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					   Estimation Monthly Ethanol
    Consumption in the U.S.

Carol Joyce Blumberg, Mathematical Statistician
    Michael R. Conner, Survey Statistician
         Susan Lord, Survey Manager

              Petroleum Division
             Office of Oil and Gas


                      Energy Information Administration
                           Official Energy Statistics from the U.S. Government
                                  Disclaimer
     This is a working document prepared by the
     Energy Information Administration (EIA) in
     order to solicit advice and comment on
     statistical matters from the American
     Statistical Association Committee on Energy
     Statistics. This topic will be discussed at
     EIA's Fall 2008 meeting with the Committee
     to be held October 23 and 24, 2008.


Ethanol Consumption: October 23, 2008              2
        General Purpose of this Study
     •Analysts (both inside and outside EIA) want quick
     access to how much ethanol is blended weekly
     into motor gasoline.
     •However, EIA weekly surveys do not collect the
     volume of ethanol.
     •It is only collected on EIA monthly surveys
     •So, the big question that motivated this research
     is whether the methods used by analysts to
     estimate weekly volumes of ethanol are feasible.

Ethanol Consumption: October 23, 2008                     3
                     Definition of Ethanol
     ―Ethanol, also called ethyl alcohol, pure
     alcohol, grain alcohol, or drinking alcohol,
     is a volatile, flammable, colorless liquid. It
     is a psychoactive drug, best known as the
     type of alcohol found in alcoholic
     beverages and in thermometers… and its
     molecular formula is C 2 H 5OH.‖
     (http://en.wikipedia.org/wiki/Ethanol)


Ethanol Consumption: October 23, 2008                 4
              Definition of Fuel Ethanol
     Fuel Ethanol--An anhydrous alcohol (ethanol
     with less than 1% water) intended for
     gasoline blending (EIA Glossary at
     http://www.eia.doe.gov/glossary/index.html)
     Note 1: EIA studies Fuel Ethanol. But
     sometimes we say/write Ethanol when the
     context is clear.
     Note 2: Fuel Ethanol is considered a type of
     oxygenate.
Ethanol Consumption: October 23, 2008               5
                   Units of Measurement
     The units of measurement for this study
     are thousand barrels per month, which
     are the units used in the surveys and
     for reported Product Supplied.




Ethanol Consumption: October 23, 2008          6
                      Method 1 Definition
     Estimated Ethanol Consumption (using
     Product Supplied definition) =
     (Net Production of Ethanol + Imports of
     Ethanol) – (Exports of Ethanol + Stock
     Changes for Ethanol)

     Note: The monthly data needed for Method
     1 are available 60 days after the end of the
     month of interest
Ethanol Consumption: October 23, 2008               7
        Some Notes on this Definition
     • This method of estimating Ethanol Consumption
       is published in Monthly Energy Review
     • The components of this definition are all public
       data available through Petroleum Navigator
     • Net Production and Gross Production are the
       same for Ethanol
     • Most of this consumption of fuel ethanol is
       reported as inputs by refiners and blenders. The
       balance is captured by an adjustment.

Ethanol Consumption: October 23, 2008                     8
        Ethanol Adjustments To Balance
            Supply and Disposition
     • Adjustments will result from errors in ethanol
       supply (production and imports), but most of the
       errors we discover are on the disposition side.
     • We are unable to identify fuel ethanol exports in
       Census data. Hence, fuel ethanol exports are
       zero in the adjustment calculation.
     • Some blending terminals are missing from the
       blender survey.
     • Some blending terminals are out of scope.
          – Less than 50,000 barrels total capacity
          – Shipments and receipts limited to rail and truck.


Ethanol Consumption: October 23, 2008                           9
     U.S. Annual Fuel Ethanol Consumption
        (in thousand barrels per month)
                             180000


                             160000

                             140000


                             120000
          thousand barrels




                             100000

                             80000

                             60000


                             40000

                             20000

                                  0
                                      2000    2001       2002       2003       2004   2005     2006       2007

                                             Reported Refinery and Blender Inputs            Adjustment

Ethanol Consumption: October 23, 2008                                                                            10
        Surveys Used to Collect Monthly
                 Ethanol Data
     Stock Change
     • EIA-810 ―Monthly Refinery Report‖
     • EIA-811 ―Monthly Bulk Terminal Report‖
     • EIA-812 ―Monthly Product Pipeline Report‖
     Production and Stock Change
     • EIA-819 ―Monthly Oxygenate Report‖
     Imports
     • EIA-814 ―Monthly Imports Report‖

