Over the last several years, growth in U.S. consumption of fuel for automobiles and trucks has more or less stalled. U.S. utilization of finished motor gasoline reached approximately 3.4 billion barrels in 2007, and fell or was stagnant for the next decade, until it rose slightly in 2019. Not surprisingly, consumption fell by nearly 14 percent in the first year of the COVID-19 pandemic in 2020, and by 2022 was still five percent below the 2019 level, according to data published by the U.S. Energy Information Agency (EIA).
As a result, growth in U.S. consumption of biobased fuels such as ethanol and biodiesel has also slowed considerably in recent years. As was the case with overall vehicle fuel use, U.S. ethanol use peaked in 2019 at 14.5 billion gallons, then fell off in the next few years due to reduced driving from pandemic restrictions in 2020, recovering slightly in 2021 and 2022 to just under 14 billion gallons.
In addition to slowing overall transportation fuel use, ethanol use has encountered the so-called ‘blend wall’, the amount of ethanol required to create a 90-10 gasoline-ethanol blend known as gasohol (E10), which is the primary blend available in most parts of the country. Easy access to purchase ethanol blends other than E10 requires installation of blender pumps at local filling stations, which is still not a common practice. Such pumps cost between $70,000 and $120,000 to install per pump, although USDA and some states do offer assistance to defray those costs. One approach to expanding beyond this roughly 14 billion gallon level by encouraging more use of E85 fuel in flexible fuel vehicles. While it is estimated that there are 27 million such vehicles in the United States, many owners of such cars are either not aware of their vehicle’s capacity to use E85 or cannot easily purchase such fuel in their regions, especially outside the Midwest..
In recent years, the biofuel industry and its political allies have also sought to increase consumption of a slightly higher ethanol blend, known as E15 fuel, by reducing regulatory barriers to its use during summer months. In 2022, the Environmental Protection Agency (EPA) issued an emergency waiver to allow expanded E15 use. This move led to consumption of E15 at 1.02 billion gallons in that year, the highest level ever. EPA initiated rulemaking on making this waiver permanent in May of 2023. It was reported that EPA submitted the final rule to the White House Office of Budget and Management (OMB) for sign off on December 19, 2023.
However, the actual new frontier for biofuels use is not expanding use of E85 or E15 but the recent moves to incorporate biofuels into commercial aviation on a regular basis offers considerably more scope for expansion. Known as sustainable aviation fuel (or SAF), this approach represents the preferred strategy for these companies to reduce their Greenhouse Gas (GHG) footprints, since unlike ground transportation, electric-powered airplanes are not yet a feasible alternative for long range passenger or freight routes. Shorter range battery- or solar- powered aircraft have been flown on an experimental basis in recent years, but such crafts are not yet commercially viable.
As with fuel consumed for ground transportation described above, aviation fuel used by the U.S. civilian sector fell precipitously between 2019 and 2020, declining 43 percent due to Covid-19 related shutdowns in the United States and around the world. By 2022, that figure is estimated to have recovered significantly, within 12 percent of the 2019 usage figure of 1.7 million barrels per day.
Several major global airlines, such as Air Canada, Alaska Air, Japan Airlines, Delta, and United Airlines, have committed to using SAF in planes flying on regular routes in recent years, but the cost gap between SAF and regular jet fuel has been too great to spur sufficient SAF production to meet the companies’ goals. According to a November 1, 2023 Reuters article, jet fuel could be purchased for $2.85 per gallon at the time, while the SAF price was more than twice as high, at $6.69 per gallon.
In September 2021, President Biden issued the SAF Grand Challenge as part of his effort to reduce U.S. GHG emissions overall. The goal was to produce 3 billion gallons of SAF annually to displace conventional aviation fuel of that amount by 2030, and totally replace conventional jet fuel by 2050. To achieve this objective, airlines would be eligible to receive tax credits if the switch to SAF generated at least 50 percent reductions in GHG emissions. This tax credit was authorized in the Inflation Reduction Act of 2022. In 2022, U.S. companies produced only 15.8 million gallons of SAF products, so these goals are quite ambitious.
In December 2023, the Treasury Department announced that it would adopt a specific model developed by the U.S. Department of Energy called Greenhouse Gases, Regulated Emissions and Energy Use in Transportation (or GREET) to determine the validity of tax credits generated by the use of ethanol as a SAF product. Treasury officials pledged to have all necessary modifications to GREET completed and published by March 2024. This decision was widely embraced by both the renewable energy sector and U.S. farm and commodity organizations.
