Thanks to continued electric vehicle growth, “Ethanol domestic demand will shrink; the only question is, by how much?” That was one of the questions addressed in a webinar on the outlook for the ethanol market on March 12 by the Center for Agricultural Profitability at the University of Nebraska-Lincoln.
Scott Irwin, the Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois Urbana-Champaign, gave his analysis of the prospects for ethanol markets in the light of changing policies and the pressure of the electric vehicle push. In the question-and-answer period, Irwin said all the market and policy factors that lined up to produce E10 may not yet be in place for E15.
The ethanol market has been a major driver for domestic corn demand since the passage of 2005 and 2007 laws, and it’s always been policy driven, as host Brad Lubben, an Extension specialist at the University of Nebraska-Lincoln, pointed out in his introduction.
Irwin noted that the E1O blend wall (10% ethanol in gasoline) was authorized beginning in the 1980s and is the “key factor” in ethanol demand. The E10 blend wall limit was approached by 2011. Since then, he said, progress has been “agonizingly slow.” In 2025, the blend percentage amounted to 10.5%, a half-percent above the blend wall.
“The implication of the E10 blend wall is that ethanol demand is set by overall gasoline demand,” he said. “But that’s been a wild ride since 2005,” thanks to unpredictable economic and policy ups and downs.
The recession of 2007-2009, the rise of COVID-19, Russia’s war on Ukraine, President Joe Biden’s green push for EVs and President Donald Trump’s trade and tariff wars between the U.S. and its partners have all had their effects on both overall demand for gasoline and on ethanol demand, which currently sits at around 137 billion gallons.
“Where is gasoline use in the United States headed?” Irwin asked. The push for EVs during the Biden administration—many of whose incentives have been repealed by Trump—dampened the ethanol markets.
Irwin said of the three categories of EVs—BEVs or fully battery-powered electric vehicles; HEV or hybrid-electric vehicles, and plug-in EVs with bigger batteries that can be charged externally—hybrids are the “silent killers” of ethanol demand.
Watch hybrid vehicle growth
All of the attention tends to be on BEVs, but the Corn Belt should be watching hybrids, he said. The gasoline demand loss from two Toyota hybrid vehicles equals that from one Tesla, and they also reduce demand further because they are “remarkably” fuel-efficient even when powered by gas—giving at least 45% better gas mileage than the internal combustion-alone model of the same vehicle.
Irwin believes large SUVs and trucks will not transition to electric in significant numbers, and his projections assume a continued blend wall of 10%. Thanks to EV growth, “ethanol domestic demand will shrink; the only question is, by how much?” He put together his own projections of three possible scenarios of EV sales.
In the most aggressive scenario projected by the Biden administration (which he thought unlikely thanks to the repeals of incentives in the One Big Beautiful Bill Act and public caution), EV growth could cost 2 billion gallons of ethanol demand by 2035. He doesn’t believe that SUVs and large trucks will significantly transition to electric vehicles. His own scenario shows much greater growth by hybrids, but that still could result in a loss of 650 million gallons of demand by 2035.
“The message to Corn Belt agriculture is straightforward,” he said. “The only real argument is how big will the demand loss be?”
There are three possible ethanol industry responses to this decline, he said: expansion of ethanol use by increasing the blend wall to 15% to capture a larger share of a shrinking market; increasing exports of U.S. ethanol to the rest of the world; and finding new markets, like sustainable aviation fuel. Irwin looked at the positive and negative factors for all three responses.
E15 scenarios
In 2011, the Environmental Protection Agency approved E15 for use in model year 2001 and newer light-duty vehicles. Current prices for D6 ethanol Renewable Identification Numbers of about $1.40 a gallon incentivize E15 pricing that should compete with E10 on a miles-per-gallon basis, he said. To compete, E15 use would need to be discounted by a least a nickel a gallon, given that there’s a 1.5% or 2% decline in efficiency per mile in E15 fuel.
Negative factors include uncertain legal liability for mis-fueling older vehicles. Some automakers will not warranty engines for E15 use (Mazda, Mercedes-Benz and Volvo). And a 1-pound RVP waiver for summer driving of E15, even if passed by Congress, would still be only a waiver, not a mandate—that is, it would allow E15, but not require it.
Irwin noted substantial conversion costs for gas stations to switch entirely to E15 pumps. “Flex pumps” that can handle both octanes could add tanks and nozzles. However, each tenth of a percentage that the ethanol blend rate increases that raises domestic ethanol demand by 130 million gallons, he said.
Exports
The U.S. is by far the top exporter of ethanol, with Canada a distant second. Exports, Irwin said, are the “star” of the ethanol sector in recent years, topping 2 billion gallons in 2025. There is a lot of optimism about expansion opportunities, especially in markets like Japan, which announced a target goal (but not a mandate) of 10% ethanol in their own gasoline blendstock that the Japanese cannot produce domestically. Canada buys almost half of U.S. ethanol exports, followed closely by the Netherlands and the UK.
Trade relations with Canada have suffered lately and ethanol exports to Canada may decline, he said.
Positive factors for an SAF market require a “policy stack” that Irwin doesn’t believe is fully in place. “I don’t see SAF growing rapidly unless it’s mandated,” he said.
The full webinar is available here.
David Murray can be reached at [email protected].
