- Jun 22, 2010
Ethanol Booming, Despite the Drawbacks - Autoline on Autoblog with John McElroy
What a difference a couple of years makes!
Today food production is soaring, especially corn. In fact, it's up so much that farmers now worry about a price crash. And all this happened despite the fact that ethanol production is booming.
Back in 2007 when criticism of ethanol started to reach a fever pitch, the U.S. produced 5.5 billion gallons of ethanol at 110 refineries. This year the U.S. is on track to produce 13 billion gallons from 187 refineries located in 26 states. In other words, ethanol production more than doubled at the same time that food prices declined. Too bad the media doesn't follow up on these things.
John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as a Detroit insider to Autoblog readers.
Because there is so much ethanol available in the market today, prices have dropped dramatically. Throughout the Midwest you can buy E-85 at anywhere from a $1.87 to $2.40 a gallon, compared to roughly $2.70 to $2.80 for regular gasoline. That puts it in the range where it makes economic sense to buy E-85, despite the drop-off in fuel economy.
In fact there is so much ethanol available that producers are clamoring to raise the blend rate from E-10 to E-15. There simply are not enough stations selling E-85, so they want all cars to use E-15.
Today it's almost impossible to buy pure gasoline in the United States. Almost all of it is blended with 10 of the gasoline the US consumes each year. Boosting the blend rate to E-15 would displace that much more.
Moreover, California has enacted a requirement for low-carbon fuel, and the only way anyone knows how to do that right now on a large-scale, affordable basis is by blending more ethanol with gasoline.
Unexpectedly, GM, Ford and Chrysler are throwing up obstacles when it comes to raising the blend rate. They claim more studies are needed to see if it's safe to use E-15 in their engines, even though the industry has decades of experience using E-22 in Brazil.
Other engine manufacturers that run the gamut from lawnmowers to snowblowers to motorboats are also objecting to E-15, saying that ethanol lacks the lubricity of gasoline and that they'll start burning valves. But we heard the exact same argument when lead was banned from gasoline in the late1970's and we made that transition without major calamity.
The real reason the Detroit Three are opposed to E-15 is that they currently get CAFE credits for building flex-fuel vehicles that can run on E-85. If the blend rate rises to E-15, the availability of E-85 would likely go down, and they would likely lose their flex-fuel credits after 2015.
But they're probably fighting an uphill battle. At this snapshot in time it looks likely that the EPA will boost the blend rate to E-15 sometime in the next year.
The numbers are just too compelling. Despite all the talk about hybrids and electrics and CAFE improvements, so far nothing has come close to displacing oil as ethanol has. And we're just getting going. There are 15 more corn-ethanol refineries being built right now, and seven more plants under construction that will make cellulosic ethanol from other biomass including switch grass and agricultural and municipal waste.
Of course none of this has convinced the critics. They continue to rail against ethanol saying it's not the answer. And they're right. It's not the answer. The Department of Agriculture estimates that the United States could derive 25% of its fuel needs from biomass by 2025. Clearly that leaves the country far short of the energy it needs.
But as I like to point out, the U.S. imports roughly 25% of its oil from OPEC. That means ethanol offers us the fastest opportunity to tell the chaps at the cartel that we no longer need them.
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