Ethanol Consumption: October 23, 2008              11
      Examples of Population Definitions
     EIA-819—―all facilities that produce
     (manufacture or distill) oxygenates
     (including MTBE plants, petrochemical
     plants, and refineries that produce
     oxygenates as part of their operations
     located in the 50 States and the District of
     Columbia).‖ In July 2008 there were 154
     respondents, with some respondents
     reporting for more than one facility.
Ethanol Consumption: October 23, 2008               12
       Population Definitions--Continued
     EIA-814: ―…each Importer of Record (or Ultimate
     Consignee in some situations regarding Canadian
     imports) who imports crude oil or petroleum
     products ―into the 50 States…the District of
     Columbia…Puerto Rico, the Virgin Islands and
     other U.S. possessions… [including] into Foreign
     Trade Zones…in the 50 States and the District of
     Columbia, and… from Puerto Rico, the Virgin
     Islands and other U.S. possessions into the 50
     States and the District of Columbia.‖
     Note: Each shipment is recorded. In July 2008
     there were 30 shipments imported of Fuel Ethanol
     by 13 different companies.

Ethanol Consumption: October 23, 2008                   13
                                    Method 2
     Method 2 uses Production volumes of Motor
     Gasoline (with Alcohol) collected at the
     Weekly level separately for Conventional and
     Reformulated gasoline.
     Collected on a stratified random sample of
     facilities using two weekly surveys
     •EIA-800 ―Weekly Refinery Report‖
     •EIA-805 ―Weekly Terminal Blenders Report‖

Ethanol Consumption: October 23, 2008               14
        Example of Sample Definition
     EIA-805—Weekly Terminal Blenders Report

     ―…[Respondents are] operators of blending
     plants selected by the EIA. Companies are
     selected into the EIA weekly sample
     according to a procedure that assures
     coverage of 90 percent of each information
     element.‖

Ethanol Consumption: October 23, 2008             15
                    Method 2--Continued
     • Data are then converted to weekly
       estimated production totals
     • Published in Weekly Petroleum Status
       Report (WPSR)
     • The weekly volumes are then converted to
       Monthly-from-Weekly volumes as
       explained on next few slides.


Ethanol Consumption: October 23, 2008             16
                 Weekly Data Collection
     • Data for the weekly surveys are collected
       on Mondays
     • Reporting period ―begins at 7:01 a.m. EST
       on Friday and ends at 7:00 a.m. EST on
       the following Friday.‖
     • For research purposes, however, we
       define a week as being from a Friday
       through the next Thursday.

Ethanol Consumption: October 23, 2008              17
     MFW (Monthly-from-Weekly) Totals
     The MFW estimates are weighted totals of
     the weeks that contain the days of a certain
     month. For example, for July 2006, the
     weighted total was
     6*(data reported for 7/7/06)
     + 7*(data reported for 7/14/06)
     + 7*(data reported for 7/21/06)
     + 7*(data reported for 7/28/06)
     + 4*(data reported for 8/4/06)
Ethanol Consumption: October 23, 2008               18
                  Calendar for July 2006


      SUN          MON         TUES     WEDS THUR        FRI    SAT
     Jun-25 Jun-26 Jun-27 Jun-28 Jun-29 Jun-30                    1
         2            3            4      5       6       7       8
         9           10           11     12      13      14      15
        16           17           18     19      20      21      22
        23           24           25     26      27      28      29
        30           31        Aug-1    Aug-2   Aug-3   Aug-4   Aug-5

Ethanol Consumption: October 23, 2008                                   19
            An Advantage of Method 2
     Method 2 is preferred by analysts because
     the data needed are available within 12 days
     of the end of the month, as opposed to the
     60 days with Method 1




Ethanol Consumption: October 23, 2008               20
      Reformulated versus Conventional
                 Gasoline
     Reformulated gasoline: ―Finished gasoline
     formulated for use in motor vehicles, the
     composition and properties of which meet the
     requirements of the reformulated gasoline
     regulations…under Section 211(k) of the Clean Air
     Act. It includes gasoline produced to meet or
     exceed emissions performance and benzene
     content standards …‖
     (EIA Glossary--http://www.eia.doe.gov/glossary )
     Conventional Gasoline: Non-reformulated
     gasoline
Ethanol Consumption: October 23, 2008                    21
                      Method 2 Definition
     Estimated Ethanol Consumption =
     k*{Monthly-from-Weekly Reformulated
       Gasoline (with alcohol) volume + Monthly-
       from-Weekly Conventional Gasoline (with
       alcohol) volume}
     where k is a some constant between .09 and
       .10, depending on the analyst


Ethanol Consumption: October 23, 2008              22
                           Initial Questions
     1. What is the best value of k to use?
     2. Once you determine k, how close are the
        estimates given by Method 1 and by
        Method 2? If possible, determine which
        is better.
     3. How well do the estimates of volume,
        from the better of Method 1 and Method
        2, match with total capacity per month for
        all ethanol facilities?

