Doing our research on biofuel production and market analysis the pandemic appears in our day-by-day lives, affecting everything. Indeed, there was a huge effect on the biofuel too. I have found these lines very interesting to understand how and in what ways the market will move forward, or stand-by. We could display how the biofuel production in 2020 could be affected by a virus in such a way.
Global transport biofuel production reached a record 162 billion litres (Litres) in 2019, or 2.8 million barrels per day. This represented a 7% year-on-year (y‑o‑y) increase. The primary cause of growth was a surge of ethanol production in Brazil and expansion of biodiesel production in the ASEAN region.
However, the Covid-19 crisis has radically changed the global context for biofuels, and we anticipate production to contract by 20 billion Litres (13%) in 2020, returning to 2017 output levels. By comparison, prior to the start of the Covid‑19 crisis, output was anticipated to increase by a further 5 billion L (3% y-o-y) in 2020. On the assumption that the pandemic is brought under control, transport fuel demand could rebound in 2021 and facilitate a return to 2019 biofuel production levels. However, this would still be 5% lower than the output anticipated in our forecast for 2021 prior to the Covid-19 crisis emerging.
| Billion litres | 2017 | 2018 | 2019 | 2020 | 2021 |
| Ethanol | 103 | 110 | 114 | 96 | 112 |
| Biodiesel and HVO | 39 | 42 | 49 | 46 | 51 |
Overall, global gasoline demand in 2020 is forecast to fall by 9%. Consequently, the Covid-19 pandemic is forecast to impact ethanol output (15% contraction).
The sharp reduction in crude oil prices puts further pressure on the biofuels industry, as lower petroleum product prices drag down biofuel prices. This compound the effect of lower biofuel demand driving stocks higher in many markets, which also depresses prices and compromises the profitability of production.
Regional Biofuel forecast
Crisis effects biofuels output differs by country, depending on policy frameworks and the size of the reduction in fuel demand caused by containment measures.
Biofuel reduction prices between mid-February and mid-April
| Reduction Price % | USA | EUROPE | BRAZIL | ASEAN |
| Ethanol | -34 | -36 | -22 | |
| Biodiesel | -7 | -29 | -29 |
The pandemic has severely affected the US ethanol industry. Output fell by nearly 50% between the end of February and early April, as numerous plants idled or reduced output in response to the dramatic drop in gasoline consumption, negative operating margins and constrained storage capacity. Blending levels remained steady at 10% of this lower volume, as higher ethanol blends such as E15 or E85 remain a small part of the market. The near simultaneous drop in fuel demand worldwide caused by the crisis also affected ethanol export prospects.
In Europe, biodiesel and HVO production increased by 12% in 2019, reaching a record 17.5 billion Litres. Italy provide the biggest increase in output, with new HVO capacity coming online.
We now forecast a 13% reduction in European biodiesel and HVO production for 2020, as opposed to the stable output we anticipated prior to the pandemic. This is primarily due to significant reduction in diesel demand across the continent, with several European countries among those most affected by the pandemic. Saturated storage capacity and a faster decline in biodiesel than feedstock prices have severely challenged production economics. Mandate increases in many EU member states in 2020, including major producers France, Italy, Spain and Germany, will soften the reduction in demand to an extent.
Biodiesel from used cooking oil (UCO) plays an important role in the EU biodiesel market, since its energy content counts double against compliance with the EU Renewable Energy Directive. UCO supply has fallen due to the closure of restaurants in many countries and imports from China are likely to decline. European ethanol output is forecast to reduce 12% y-o-y to 4.3 billion L in 2020.
ANNUAL CHANGE IN BIOFUEL PRODUCTION
| Billion of liters | 2018 | 2019 | 2020 |
| Ethanol | 6,2 | 4,2 | -17,7 |
| Biodiesel and HVO | 2,9 | 6,8 | -2,7 |
As a summary, we can come into conclusion that renewable technologies will be slow down a little bit till the market is recovered. The EU should reinforce the beams of new technologies that could help the market to adapt to circumstances like as a pandemic situation. The EU should also reinforce the policies towards Ethanol production and reduce the support on diesel if the majority of new and disruptive technologies want to survive within this complex market.
Source: IEA: https://www.iea.org/
