Is Ethanol the next big thing?

[Mike]

http://money.cnn.com/magazines/fortune/fortune_archive/2006/02/06/8367959/index.htm

The writer of this article thinks so. I don't know if E85 is catching on all that much nationally yet, but it definitely has a presence here in the upper midwest.

If anybody wants to get in at "the ground floor" so to speak, it probably wouldn't be a bad idea to take a good long look at the companies likely to be major players in all of this. With oil continuing to run above $60 per barrel w/ tight supplies and price spikes linked to global instability / hurricanes, the pressure for a conversion to more ethanol use will only increase over time - particularly since it can utilize our existing oil and gas infrastructure (including no necessary significant redesign of the automobile).

Thoughts?

[The_Technician]

Mike, I did a little digging on production of ethanol yesterday....its come to be that through some innovative techniques in processing the cellulose ethanol, they can achieve a 34% gain in BTU's (over the amount it takes to produce it) in producing the stuff....with the cellulose conversion it means that it wouldn't necessarily have to come from food sources either.....grasses, wood, and such qualify.....

Under this pretense it would make ethanol a definite option.....

[Mike]

I think we look to Brazil on this - they have the best infrastructure in the world for ethanol. Most of their automobiles use it - and not just the E85 that we have in limited quantities here in the states, but they use 100% ethanol (and have the ability to switch their engines from ethanol to gas and vice versa). :eek:

A good first step would be to lower the tariff with Brazil. I think the article I cited pegged it at $0.54 per gallon. That's ridiculous, and it guarantees that it can't compete with gasoline (or our own ethanol for that matter!).

I'm a free trader at heart - lower the barriers and costs to trade and everybody is better off in the long run as goods and services are cheaper and more readily available.

[Ichiro]

Folks, if you are interested on info on Ethanol, I would read the 6 Feb 06 issue of the Fortune Magazine.Title---The Future of Fuel--How to Beat the High Cost of Gasoline--Forever!!! Ethanol is the answer to our energy dilemma. It's clean and green and it runs in today's cars. And in a generation, it could replace gas. By Adam Lashinsky and Nelson D. Schwartz.

[Mike]

That was the article linked in this thread (via cnn's money page). :D

[cowboy]

Ethanol is not the answer? It is a peace of the puzzle. Currently corn and other by products are cheap but as soon as you use them or have a disaster effecting that commodity, it goes up just like any other commodity. Then it becomes just another alternative which is all Ethanol will be. Don't get me wrong, I think Ethanol is a great product. Fact is Ethanol burns cleaner which is a very big plus.

[Mike]

The key to that is the new process involving the use of husks and agricultural waste products among other things. Another option is to increase our use of diesel fuel as well.

[FUTURESTRADER]

The key to that is the new process involving the use of husks and agricultural waste products among other things. Another option is to increase our use of diesel fuel as well.

and we're using biodiesel now...some hybrids are becoming ethanol capable (flex-fueled)....may just make that 75% petroleum reduction by 2025??!!...$10/barrel oil in next few years???...covered remainder of short oil puts yesterday :))

[charmedboi82]

and we're using biodiesel now...some hybrids are becoming ethanol capable (flex-fueled)....may just make that 75% petroleum reduction by 2025??!!...$10/barrel oil in next few years???...covered remainder of short oil puts yesterday :))

I don't think you'll see that anytime soon. Even if the American economy can treat its addiction, some other big (and growing economies), China comes to mind, heavily depend on it. We might never see $10 oil because of the value of the dollar, etc. by the time that demand decreases.

I wish I had more faith in the plan to wean us from oil; however, when I look at the vehicles that people drive and their affinity for leaving cars running (and delivery trucks are no different), I realize that it won't happen. I'm perfectly willing to pay gas for a small car because I don't want a big car (too scary) and it's too much hassle for the environment. Actually, right now I get by very fine without a car, but let's face it, that's not the American mentality, and I don't expect that we'll change easily to something 'new'.

[Oldcoin]

Cost of E85 fuel is higher than gasoline
By James R. Healey, USA TODAY
The heavily promoted alcohol fuel called E85 might cut America's oil use and help support U.S. agriculture, but it's not reducing motorists' fuel bills. It's boosting them significantly.




A sign advertises E85 fuel at a Chicago gas station.

By Scott Olson, Getty Images
The price of E85 — a fuel that's 85% ethanol made from grain and 15% conventional gasoline — is higher than that of gasoline, even though E85 has only 72% as much energy. The U.S. Department of Energy says a vehicle has to use 1.4 times as much E85 as gasoline to go the same distance.
At some Nebraska stations, E85 was $2.19 a gallon Tuesday, while gasoline with 10% ethanol — a common substitute for unleaded regular in the Midwest — was $2.06. "This doesn't make sense," says Wayne Davis, a division manager at fuel company Bosselman, based in Grand Island, Neb. "Our customers are saying, 'I'm not going to buy E85, which is better for the environment and the economy, unless it's cheaper.' We're seeing E85 just sit." Related: EPA rules won't curtail ethanol demand.
President Bush, in his State of the Union speech Jan. 31, promoted ethanol as a way to help reduce Middle East oil imports 75% by 2025.
Ford Motor and General Motors are working with fuel companies to boost the number of E85 stations in the Midwest. The two automakers say they will build about 600,000 vehicles this year with the special equipment needed to use E85. About 5 million already are on the road. All that emphasis could be negated by pricing.
"Price dictates demand. Period," says Dave Lybarger, who sells E85 at one of his two Petro Plus stations in Garnett, Kan.
He was selling E85 for $1.94 a gallon Tuesday, and conventional gasoline for $2.19. "If you get it 40 cents under, you start attracting new business. If you get to just 10 under, you start to lose some (E85) business," he says.
Nationwide average price for gasoline has sunk to $2.286 per gallon, according to travel group AAA's daily report.
To be an even-up energy value, E85 would have to sell for 72% of that, $1.646.
But E85 wholesale prices have jumped to more than $2, so retailers can't afford to sell it for that.
The price of ethanol has been driven up because major oil refiners are suddenly buying in bulk. They're stocking up on ethanol as a replacement for MTBE, a petroleum-based additive suspected of causing cancer. MTBE and ethanol boost the octane of gasoline and can reduce pollution.
MTBE isn't officially banned, but oil companies are switching to avoid lawsuits.
"Gasoline with MTBE in it will become like gasoline with anthrax in it within the next 90 days," predicts Tom Kloza, veteran analyst at the Oil Price Information Service.

[Dave M]

Twenty-five years ago I was on the Planning staff of the Minnesota Dept of Agriculture. We researched alcohol fuels.

* A 10% mixture was standard "gasohol."
* A large fraction of the total production was concentrated in one company, Archer Daniels.
* Transportation costs raised the price of a gallon of alcohol to where a subsidy was required to make it competitive. (A pipeline is needed.)
* A protective tariff was enacted to enable the local industry to develop.
* Using oil-based fertilizers and fuels to raise the feedstocks -- corn, etc. -- eliminated the savings.
* Thus only low-till or no-till agriculture suited this crop.
* Actually, cattails are the most efficient source for biomass fuels, in terms of energy "out" per square meter "in."

Here you see the reasons why gasohol never really caught on. It benefits one company, requires a subsidy so the more we use the more $$ we lose, ag practices eat up the savings, cattails love wetlands which are protected: no net loss.

It might amuse you to learn that Herr Otto, the German who developed the "Otto Cycle" upon which our IC engines are based, ran his prototypes on pure alcohol since gasoline was not yet available.

Dave

[cowboy]

Thanks for the very informing post Dave! This tells a lot about the story of ethonal.