The U.S. Environmental Protection Agency on Tuesday raised the amount of renewable fuel that must be blended into gasoline used for transportation next year.
The agency set a standard of 4.66 percent for 2008, up from 4.02 percent this year, to step closer to the country's Energy Policy Act goal of blending 7.5 billion gallons of renewable fuel with gasoline in 2012.
But the move is unlikely to have much effect, considering that gasoline blenders already are using more than that amount, an analyst said.
"At this point, the economics with discretionary blending really have pushed overall consumption and usage higher than that," said Rick Kment, a biofuels analyst at research firm DTN. "Overall, I don't see this having a huge effect."
A glut of new ethanol production -- combined with high gasoline prices -- has pushed prices for the biofuel below that of gasoline.
That has been bad news for ethanol manufacturers, which have seen margins shrink and the price for ethanol drop while the prices of crops used to make the fuel have risen (see Ethanol's Tough Times Continue).
Some companies, such as VeraSun, have postponed plans to grow capacity further (see Ethanol Margins Suffer), and companies also have seen share prices fall steadily (see Ethanol Stocks Keep Falling).
But lower prices also have grown the market, increasing the amount of ethanol that blenders are voluntarily mixing in with gasoline.
Many already are blending in 10 percent ethanol, which is the maximum allowed in some areas, Kment said.
"It makes economic sense for most blenders to use [more than] the minimum standard at this point just because it's beneficial economically," he said. "So at this point, I don't see meeting that 4.6 percent as being a problem."
Nonetheless, EPA spokesperson Margot Perez-Sullivan said the standard "provides market certainty that this renewable fuel will be produced."
As the market for ethanol has picked up, prices also have increased slightly, but ethanol still is significantly cheaper than gasoline, Kment said.
If, for some reason, ethanol prices once again exceed those of gasoline, the minimum standard might come into play again, he said, adding, "I don't necessarily see that in the near future."