Ethanol Consumption: October 23, 2008                23
          Important Aside--Percentage of
           Ethanol (Alcohol) in Gasoline
     • For most states, the percentage of ethanol
       in both reformulated and conventional
       gasoline is about 10%
     • California has only reformulated gasoline,
       which has about 6% ethanol
     • Minnesota and a few other areas have
       small amounts of E-85, which is
       conventional gasoline with around 85%
       ethanol

Ethanol Consumption: October 23, 2008               24
                 Answering Question #1
     Question: What is best value of k to use?
     Method: Because of the disparity among
     conventional gasoline (with alcohol) and
     reformulated gasoline (with alcohol) in the
     expected percentage of ethanol, I proposed
     fitting a no-intercept model:
     Method 1 Ethanol volume =
              MFW Volume of Reform.Gas.)
      +     * (MFW Volume for Conv. Gas.) 
Ethanol Consumption: October 23, 2008              25
      Values Expected for Estimated β’s
                             ˆ
     We would expect that  1 would be somewhere
     around .086 since California (at 6% ethanol) in
     2007 had 34.94% of the reported gross
     production of the volume of reformulated
     gasoline (with alcohol), with the rest of the
     production at 10% ethanol
                             ˆ
     We would expect that  2 would be a little bit
     bigger than .10 since some states have small
     volumes of conventional gasoline at about 85%
     ethanol.

Ethanol Consumption: October 23, 2008                  26
                                        Results
     Estimated Ethanol Consumption =
     .07473*(MFW for Reform. Gas)
     +.12993*(MFW for Conv. Gas)
     using 42 months of data from January, 2005
     to June, 2008

     R2 = .9973


Ethanol Consumption: October 23, 2008             27
                  Actual by Predicted Plot
                                        20000
           "Consumption" (Mbl) Actual
                                        18000
               Calculated Ethanol


                                        16000
                                        14000

                                        12000
                                        10000

                                        8000
                                        6000
                                            6000      10000      14000      18000
                                                  Calculated Ethanol "Consumption"
                                                (Mbl) Predicted P<.0001 RMSE=656.49




Ethanol Consumption: October 23, 2008                                                 28
                                                                          Residual when MFW
                                                                         Volumes are Predictors




                                                                             -500
                                                                                    0
                                                                                        500
                                                                                              1000
                                                                                                     1500




                                                             -1500
                                                                     -1000
                                                10/01/2004

                                                03/01/2005




Ethanol Consumption: October 23, 2008
                                                08/01/2005

                                                01/01/2006

                                                06/01/2006


                                        Month
                                                11/01/2006

                                                04/01/2007
                                                                                                            Graph of Residuals




                                                09/01/2007

                                                02/01/2008

                                                07/01/2008
29
                Discussion of Residuals
     •Notice that there seems to be a change in
     the predominant sign of the residuals around
     observation 20 (August 2006)

     •So, we re-estimated the regression
     coefficients using only the last 23 months.



Ethanol Consumption: October 23, 2008               30
         Regression Equation for Last 23
                    Months
     Estimated Ethanol Consumption =
     .07134*(MFW for Reform. Gas)
     +.14068*(MFW for Conv. Gas)
     using 23 months of data from August, 2006
     to June, 2008
     R2 = .9990
     Notice that these coefficients are further
     away from what we expected than when we
     used all 42 months
Ethanol Consumption: October 23, 2008             31
                            Actual by Predicted Plot
           "Consumption" (Mbl) Actual   19000
                                        18000
               Calculated Ethanol



                                        17000
                                        16000
                                        15000
                                        14000
                                        13000
                                        12000
                                        11000
                                             11000   13000    15000    17000    19000
                                                  Calculated Ethanol "Consumption"
                                                (Mbl) Predicted P<.0001 RMSE=484.3


Ethanol Consumption: October 23, 2008                                                   32
                                                                 Residual when MFW Volumes since
                                                                     August 2006 are Predictors




                                                                      -500
                                                                             0
                                                                                    500
                                                                                            1000




                                                             -1000
                                                07/01/2006

                                                10/01/2006




Ethanol Consumption: October 23, 2008
                                                01/01/2007

                                                04/01/2007

                                                07/01/2007

                                        Month   10/01/2007

                                                01/01/2008
                                                                                                   Graph of Residuals




                                                04/01/2008

                                                07/01/2008
33
                        Conclusion so Far
     It appears that either the MFW volume of
     Reformulated Gasoline is too high OR volume of
     Conventional Gasoline is too low OR both.
     So, we now suspected the problem was in the
     MFW volume of Method 2 and not in the volumes
     of Method 1 as both internal and external analysts
     have suggested. We also suspect the problem is
     in the Conventional Gasoline volumes from looking
     at the data.


