Posted on 04/18/2006 4:27:22 PM PDT by SierraWasp
The high cost of summer driving
Ethanol switchover could stoke gasoline prices
By Stephanie I. Cohen Last Update: 7:00 PM ET Apr 18, 2006
WASHINGTON (MarketWatch) -- The drive to produce cleaner-burning fuel could lead to gasoline price spikes in some areas of the country as ethanol markets remain tight throughout the summer, government and industry officials are warning.
These hikes would be on top of the 25-cents-a-gallon average increase in prices at the pump already expected this summer compared with last year, according to the Energy Department.
Ethanol is a home-grown renewable fuel made primarily from corn feedstock that can be blended with gasoline to make it burner cleaner. In August 2005 President Bush signed legislation creating a national renewable fuels standard to boost the use of renewable fuels such as ethanol.
While the domestic ethanol industry has ratcheted up production over the past year, a number of factors have pumped up demand for the biofuel and created supply concerns.
Areas of the country believed to be most vulnerable to spikes triggered by the ethanol rush include Houston, Dallas, and Fort Worth in Texas, along with areas in the mid-Atlantic and East Coast regions of the U.S. that rely on reformulated gasoline.
"We see them as being logistical dislocations and how that resolves is in higher prices. So the implication would be perhaps isolated spikes in the wholesale prices of reformulated gasoline," said Guy Caruso, administrator of the Energy Department's statistical arm, the Energy Information Administration.
"We're not predicting that we're just saying that's possible," Caruso said.
Last fall, Congress passed energy legislation mandating a seven-year ramp up in the amount of biofuel blended into the nation's gasoline stocks, beginning with nearly 4 billion gallons in 2006 and rising to 7.5 billion gallons in 2012. Ethanol is expected to fulfill most of this requirement.
Additionally, numerous states that use reformulated gasoline have banned the use of ethanol's only commercial competitor, methyl tertiary butyl ether, or MTBE, which has been found to contaminate underground water supplies.
Congress also decided not to include a liability waiver in the energy bill to protect refiners that blended MTBE into gasoline from lawsuits stemming from contamination. This has touched off a rapid phase-out of MTBE from gasoline stocks ahead of May when the renewable fuel provisions in the energy bill kick in and refiners say they face liability exposure.
Motorists operating gasoline-powered vehicles in areas not affected by price spikes are unlikely to be aware of changes in the content of gasoline offered at their neighborhood retail station. Ethanol is a fairly standard component of in conventional gasoline markets.
"In terms of performance of vehicles there will be no difference. Where [motorists] will see a difference is in price. It's impacting prices nationwide," said Mantill Williams, director of public affairs for AAA, a national organization that represents motorists. Ethanol by the numbers
Demand for ethanol averaged about 263,000 barrels a day, or 4 billion gallons in 2005, according to Gordon Schremp, senior fuels specialist with the California Energy Commission. California currently uses almost 1 billion gallons of ethanol a year, or a quarter of the domestic market.
By January of this year, the domestic ethanol industry was producing 288,000 barrels a day, the most recent month for which figures are available. The Renewable Fuels Association says domestic producers have the capacity to deliver at least 4.5 billion gallons this year, more than the bump up mandated by the energy legislation.
But the renewable fuels mandate coupled with the phase-out of MTBE and state fuel requirements is expected to produce a need for about 395,000 barrels of ethanol a day, or 6.1 billion gallons in 2006, according to the Energy Department.
Schremp also pointed to imports of reformulated gasoline -- about 240,00 barrels in 2005 -- containing MTBE that are primarily shipped to East coast markets, which will need to be replaced with MTBE-free supplies.
Caruso acknowledged that ethanol typically added to conventional gasoline blends will need to be diverted to the East Coast and Texas. The roughly 600 retail gas stations that dispense E85, made up of 85% ethanol and 15% gasoline, for use in flexible fuel vehicles are a likely target.
"Gasoline suppliers today are repositioning ethanol previously used in discretionary conventional gasoline blending in areas like the Midwest to the East Coast and Texas," according to short-term outlook released by the Energy Information Administration this week.
