L), equivalent to 2 480 thousand barrels per day (kb/d) – an 11.6% drop from 2019’s record output and the first reduction in annual production in two decades.

While this projection is a slight upward revision from the IEA forecast update in May, it is far below the 3% growth anticipated for 2020 in our pre-pandemic forecast. The greatest year-on-year (y-o-y) drops in output are for US and Brazilian ethanol, and European biodiesel.

Lower transport fuel demand resulting from the Covid19 crisis reduces biofuel consumption in countries where mandate policies require a set percentage of biofuels to be blended with fossil transport fuels. Overall, global gasoline demand is anticipated to contract by 10%, and diesel by 6% in 2020. Diesel is less affected, as a substantial share of its consumption is for the transport of goods, which the crisis has impacted less than personal mobility.

A lowering of crude oil prices since the start of the pandemic has made biofuels less competitive with fossil transport fuels. The average crude oil price for 2020 is currently estimated at around USD 40/bbl, down from USD 64/bbl in 2019. This has reduced unblended ethanol purchases in Brazil (-17% in the first half of 2020) and delayed increases to biofuel blending rates in the Association of Southeast Asian Nations (ASEAN) region because this would imply higher costs for governments that subsidise biofuels to ensure their competitiveness with gasoline and fossil diesel. Lower crude oil prices have also caused biofuel prices to fall, albeit generally to a lesser extent, which challenges production economics for some plants.

If fossil transport fuel demand rebounds to close to pre-pandemic levels and policy support in key markets continues to expand, transport biofuel production could reach 162 billion L in 2021, a return to the 2019 level. This is contingent, however, on the health crisis being brought under control and the avoidance of further widespread mobility restrictions.

Download the IEA report on their website here.

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Category: Fuels

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