Ethanol Consumption: October 23, 2008                     34
                                   Next Step
     •Second author pointed out that there are
     also unpublished data related to ethanol
     consumption.
     •They are the volumes of Reformulated
     Gasoline (with alcohol) and of Conventional
     Gasoline (with alcohol) based on the
     monthly surveys used to produce Petroleum
     Supply Monthly and Petroleum Supply
     Annual, which are Censuses of appropriate
     companies.
Ethanol Consumption: October 23, 2008              35
                                    Method 3
     Ethanol Volume =
           Production Monthly Volume of Reform.Gas.)

     +   * (Productio Monthly Volume for Conv. Gas.) 
                       n


     • Volumes here are for Gasoline (with Alcohol)
     • Volumes are the final (revised) values




Ethanol Consumption: October 23, 2008                       36
      Values Expected for Estimated β’s
                              ˆ
     We would expect that  1 would be somewhere
     around .086 since California (at 6% ethanol) in
     2007 had 34.94% of the reported gross
     production the volume of reformulated gasoline
     (with alcohol), with the rest at 10% ethanol.

                            ˆ
     We would expect that  2 would be a little bit
     bigger than .10 since some states have small
     volumes of conventional gasoline at 85%
     ethanol.


Ethanol Consumption: October 23, 2008                  37
                                        Results
     Estimated Ethanol Consumption =
     .08608*(Month. Prod. Supplied for Reform. Gas)
     +.10110*(Month. Prod. Supplied for Conv. Gas)

     using 42 months of data from January, 2005 to
       June, 2008

     R2 = .9995


Ethanol Consumption: October 23, 2008                 38
                          Actual by Predicted Plot
            "Consumption" (Mbl) Actual   20000
                                         18000
                Calculated Ethanol



                                         16000
                                         14000

                                         12000
                                         10000

                                         8000
                                         6000
                                             6000      10000      14000      18000
                                                   Calculated Ethanol "Consumption"
                                                 (Mbl) Predicted P<.0001 RMSE=284.06


Ethanol Consumption: October 23, 2008                                                  39
                                                               Residuals when PSA/PSM
                                                             Gasoline Volumes are Predictors




                                                              -500
                                                                        0
                                                                                   500
                                                                                               1000


                                                10/01/2004

                                                03/01/2005




Ethanol Consumption: October 23, 2008
                                                08/01/2005

                                                01/01/2006

                                                06/01/2006


                                        Month
                                                11/01/2006

                                                04/01/2007
                                                                                                      Graph of Residuals




                                                09/01/2007

                                                02/01/2008

                                                07/01/2008
40
              Possible Explanation for the
               Pattern in the Residuals
  • No data are collected on exports of fuel ethanol by either
    EIA or Census Bureau
  • Census Bureau does collect data on exports of all types of
    ethanol combined
  • Hence, in computing Product Supplied (Method 1) no
    exports are subtracted out
  • But, exports of fuel ethanol appear to have only begun
    recently (anecdotal information)
  • So, recently the Product Supplied volumes may be a little
    higher than they should be because of lack of a Census
    Bureau code for exports of fuel ethanol.
  • Therefore, pattern in the residuals is as would be expected.



Ethanol Consumption: October 23, 2008                              41
     Final Conclusions from Regression
                 Analyses
     The Product Supplied volumes of
     ethanol reported in the Monthly Energy
     Review (that is, Method 1) and
     unpublished Product Supplied volumes
     of motor gasoline with alcohol (that is,
     Method 3) appear to be extremely
     consistent.

Ethanol Consumption: October 23, 2008           42
             Conclusions for Regressions
                     (continued)
     Method 2, even the improvement of
     using separate multipliers for the two
     types of gasoline (reformulated and
     conventional), appears to be
     inconsistent with the other two methods
     (Method 1 and modified Method 3).