But Schremp said "it may not be realistic to assume that every single drop of discretionary ethanol can migrate to other markets."
More ethanol from domestic production will be available after the middle of the year, according to the Renewable Fuels Association. About 900,000,000 additional gallons of ethanol production will come online in the second half of the year, compared with 500,000,000 gallons in the first six months of 2006, an association spokesman said.
Unfortunately for drivers this means that any relief from tight ethanol markets will come sometime after the summer driving season, according to the Energy Department.
"While ethanol supplies are expected to remain tight this summer, sufficient new ethanol production capacity is under construction to replace MTBE and resume previous levels of discretionary ethanol blending in conventional gasoline in 2007," according to a short-term energy outlook released by the Energy Department's Energy Information Administration.
Supply concerns for ethanol? hehehe...if my grandpa, great uncle, and great grandpa were still alive, there would be no supply concerns for ethanol. but then again, maybe so because they would drink it before it got shipped out. Hhhmmm....now where exactly did I put that copper pot?
Hydrogen derived from a nuclear-driven process seems one good alternative to gasoline. For that, we could use rotary Wankel engines (something like Mazda has developed over the years), which use gas and hydrogen SEEMLESSLY in any mixture - or straight, if only one is available.
I understand the dangers of MTBE and I understand the desire by the EPA for oxygenates in gasoline.
In certain geographic areas, like the LA Basin, smog is easily trapped by weather conditions. Maybe it makes sense there.
But to force the rest of us to pay more for worse-performing gasoline because of the mountains surrounding Los Angeles is nuts.
Some environmentalists hate ethanol; they say that ethanol is terrible for the environment.
For instance, the runoff from corn fields create "dead zones" in rivers, lakes, deltas, and oceans near coastlines.
Furthermore, in order to produce ethanol, a lot of corn must be produced, using exorbitant amounts of water and other natural resources.
Therefore, ethanol creates huge environmental problems. It is more expensive than oil in many ways.
How dare you tell me how to eat my environmentalists? My dietary laws strictly require them to be fried. Preferably under a sun unimpeded by ozone.
Bush could delay this order with an EO - one call to the EPA to suspend the ethanol mandate for one year is all it would take.
The "whole story" is far more detailed and lengthly, but in a nutshell...
When the government called for the final phase-out of leaded gasoline, an oxygenate became necessary to enable octane ratings to be maintained. At that time the refiners came to the government with the option to use either ethanol or MTBE. The government, at the time, said in essence, "We don't care, as long as it does the job." Now, all these many years later, the same governemnt is coming back to the same refiners asking, "Why'n the Hell are you using that toxic MTBE crap??" The italicized excerpt, above, means that this same governemnt is refusing to protect these refiners from lawsuits that will, inevitably, arise from the refiners' use of a compund the government previously said was okay for them to use.
Your tax dollars hard at work, folks. Read it and weep. Again.
So they enforced, (wink wink) although this was one of them "friendly lawsuits" where the EPA suggested to NRDC that they litigate to get the ball rolling. That's what brought on the MTBE which poisoned a lot of drinking water in CA!!!
The stupid CA EPA tried to blame that poisoning on leaking tanks in the ground and drove almost all the independent mom & pop gas stations out of business in CA for nothing, except now we can't even git a GAS WAR started which was what the independents were occasionally able to start.
It is getting more and more like the near monopoly that utilities have, which is giving voice to idiots like Bill O'Rielly who is calling for boycotts and more offensive government interference with the free market. (what little is left, if any!!!)
I'm really amazed at how much the "big oil" companies have put up with and how well they've been providing their commodity at faily stable/affordabel prices for so long, with as much dinkin around they've had to put up with.
For cripes sake, they can't even build anymore refineries anywhere in this country without mobs of idiots brutalizing our "democratic process" and intimidating our gutless elected officials into killing any such projects under the NIMBY banner, or the BANANA (Build Absolutely Nothing Anywhere Near Anything) banner!!! (same goes for nuclear plants)
The "China Syndrome" shoulda been a movie about the forced re-location of Jane Fonda to Red China during the 1970's!!!
