Ethanol and Reducing Foreign Oil Dependency

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Besides economic and environmental advantages, ethanol has helped America lessen its dependency on foreign oil. In fact, increased production of renewable fuels such as ethanol were key components of the Energy Independence and Security Act (EISA) of 2007.

The act, which was passed by Congress and signed into law by President George W. Bush, clearly saw the potential for clean renewable fuels like ethanol to increase America’s energy security.

From 2005 (when the Renewable Fuels Act was passed) to 2013, ethanol production has steadily increased. In 2005, ethanol production was 0.25 million barrels a day.In 2013, it was at 0.87 million barrels a day.

Ethanol supply in motor gasoline has risen in tandem. In 2005, it comprised 2.8 percent of total gasoline consumption. In 2013, it stood at 9.8 percent. In some states such as Minnesota, which has the most number of E85 fueling stations, it was above 10 percent.

What about domestic crude oil production?

In the last few years, domestic production of crude oil has certainly risen. However, there is still a lot of misconception on what this means in terms of crude oil imports.

A common misconception is that America now produces more oil than it imports. Another popular belief is that America is now a net exporter of crude oil.

Both assertions are wrong.

On the first, data by the U.S. Energy Information Agency (EIA) clearly shows that America still imports more crude oil than it produces although imports are on a downtrend while domestic production is moving up.

As for the second assertion, America has become a net exporter of petroleum products, not crude oil. These petroleum products includes distillate fuel such as diesel, liquefied petroleum gas, motor gasoline and jet fuel.

In fact, according to the EIA, the United States imported crude oil to be refined as petroleum products that were later exported.

U.S. Fuel Supply.001

As illustrated above, America still imports more than it produces although domestic production and imports were nearly at the same level in 2013.

Nonetheless, it is important to note that crude oil imports would have been higher if it weren’t for increased ethanol production.

As the chart above indicates, net crude oil imports in 2013 was 40.2% of fuel supply while ethanol accounted for 4.6%. Without ethanol, crude oil imports would have increased to 44.8% of total supply.

The chart below details what our net crude oil imports would have been since 2005 if ethanol was not in the equation.

US Crude Oil Imports Without Ethanol.001

As we can see, ethanol has played a significant role in reducing crude oil imports.

According to a study by ABF Economics released in 2015, ethanol replaced the importation of 515 million barrels of crude oil. This, the study said, was roughly the equivalent of 18 percent of total expected crude oil and finished petroluemn imports in 2014. And unlike fossil fuels which are a finite resource, increased ethanol production in the coming years will play a significant role in reducing America’s dependency on foreign oil.