Ethanol Consumption: October 23, 2008          43
                             Next Question
     This was our third question originally, but
     was modified based on results from the
     regression analyses

     How well do the estimates of
     ethanol volume using Method 1
     match with facility capacities?

Ethanol Consumption: October 23, 2008              44
                               Methodology
     1st: Compared at the respondent level
     (unpublished confidential data) the reported
     ethanol volumes produced with the
     respondents’ capacities as known by EIA.
     Identified facilities/respondents with
     production greater than capacity by more
     than 5% consistently.
     2nd: Investigated the identified discrepancies
     by various methods described on next few
     slides
Ethanol Consumption: October 23, 2008                 45
       Determining Facility Capacities
     •We do not ask for these capacities on any
     of EIA’s surveys.
     •Must find the capacities and changes in
     capacity by doing research
     •Research is done by the third author using
     a variety of methods



Ethanol Consumption: October 23, 2008              46
              Sources of Capacity Data
                                        Websites
     Renewable Fuels Association (RFA)
     http://www.ethanolrfa.org/industry/locations/
     ICM,Inc (design & construct ethanol facilities)
     http://www.icminc.com/
     State websites (both government and ethanol associations)
     Respondent/Facility websites
     DTN Ethanol Center website (marketing information site)
     http://www.dtnethanolcenter.com/

Ethanol Consumption: October 23, 2008                            47
                 Sources of Capacity Data
                       (continued)
                 Journals/Industry Publications
  Ethanol Producer Magazine
  DTN eNewsletter
  (Subscribe at http://www.dtnethanolcenter.com/)



  Personal Contacts by Email and Telephone

Ethanol Consumption: October 23, 2008               48
                 Sources of Capacity Data
                       (continued)
                       Other
  Comparison with a capacity list kept by
  Tancred Lidderdale of EMEU (Office of Energy
  Markets and End Use). Note: The EMEU list is
  based heavily on third author’s file—but, there
  are some instances where it has more up-to-
  date information.
  Air permit ceilings (maximum volume that
  facilities are permitted to produce)
Ethanol Consumption: October 23, 2008               49
        Partial Answer to Question #3
     By using the above sources of information, we
     found that indeed the capacities of many facilities
     had increased. Reasons included:
     •Expansion
     •Technology Improvements
     •Tweaking
     Note: Stated Capacity is a ―soft‖ number since it is the
     ―average maximum‖ barrels per month under assumed
     usual conditions. The number of days of operation,
     feedstock quality, etc. determine each month’s capacity
     deviation from Stated Capacity.


Ethanol Consumption: October 23, 2008                           50
                        Final Conclusions
     • The volumes reported in Monthly Energy
       Review are consistent with other monthly
       data.
     • Once we complete our investigations of
       the discrepancies at the respondent level
       between production and capacity, we will
       have Total Capacity > Total Production.



Ethanol Consumption: October 23, 2008              51
                       Recommendations
     1. Create one of more new tables (in Petroleum
       Navigator) showing the following details:
       A. Fuel Ethanol Supplied
       B. Refinery and Blender Production of gasoline
       with ethanol (broken down by reformulated and
       conventional gasoline)
       C. Adjustments
       D. Total Fuel Ethanol Consumption as presently
       reported only in Monthly Energy Review

Ethanol Consumption: October 23, 2008                   52
       Recommendations (continued)
     2. Reconsider methods of adjusting
        gasoline production in the weekly and
        monthly published volumes to make the
        two data systems more consistent. As
        part of this, make use of available weekly
        data on gasoline blending components
        when calculating the weekly
        adjustments.

Ethanol Consumption: October 23, 2008                53
       Recommendations (continued)
     3. Begin collecting weekly data directly on
        fuel ethanol (as is already planned for
        2010)
     4. Perform annual comparisons of fuel
        ethanol plant capacity data from both EIA
        and non-EIA sources with EIA fuel
        ethanol production data to identity cases
        where additional follow-up may be
        needed with survey respondents

Ethanol Consumption: October 23, 2008               54
       Recommendations (continued)
     5. Add the collection of company/facility
        capacities to the present EIA-819
        ―Monthly Oxygenate Report‖.
     6. These recommendations should be part
        of the on-going broader discussion
        concerning fuel ethanol data
        requirements.



Ethanol Consumption: October 23, 2008            55
                                  Thank you
     Contact Person:
     Carol Joyce Blumberg
     Petroleum Division (EI-42)
     Office of Oil and Gas
     Carol.Blumberg@eia.doe.gov
     Phone: (202) 586-6565
     Fax:(202) 586-4913

Ethanol Consumption: October 23, 2008         56

				
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