This ethanol market monitoring report provides an update on the changes that have occurred in the wholesale and retail fuel markets since our last report was completed in September 2021, and contains our analysis on the effect that IPART’s wholesale price determinations have on the retail market for E10.
The retail price of E10 has increased and sales have fallen
At the time we prepared our last market monitoring report, NSW was coming out of its second major COVID-19 lockdown. In the intervening period there has been a marked change in the conditions prevailing in both the wholesale and retail fuel markets.
At the end of March 2024, E10 prices were significantly higher than they were in 2021. These increases were similar to the prices changes of unleaded fuels. This is to be expected as unleaded fuel makes up 90% to 91% of E10 (with ethanol making up the other 9% to 10%). The increases are largely the result of higher global oil prices.
Fuel sales in NSW have recovered from the lows observed in the 2020-2021 lockdowns, but remain around 10% lower than they were in 2019 prior to the pandemic. This is likely a result of the increased uptake of more full-efficient, hybrids and electric vehicles, which is expected to continue in the future.
E10 now makes up around 22% of fuel sales (down from 25% in 2019). This is just over a third of what would be required to meet the ethanol mandate (which requires that around 6% of all fuel sales are ethanol, and so E10 must make up around 60% of fuel sales).
E10 continues to be widely available and accessible in NSW
We have also found that in New South Wales, all volume fuel retailers promote E10 fuel as required by the Act or have an exemption from doing so under the Act. As at April 2024, 72% of the service stations in NSW were supplying E10, with those service stations located throughout regional and metropolitan areas of NSW. E10 was as accessible as U91 at those service stations subject to the Biofuels Act, with over 50% of the nozzles at those service stations dispensing E10.
Retailers have continued to sell E10 at a discount to U91, even though there were 2 relatively prolonged periods in which the wholesale price of E10 exceeded that of U91. The prevailing average level of discount compared to regular unleaded fuel is approximately 2.1 c/L.
Our wholesale price determinations are not intended to constrain ethanol prices, but do provide retailers with protection
If high wholesale ethanol prices persist and absorbing the cost differential becomes financially unsustainable for retailers, then they could consider other options, including importing ethanol or raising the retail price of E10. Retailers also have the option of applying for an exemption from the ethanol mandate on the basis that it is not economically viable because the wholesale price of ethanol exceeds our determination, as 1 retailer has already done.
While all retailers that are subject to the Biofuels Act currently have an exemption from the ethanol mandate, most have obtained the exemption on the basis that they have taken all of the prescribed steps to comply. This includes, having arrangements in place to secure, on a continuing basis, sufficient ethanol or E10 to comply with the mandate. Retailers with an exemption on this ground can therefore still be exposed to higher wholesale ethanol prices.
Obtaining an exemption because the wholesale ethanol price exceeds our determined price, could therefore provide retailers with a greater level of protection than they may otherwise have under their existing exemption.