Quote:
Originally Posted by hrcslam
Yes, and the government is doing nothing to help push alternative fuels along. If the government would tax ONLY fossil fuels then the demand for bio-fuels would increase substantially. Demand increases then supply increases and so on. But, until gas reaches a price that is significantly higher than E85, the American public wont get away from what they already do.
Imagine if E85 was $2.85-$3.00/gal ans gasoline was $6.00-7.50/ gallon. People would convert to E85 in a flash. Demand would increase then supply would decrease. Investment companies will notice the demand and build more refineries then the supply will increase until supply and demand is met. Public transportation and better driving habits will be observed and the use of oil will cut at least 25% over night. IMO.
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1. The federal government is spending billions of dollars to research alternative fuels.
2. The federal government is spending billions of dollars to subsidize the construction of cellulosic ethanol plants.
3. The federal government is subsidizing the production of ethanol by giving tax credits to companies that blend ethanol into gasoline.
4. The federal government is creating a demand for ethanol by mandating that (eventually) 15 billion gallons be blended into the nation's gasoline supply.
5. The reason E-85 is not cheaper is because notwithstanding the fact that America's production of ethanol is skyrocketing (it is increasing by 1 to 2 billion gallons per year), the supply cannot keep up with demand. Why the demand? Simple: as long as ethanol is priced a few cents less than the wholesale price of gasoline, refiners will by the cheaper ethanol and blend it with the more expensive gasoline. Therefore, ethanol producers are simply increasing their prices as the price of gasoline goes up.
6. Retailers are not going to charge $3.00 for E85 if gasoline is selling for $7.50. Why? Because people still would by E85 if it were priced at $5.00. The only way the price of E85 would drop more than that is if the supply were so great it could replace all gasoline. However, for the foreseeable future, there is no way we can make that much ethanol.
7. American demand for ethanol has gone from 4 billion gallons in 2006 to 8 billion gallons this year. That is a 100% increase in 2 years. Plants are being constructed by the dozens all over the country. Over one dozen cellulosic ethanol plants are under construction. Seriously, what more do you want?