I just wish you two pundits had worked in the oil industry like I have for over 25 years and seen prices plummet like I have regularly.
My co-workers lost their jobs and never came back.
You only remember price increases, never the price decreases.
And you think we somehow control them. Friends, if we controlled them, there would never be price decreases. Your amnesia doesn't change reality.
Ah, yes, there was a ruckus out here, early on. Maybe it was in the fallout of that suit that the refiners posed the option to the gov't over which oxygentate to use.
Aw, heck. My wife could lay it out point-by-point; she was a QA Lab Chemist with one of the biggies for years and saw it all go down from the inside; first the gov't pushing one way, then the other. Always an opponent of big gov't, she never got so chummy with her employer as to indulge any bias that direction, either, though. She's as stright-up and no-nonsense as they come and has one of the most sensetive "BS Meters" Ive ever encountered.
Hey thanks for clearing it up ... you the uninformed lurk.
I know all about MTBE and how it got in gasoline and how it got out. It's a CA nutty thing, we don't allow our politician to do such stupid stuff like this in our state. Imagine, posion your own ground water supply, how stupid is that.
BTW how is the air in CA.
Everyone should have wives that are omnipotant BS dectors!!! Mine is like that too!!! But she's not a chemist outside the kitchen!!! (grin)
Oh yeah??? Just tell me what state you live in since you were afraid to register even that most basic info on you FR home page and I'll soon find a bunch of stupid stuff your politicians have done that would boggle the average uninformed lurker's mind from your state/territory!!!
The government made a mistake in allowing MTBE. Just because they made a mistake does not mean that we don't need to protect our drinking water. It would be insane to keep using this stuff. It really has contaminated drinking water. And it only takes a drop to contaminate a lot of water. It is nasty stuff.
We're agreed on that. In fact, I've heard no sane person argue otherwise. That stated, ethanol isn't particularly nice to water, either. The bottom line is that, the refiners have asserted for YEARS that oxygenates aren't necessary; that they can achieve "clean" gasoline without them. We only have them because of background machinations on the part of our gov't; doing it "for the children", no doubt.
Yes, water quality needs to be protected from contaminants. No, oxygenates -- MTBE and ethanol -- are NOT necessary.
It should be PAINFULLY obvious that BOTH the refiners and the environmentalists could have their wishes -- and we could ALL WIN, for once -- if our big, fat, nanny of a gov't would just butt out of this. the refiners could drop the oxygenates -- MTBE and ethanol -- and blend "clean" gas without them. They'd be happy, the big bad toxins wouldn't be in the gasoline, anymore, so they wouldn't be an issue with our water supplies... We could win. Easily.
<RETCHING_SARCASM>
But, NOOOOoooo, can't have THAT, now, can we? Can't possibly have an aspect of life left untouched (unmolested?) by the presence of our Dear Ol' Uncle Sam, now. That'd be downright unpatriotic!!
</RETCHING_SARCASM>
Mine's not a chemist outside the kitchen, anymore, either. In fact, she's never been a chemist in the kitchen; she's an absolute WIZARD! We have a standing joke that she's never made the same thing twice, because she's forever making things with slightly different ingredients. Got none of X-Y-Z for the spaghetti sauce, tonight? No problem! We'll sub in some of A-B-C, instead! Results?? Delectable!!
Unfortunately, we are dealing with the O'Reilly factor here!
Opiners who are popinjays with
NO CLUE.
Economics 101 folks.
We don't drill here.
We won't refine here anymore.
What we do refine here is changed every year by smoke and mirror "do gooders".
(ever wonder what they actually "Do good" at? Where's the proof that they are doing anything or that it's result is 'good'?)
Retooling a refinery is like trying to make a menopausal woman pregnant again! (as if she'd want that!)
We are asking them to become pregnant on a momentary basis.
Why?
To save millions of fat, menopausal Caribou who can't Stop giving birth and likely WANT to commit suicide as a result!
(They are praying for suicidal Islamists to come kill them)
Yep. It's that simple
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