I was getting ready for fall speeches, now that harvest is finished. (Whew!) One of the curious trends I will be sharing is gasoline consumption. In short we may be talking Peak Gas(oline).
Of course, note that the scale makes the "hump" more dramatic than if it was based at zero, but still, it seems to me the advances in engines and stricter mileage requirements are having a big impact.
Now add in this unexpected trend:
(Apologies for the lack of source links - I forgot to load them with the pics)
In short, even with a recovery clearly in progress, we may not see gasoline consumption rise back to former intensity. in fact, with even a few more CNG vehicles, although facing an uphill battle for acceptance, demand for gas could be dull at best.
That has big implications for the RFS. Also the upcoming changes in the RFS focused on biodiesel. Hence when Scott and Darrel did the math on the ethanol impact for corn, the arrived at a unexpected place, IMHO.
The biofuels era that began in 2006 helped propel corn and other crop prices to a new higher level that has been sustained for nearly six years. One might be tempted to conclude that this new era is coming to an end as corn consumption for ethanol levels out and corn production begins to catch up. Instead, it actually appears that the new era of higher crop prices could be extended well into the future as a result of the RFS for advanced biofuels that in all likelihood can only be met with a rapid expansion in biodiesel production. To gain some perspective on the potential size of this expansion, consider our projection of 3.113 billion gallons of biodiesel production in 2015. This would require about 23.5 billion pounds of feedstock when total consumption of fats and oils in the U.S. currently totals about 28 billion pounds annually. Consumption of tallow and grease, another biodiesel feedstock, is thought to be near 10 billion pounds per year. At the projected level for 2015, biodiesel would account for over 60 percent of fats and oils consumption from all sources. This compares to about 20 percent in in 2012. The new price era, then, would not be extended by rising corn demand, but by rising vegetable oil demand. Whether this scenario actually is realized depends crucially on the evolution of biofuels policy here in the U.S. and energy policies in Brazil. We will be monitoring these issues closely in the future. [More]I just don't see how policy makers will let fuels compete this directly for food - unlike corn, which is largely for feed, we're talking human consumption of vegetable oils. Demand for same is strong, driven by oil-deficit nations beginning to upgrade diets. No longer is oil a drag on oil-commodity prices - it is often the driver these days.
The persistent assumption - and I admit it still seems reasonable - is corn production will resume what we thought was a permanent acceleration of yield, thanks to biotech, better tools and our immodest brilliance. Climate change may brutally revise those expectations for many of us, but it will take a couple more clunker national yields before we will address it, I would venture.
The battle over the ethanol mandate could replace Afghanistan as our longest war. And it may be not so much resolved as just quietly fizzling out. Oddly, perhaps the same as Afghanistan ends. Maybe the longer the conflict, the fuzzier the end.