Boon for E85 Use: Ethanol "Quiet Freefall" - Dramatically Cheaper after Summer Crunch

[Ming]

Good news to counter the critics who used recent high Ethanol prices as a talking point to play down the potential of E-85 in the market. The spike in Ethanol prices due to the MTBE replacement issue appears to be cooling off, returning to prior pricing that would make E-85 attractive also from a price perspective despite the drop in fuel economy.

Note that prior to the price spike, E-85 was to be had for about 80 cents to a dollar less per gallon when compared to Gasoline. Last I checked about a month or two ago (before the drop), here at a Kroger in Houston, E-85 was about 30 cents cheaper than a gallon of gas. Not enough to offset the cost of the fuel economy loss.



Ethanol price drop may bring lower gas prices, group says
www.wastenews.com

Aug. 2 -- Ethanol prices have dropped significantly, though quietly, which could lead to reduced gasoline prices this fall and winter, according to a widely accepted fuel price benchmark used for supply contracts.

Oil Price Information Services has seen spot pricing for ethanol drop from $5.66 per gallon in places like Baltimore, New York, Philadelphia and Boston to $2.75 per gallon in those same areas as of Aug. 1. The decrease in price could have a great effect on wholesale and retail gasoline prices for the next 10 months, OPIS said.

The summer fuel crunch that sent those prices soaring is cooling and more ethanol production capacity has come on line to meet demand, according to the group.

Source:http://www.wastenews.com/headlines2.html?id=1154538945

Ethanol Suddenly Plentiful; Could Spur Gasohol Resurgence, According to OPIS

WALL, N.J.--(BUSINESS WIRE)--Aug. 1, 2006--A quiet freefall has occurred in what was earlier a clearly overheated summer spot market for ethanol. The level at which the ongoing price plunge stabilizes may have a great impact on the course of wholesale and retail prices for the next 10 months. In a dramatic turnabout, ethanol may actually reduce finished gasoline prices this autumn and winter.

OPIS notes that spot ethanol prices, representing the value of fuel grade alcohol that bulk buyers and sellers negotiate, have dropped by nearly $3.00/gal in some markets in just six weeks. See chart. Example: if you needed to find northeastern ethanol to complete your reformulated gasoline mixture on the first day of summer, it cost $5.65/gal in places like Baltimore, New York, Philadelphia and Boston. Today, on the first day of August, those same areas see ethanol barely fetch $2.75/gal, thanks to the new production that Midwestern plants are now marketing.

Even lower prices could be in the cards for this winter.

Source: http://home.businesswire.com/portal/...77&newsLang=en

[SSrevolution]

I had no idea it was that expensive. What the ethanol producers need to do it get together to make the product as cheap as they can. Lets say $1.75 a gallon. This would scare every last one of the oil giants so bad they would ******************** their pants and lower the prices so much that they would be able to be compedative with the incoming E85.

[Ming]

Originally Posted by SSrevolution

I had no idea it was that expensive. What the ethanol producers need to do it get together to make the product as cheap as they can. Lets say $1.75 a gallon. This would scare every last one of the oil giants so bad they would ******************** their pants and lower the prices so much that they would be able to be compedative with the incoming E85.

It was selling for $2.50 a gallon in Houston not a month or two ago. So the 5 dollar a gallon thing doesn't make a lot of sense to me, either. Perhaps it is a local thing in New York. Or just a matter of supplying those locations with the fuel that are / were completely new to it. $2.75 sounds much more reasonalble.

And we must remember that E-85 is not 100%, which is the price they are referring to - so that mixes it up a bit, too (actually raises it?).

[asim]

Cool...lower gas prices, everyone loves that!

[Ytriox]

Originally Posted by SSrevolution

I had no idea it was that expensive. What the ethanol producers need to do it get together to make the product as cheap as they can. Lets say $1.75 a gallon. This would scare every last one of the oil giants so bad they would ******************** their pants and lower the prices so much that they would be able to be compedative with the incoming E85.

