Dying Biofuels: Green Fuel Plants Are Shutting Down and Some May Never Come Back

  • Date: 30/03/20
  • Bloomberg

The coronavirus and cheap oil are hitting the fuel business so hard that ethanol plants are shutting down. Some may never come back.

The entire biofuel industry is facing a reckoning. Long before the pandemic emptied roads and exacerbated an oil price war, producers were battling chronic oversupply and trade upheaval. Now slumping demand and prices mean smaller producers and those with heavy debt loads will struggle to ride out the losses.

“When we come out of these two Black Swan events — the price war in oil and now the coronavirus — we will probably look differently as an industry,” said Todd Becker, chief executive officer of U.S. ethanol producer Green Plains Inc. “There are definitely plants out there that are going to run out of capital.”

Seen as a greener alternative to gasoline and once promoted as a way for countries to wean themselves off foreign oil, the industry is facing another crushing blow. Corn ethanol plants are closing across the U.S., Brazilian producers of sugar cane-based fuel are sinking further into debt and efforts to use more biofuel are being jeopardized in Asia. In Europe, producers are either cutting back or making feedstock for hand sanitizer.

Biofuel prices hit record lows in many markets

U.S. gasoline hit a 20-year low and prices at the pump are already below $1 a gallon in some states. That’s on the back of an oil price war between Russia and Saudi Arabia that sent crude markets into meltdown and the virus outbreak that has upended demand.

While cheap fuel is good news for consumers, it’s hurting biofuel producers and American farmers, who sell about a third of their corn crops to the ethanol industry.

Valero Energy Corp., the No. 2 U.S. oil refiner, is temporarily closing two plants and won’t comply with some contracts. Andersons Inc. is suspending operations at its plants and POET has “temporarily ceased corn purchases at a number of locations.” Pacific Ethanol Inc. is cutting output by as much as 60%.

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