Grassley Asks White House for Biofuel Support as SPR Fill Helps Oil Industry

March 20, 2020

Print This Article Share it With Friends

by Meghan Gordon (S&P Global) US Senator Chuck Grassley, Republican-Iowa, urged the Trump administration Thursday to help the US biofuel industry weather plunging fuel prices and demand, just as the White House was seen as supporting domestic oil producers by filling up the government's emergency crude stockpile.

"Fuel consumption has been slashed due to coronavirus & that has hurt energy jobs including ethanol + biodiesel plants in Iowa," Grassley tweeted. "If something is done to help oil, there needs to be something for biofuels workers. It's a matter of fairness."

The Energy Department announced earlier Thursday that it was seeking to buy an initial 30 million barrels of US crude as part of Trump's pledge to fill the Strategic Petroleum Reserve.

Energy Secretary Dan Brouillette pushed back on the idea that the SPR purchases were designed to be as an economic stimulus for US oil producers, who are getting hammered by historic low prices caused by plummeting coronavirus demand and the breakdown of OPEC+ supply cooperation.

...

Ethanol margins have sunk further below zero, meaning many ethanol plants are losing money on every gallon of the biofuel they produce. And with ethanol prices far exceeding those of gasoline, blenders will lose any incentive to blend more than just the ethanol volumes required under the Renewable Fuel Standard.

While few plants have closed so far, market observers expect that many such closures are inevitable. READ MORE

Department of Energy Executes On Direction Of President Trump, Announces Solicitation To Purchase Crude Oil For The SPR To Provide Relief To American Energy Industry (U.S. Department of Energy)

U.S. to buy initial 30 million bbls of oil for emergency stockpile (Reuters)

US seeks $3 billion to boost oil producers as prices plunge (New Haven Register)

Daily on Energy: Could Treasury be looking at getting into oil speculation? (Washington Examiner)

Restaurants, confectioners, ethanol industry ask for help (Fence Post)

Ethanol Industry in Trouble Amid COVID-19, Crude Oil Price War (Hoosier Ag Today)

Energy Markets Erode Ethanol Margins: Industry Officials Call on Trump Administration to Bolster Ethanol (DTN Progressive Farmer)

ACE TELLS WHITE HOUSE ETHANOL INDUSTRY MUST HAVE HELP (Brownfield Ag News)

COVID-19 expected to hit biofuel sector hard (Western Producer)

Crude oil’s price collapse hits ethanol market hard (Farm and Dairy)

Excerpt from Daily Examiner: COULD TREASURY BE LOOKING AT GETTING INTO OIL SPECULATION? We initially discounted Treasury Secretary Steve Mnuchin’s eyebrow-raising statement Thursday that the U.S. government should “go out and buy $10 billion or $20 billion" of oil to “fill up the reserves.”

If he was talking about filling the Strategic Petroleum Reserve, the math didn’t add up —that amount would purchase enough oil to fill up the reserve five times over at least.

Later Thursday, Energy Secretary Dan Brouillette said that he would ask Congress for $3 billion to fulfill President Trump’s order to buy low-priced oil to restock the SPR, which would be more than enough to cover the 77 million barrels open capacity.

Brouillette was clearly caught off guard by Mnuchin’s comment, telling reporters that he had not seen what the treasury secretary said and planned to call to ask what he meant (the press office for both officials did not respond to requests for follow-up comment from Josh).

While it’s certainly possible Mnuchin simply fudged the numbers, some analysts aren’t so sure.

“I don't think anyone should discount when Mnuchin said,” said Kevin Book, managing director of the consulting group ClearView Energy. “Mnuchin is not a guy who misses details. Our interpretation was he was proposing something much bigger.”

Indeed, it’s possible Mnuchin was hinting at something else, like the possibility of the government buying $10-20 billion of crude outright, to be stored elsewhere in industry-run storage terminals for future sale, not just for SPR storage. So the U.S. could look to purchase large quantities of crude oil and make it a government investment, an idea that Book says has precedent in desperate times.

“We are on a war footing now,” Book told Josh. “When America has been on war footing the government has bought commodities for the purposes of making industries whole. When the country is on a war footing, the government gets into business.”

To buy the huge amount of oil Mnuchin floated would require the government taking over commercial storage facilities, considering it’d be impossible to immediately find willing buyers for it. The legal authority on doing that “is very vague,” Book said.

Oil and gas industry officials are unsurprisingly dismissing the concept.

Mike Sommers, the CEO of the American Petroleum Institute, told Josh in an interview Friday that the Trump administration has not mentioned this possibility in conversations they’ve had about managing the oil market challenge.

“We don’t think it’s an appropriate idea,” Sommers said. READ MORE