Not really, as they'd sell out of ethanol before making a dent in oil consumption levels. Regardless of price (and the conveniently ignored fact that the price of ethanol is largely dependant on government subsidies), there just isn't a large enough supply, and there won't be until there are major breakthroughs on cellulosic ethanol production that deliver sufficient quantities and prices to be competitive. As long as ethanol is derived from food crops like corn, it's more a corporate welfare scheme for big agribusiness than a viable exit strategy from fossil fuels.

[rwalth]

Originally Posted by Ytriox

Not really, as they'd sell out of ethanol before making a dent in oil consumption levels. Regardless of price (and the conveniently ignored fact that the price of ethanol is largely dependant on government subsidies), there just isn't a large enough supply, and there won't be until there are major breakthroughs on cellulosic ethanol production that deliver sufficient quantities and prices to be competitive. As long as ethanol is derived from food crops like corn, it's more a corporate welfare scheme for big agribusiness than a viable exit strategy from fossil fuels.

Many of you naysayers fail to point out that oil is also subsidised through various tax breaks. Just one example is the huge tax break oil companies receive for new exploration. There is not an energy source out there that is not subsidised in one way or another.

[rwalth]

I really hope this means the price of E85 comes down in Idaho. Right now it is the same price as regular unleaded. I took identical 260 mile trips on consecutive weekends, the first burning gasoline and the second burning E85 (it was actually probably E70 since I still had about 5 gallons of gasoline in my tank when I filled up with E85). The mpg results were 17.9MPG on gasoline and 13.5MPG with E85. The end result is that E85 needs to be about 75 cents per gallon cheaper than gasoline to be competative.

[mobyss]

Every GMT900 engine should be E85 capable - not just two of the four 5.3s. The 4.3, 4.8, 6.0, and 6.2s should be E85 engines also.







did this already post? If so - sorry.

[mobyss]

Originally Posted by rwalth

Many of you naysayers fail to point out that oil is also subsidised through various tax breaks. Just one example is the huge tax break oil companies receive for new exploration. There is not an energy source out there that is not subsidised in one way or another.

And a lot of people would say oil is currently "subsidised" by the blood of American soldiers trying to keep the peace in the middle east. I'd rather pay more for "corn juice".

[Ytriox]

Originally Posted by rwalth

Many of you naysayers fail to point out that oil is also subsidised through various tax breaks. Just one example is the huge tax break oil companies receive for new exploration. There is not an energy source out there that is not subsidised in one way or another.

The magnitude of the subsidies relative to price is not really comparable. Ethanol's getting a much bigger break, and that's before factoring in general farm subsidies.

Regardless, it doesn't address the issue of supply, which is the primary one (as it is with oil). I'm not a naysayer. It's just that the supply of ethanol and the crops needed to manufacture it are very limited compared to American demand for energy. That's a fact, and it's not likely to change unless the cost and efficiency of cellulosic ethanol reaches the point where it's a viable alternative, because there's never going to be enough corn to satisfy our appetite for fuel.

[Ming]

Originally Posted by Ytriox

The magnitude of the subsidies relative to price is not really comparable. Ethanol's getting a much bigger break, and that's before factoring in general farm subsidies.

How much have we spent in the Middle East war(s) in part to keep oil flowing? 400 billion now? I'd rather see us make a calculated withdrawal from that region and spend our money developing cellulosic Ethanol and subsidizing corn juice (or sugar beets or whatever) as stated above.

Clearly Ethanol will not replace gasoline any time soon. But I do think it can make a dent. Enough of a dent that with our own domestic sources opened up more, we can rely much less on imported oil. Especially Middle Eastern oil...or so I thought until I heard that Iran is planning to invest in Venezuelan oil production.

Big hugs and oil deals unite Iran, Venezuela
Two leaders rail against the U.S., Israel; plan investments in energy projects
7/31/06

Iran's Oil Minister, Kazem Vaziri-Hamaneh, said Iranian company Petropars Ltd. would invest $4-billion (U.S.) in two Venezuelan energy projects.

http://www.theglobeandmail.com/servl...iness/America/

[Hunter]

Ethanol is expensive to produce, and needs government subsidization (at least with the current production methods) in order to be profitable as an automobile fuel. However, Ethanol is a much cleaner burning fuel, which provides some justification for subsidization.

