Ethanol

Chris pointed me at a CNN article on ethanol (This link was removed since it was dead).

I would not favor the government mandates mentioned in the article, for example:

“It would take a combination of consumption mandates to ensure that the demand would be there, and conceivably some production incentives to use sugar ethanol,” he said. When government gets too involved in mandating business, it leads to inflexibility to respond to market conditions since location specific blends of gasoline during supply / demand imbalance can’t be used in another area with different regulations to remedy supply crunch. It also leads to higher prices since ethanol is currently more expensive than gasoline so blending it into gasoline increases the cost at the pump. Remember that ethanol has ~67% percent of the BTUs as gasoline. Therefore, you are paying more for less efficiency (less BTUs of energy).

“Ethanol prices have displayed a measure of volatility in recent months. In Nebraska — where the state has tracked monthly ethanol and gasoline rack prices since 1982 — ethanol was 18 to 44 cents a gallon cheaper than gasoline from March through June 2005. In July, though, the price of ethanol jumped past gasoline, and it has been more expensive since.”

Ethanol contributes to further instability of the price at the pump since its pricing swings wildly. Furthermore, think of the transportation / logistical challenges since ethanol is mixed in at the terminal and needs to follow a parallel path to gasoline. Remember that it can’t travel via pipeline, which is the best transportation mechanism, since it absorbs water. Ethanol and gasoline must arrive at the same time for a product to be available if ethanol blending is required by law.

Is Ethanol worth it?

“A professor of geo-engineering at the University of California-Berkeley, Patzek isn’t impressed by the notion that ethanol will help reduce American dependence on foreign oil. The researcher pointed out that in 2004 American motorists used some 140 billion gallons of gasoline. Meanwhile, the ethanol industry produced about 3.4 billion gallons that year, according to the Renewable Fuels Association. Patzek said ethanol backers are “playing on human inability to see the scale.” “Five years from now with all the ethanol anybody will be able to produce, the impact” on gasoline consumption “of all of that is less than inflating car tires properly, just in passenger cars,” he said.” Have you check your tires for proper air pressure lately?

I also have read that if all the farm land in the U.S. were converted to growing ethanol via corn, we could make E10 (which is 90% gasoline and 10% ethanol) nationwide. E85 is a different story, since there isn’t enough land to scale corn grown ethanol. Think about the huge outlay of infrastructure required just at the store level. Stations currently have two tanks, premium and regular, mid grade is mixed by the pump. To add an additional tank and dispenser would cost ~$100k for a small station and $200k for a large station. A small company has ~1600 stations.