The market represents an opportunity totalling 200 million gallons of U.S. ethanol
By Diego Flammini
U.S. ethanol will now be accepted by another Asian country.
Between 2010 and 2019, the U.S. did not export ethanol to Indonesia due to a ban on pre-blended fuels entering the country.
The Indonesian government has lifted that restriction, allowing U.S. ethanol to tap into a market that could be worth 200 million gallons of ethanol annually, which is the equivalent to about 71 million bushels of corn.
The U.S. Grains Council, Growth Energy, the Renewable Fuels Association (RFA) and the United States Department of Agriculture’s Foreign Agricultural Service have been working since December 2017 to have Indonesia lift its pre-blended fuel ban.
The Indonesian government’s decision to remove the restrictions is the result of hard work from the industry, said Ed Hubbard, general counsel with the RFA.
“Indonesia’s decision to lift the ban is the result of a great deal of diplomacy and negotiation with the country over the economic and environmental benefits of using ethanol blended fuels,” he told Farms.com in an emailed statement. “By importing gasoline, pre-blended with ethanol, that lowers the price to import finished gasoline and lowers the price for consumers at the pump.”
In Indonesia, Pertamina, a state-owned oil company, controls fuel blends.
In December 2019, the Indonesian government mandated that Pertamina reduce its fuel imports and set a path for expanded use of E5 blend by 2020 and E20 by 2025.
“However, these policies have not been successful to date due to lack of any strong enforcement,” Hubbard said to Farms.com. “As part of our industry efforts to encourage production and use of ethanol to blend in fuel in Indonesia, we have shown them how important it is to have a firm blend policy combined with an open trade policy to help when domestic production fails to meet demand.”
Indonesia’s decision to lift its ban is another piece of good news for the ethanol industry, which has experienced a few positives lately.
“Ethanol futures are higher on the day,” said Abhinesh Gopal, head of commodity research with Farms.com Risk Management. “Ethanol has been on a recovery path along with gasoline since the economy reopened, and now we have some of the idle ethanol plant capacity slowly coming back online.”