[motorman]

Originally Posted by Ytriox

The magnitude of the subsidies relative to price is not really comparable. Ethanol's getting a much bigger break, and that's before factoring in general farm subsidies.

Regardless, it doesn't address the issue of supply, which is the primary one (as it is with oil). I'm not a naysayer. It's just that the supply of ethanol and the crops needed to manufacture it are very limited compared to American demand for energy. That's a fact, and it's not likely to change unless the cost and efficiency of cellulosic ethanol reaches the point where it's a viable alternative, because there's never going to be enough corn to satisfy our appetite for fuel.

if every ear of corn grown in the USA was to make E-85 the supply would only last 2 month if every car was E-85. the USA uses a lot of gasoline and at $3/gal we are using more than last year so that tells you the price will not be coming down even if the supply increases. the oil companies are not stupid

[Ytriox]

Originally Posted by Ming

How much have we spent in the Middle East war(s) in part to keep oil flowing? 400 billion now? I'd rather see us make a calculated withdrawal from that region and spend our money developing cellulosic Ethanol and subsidizing corn juice (or sugar beets or whatever) as stated above.

Clearly Ethanol will not replace gasoline any time soon. But I do think it can make a dent. Enough of a dent that with our own domestic sources opened up more, we can rely much less on imported oil.

I'm all for that.

My point, though, is that price is not really the limiting factor on ethanol at the moment. Supply is. Regardless of price or if you are willing to ignore it, there just isn't a big enough supply. They could give ethanol away, or you could be willing to pay 5.00/gal to get it, and the limited supply would still be the problem.

And, unless ADM and the others in the ethanol business are completely unlike every other company in the world, they aren't going to increase supply unless they have a profitable source, which cellulosic ethanol currently isn't, and limited supply is ultimately going to mean higher prices, both for Ethanol and its competitor, Gasoline. Corn based ethanol is the only profitable type for them at the moment, but they're limited by the supply of corn (or will be as they increase refining capacity).

The only way ethanol can reduce gas prices is if it's available in wide enough supply to threaten the demand for oil. It isn't and likely won't be anytime in the near future. Until then, oil companies don't have anything to worry about from ethanol and will have no reason to drop their own prices.

I also think it's a bit simplistic to lay our entire concern over the middle east region on our need for oil, but that's a whole 'nother argument.

If we want to reduce our dependance on foreign oil, we need to maximize domestic production, conserve energy to reduce demand, and exploit alternatives that are currently feasible. Personally, I think plug-in hybrids show the most short term promise, with ethanol fueled, pure electric, and hydrogen fueled vehicles possible viable future alternatives in a decade or two. Cost is an issue for the consumer with both hybrids and ethanol systems, though. And any increase in drilling in, say, ANWR, or off-shore rigs faces tremendous political and environmental opposition. So do alternate power plant types, like wind farms and especially nuclear plants. And even reducing local demand for foreign oil doesn't make a huge difference if other foreign markets like China and Russia are willing to pick up the slack with increasing demand. It's a complicated situation with a lot of selfish interests involved, and there's no easy solution at the moment, ethanol included.

[racy]

Originally Posted by SSrevolution

I had no idea it was that expensive. What the ethanol producers need to do it get together to make the product as cheap as they can. Lets say $1.75 a gallon. This would scare every last one of the oil giants so bad they would ******************** their pants and lower the prices so much that they would be able to be compedative with the incoming E85.

The problem is, ethanol still isn't that easy to make. It is attractive right now because gas prices are so high. Ethanol has never been able to beat the $1.00/gal mark with current technology.

Remember, all the ethanol producers to date are still nothing more than industrial sized moonshine facilities.

However, there's really good news already coming over the horizon: New enzymes for preprocessing are coming online as well as some of the first commercial cellulosic plants. Cellulosic plants will be the ethanol of the future, but it will take some time. There are only two in all of North America at the moment, and they are still in the construction phase. Price per gallon via cellolosic methods will drop to a level that will still be competitive with gasoline, even if oil prices were to plunge to low levels.