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By Michael Hirtzer
CHICAGO, Oct 15 (Reuters) - The Trump administration's planto allow year-round sales of higher-grade corn ethanol wouldhave limited impact on the depressed U.S. ethanol market, withrecord supplies and prices for the fuel hovering near the lowestin a decade, analysts said.
President Donald Trump announced the decision last weekahead of a campaign trip to Iowa, the top producer of corn andethanol. With mid-term elections looming, Trump aimed to give aboost to corn producers in the Farm Belt, who helped secure hisnarrow 2016 election victory.
He said his administration would allow a waiver for sales ofE15, which was banned from June 1 to Sept. 15 and has about 5percent more ethanol than the most common E10 gasolineformulation.
The cheaper E15 variety is not allowed in some U.S. statesduring the summer because its higher alcohol content can make itevaporate more quickly in warmer temperatures, increasing smog.
Oil refiners are opposed to the move and have vowed to sue,arguing that only Congress can lift the ban.
Even if the plan moves forward by next summer and hundredsof mostly small and rural gasoline station chains install newdispensers to sell E15, overall sales likely would increase onlyslightly.
There are more than 1,300 stations with pumps that candispense E15, according to the Renewable Fuels Association tradegroup. That is a small portion of the estimated 122,000stations in the country, according to the National Associationof Convenience Stores.
RFA said the number of stations offering E15 could double toaround 2,700 by late 2019 to early 2020, or 2.2 percent of thetotal.
Analysts said large oil refiners were unlikely to build newinfrastructure for E15. Major fuel sellers, including BP,Exxon Mobile Corp, Royal Dutch Shell Plc andValero Energy did not respond to requests for comment.
Mark Lytle, a vice president at pipeline and terminaloperator Pro Petroleum, said his company would consider addingethanol tank storage if fueling stations start demanding more ofthe biofuel. But due to the uncertainty regarding challenges tothe measure, expansions in the short-term were unlikely.
Lytle said it can cost $250,000 to add fuel pumps, tanks andother equipment - investments that could take about six years topay off with sales of E15.
"There's a lot of capital investment that's required," Lytlesaid. "It's simply return on investment – can I sell enough E15to pay for my project?"
Ethanol makers are desperate for any demand boost. U.S.supplies last week swelled to 24 million barrels, just below arecord from March. The market has been under pressure sinceChina, formerly the top importer of U.S. ethanol, imposedtariffs on shipments as part of the Washington-Beijing tradespat.
J.P. Morgan analyst Ann Duignan said infrastructure todispense E15 is insufficient. "The likely impact on U.S. ethanoland corn demand in the foreseeable future is immaterial, in ourview," she said in a note.
Casey's General Stores Inc said in a statement thatit would expand E15 offerings to as many as 500 of its 2,000stores over the next few years.
The Sheetz Inc gas station chain will add E15 pumps at eachof the 20 to 25 new stores it builds annually during the comingyears, said Michael Lorenz, vice president of petroleum supplyat Sheetz.
Sheetz already offers E15 at 240 of its 580 locations in theeastern United States.
Ethanol prices of $1.30 per gallon were 64 centscheaper than gasoline on Monday. Sheetz sells E15 at about 5cents less than regular gasoline.
"The consumer is sensitive to price when it comes togasoline. They appreciate (E15) being offered at a lower price,"Lorenz said.(Reporting by Michael Hirtzer; Editing by Caroline Stauffer andDan Grebler)
