Sales of E10 fuel have been declining over the past five years
Melbourne, Australia (PRWEB) July 16, 2014
Ethanol Fuel Production in Australia is running on fumes. The past five years have been good for the industry, with production volumes rising. Revenue is forecast to grow at an annualised 6.4% over the five years through 2014-15, to reach $277.9 million. However, most of this growth has been due to government assistance. The industry is characterised by its reliance on heavy subsidies in the form of fuels excise rebates. According to IBISWorld industry analyst Andrei Ivanov, “despite some growth over the past five years, the future for the industry is bleak.” The 2014-15 budget proposed the scrapping of the excise rebate. A 2014 study by the Bureau of Resources and Energy Economics (BREE) suggested that without this assistance, the industry would collapse on the grounds that it is economically unviable to produce ethanol as a substitute for petrol in Australia. Assuming that the budget passes through Federal Parliament and the rebate is abolished, ethanol production in Australia will fall.
Australian ethanol production is miniscule compared with other countries such as Brazil and the United States. There are currently three ethanol plants operating with a combined annual capacity of 440 megalitres per year. “Despite its discounted price, ethanol blended fuel is not popular with motorists,” says Ivanov. Sales of E10 fuel have been declining over the past five years. This, combined with the backlash from the BREE study, is forecast to result in stagnant revenue growth in 2014-15. New South Wales accounts for the majority of E10 fuel sold in Australia, which can be attributed to legislation since petrol producers and retailers are required by law to sell E10 fuel in the state. The industry remains lost in debates regarding the political, economic and environmental implications of switching from traditional petrol to ethanol-blended fuel, which is considered more sustainable. Currently, ethanol production is subsidised by governments globally. Whether or not the cost of subsidisation will pay off in the near future remains unclear. At the moment, it appears that the industry is losing the battle.
The Ethanol Fuel Production industry is highly concentrated, with just three major players accounting for almost all industry revenue. The small number of participants in the industry reflects the scale required to produce profitably, even with subsides in place. Most industry participants produce ethanol alongside other activities, such as food manufacturing. For these participants, ethanol production is way of extracting value from products left over from other processes. These waste products and the waste products from ethanol production, are often in turn onsold. In the past five years, industry concentration has remained stable as industry participants have made few changes to their production facilities.
For more information, visit IBISWorld’s Ethanol Fuel Production report in Australia industry page.
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IBISWorld Industry Report Key Topics
Operators in this industry produce ethanol fuel. The industry concentrates on non-potable ethanol (ethyl alcohol) that is used as a motor fuel, mainly as a biofuel additive for gasoline.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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