Ethanol Boom Running Out of Gas

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Thread: Ethanol Boom Running Out of Gas

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    Ethanol Boom Running Out of Gas

    Wall Street Journal
    By LAUREN ETTER and ILAN BRAT
    October 1, 2007; Page A2

    Ethanol's frenzied growth over the past year is coming to a halt -- at least for now.

    The price of ethanol has fallen by 30% over the past few months as a glut of the corn-based fuel looms, while the price of ethanol's primary component, corn, had risen. That is squeezing ethanol companies' profits and pushing some ethanol plants to the brink of bankruptcy.

    Financing for new ethanol plants is drying up in many areas, and plans to build are being delayed or canceled across the Midwest, as investors increasingly decide that only the most-efficient ethanol plants are worth their money.

    Some ethanol companies are "under deathwatch" now, says Chris Groobey, a partner in the project-finance practice of law firm Baker & McKenzie, which has worked with lenders and private-equity funds involved with ethanol.

    The downturn exposes the industry's reliance on political support in Washington, which has offered tax credits to refiners to blend ethanol with gasoline, as well as tariffs on imported ethanol and other measures. Some lawmakers and the Bush administration are pushing corn-based ethanol as a complement and substitute for gasoline amid tight and unpredictable global oil markets.

    Ethanol companies are seeking increases in pending energy legislation in the amount of ethanol refiners are required to use. At the same time, food, cattle, poultry and other interests are quietly nudging lawmakers to pull back on subsidies that encourage ethanol production and have indirectly led to increases in food costs due to the increase in the price of corn and other grains.

    Ethanol has gotten snagged by its own success. The price of ethanol has dropped to about $1.50 a gallon, down from about $2.50 at the end of last year, according to the Oil Price Information Service. That is largely because too much ethanol is being produced. Part of the problem appears to be that oil companies aren't able to blend ethanol into gasoline as quickly as ethanol is produced.

    By next year, U.S. ethanol capacity is expected to reach about 12 billion gallons, according to Eitan Bernstein, an energy analyst at Friedman, Billings, Ramsey Group Inc., based in Arlington, Va. Currently, demand is just less than seven billion gallons.

    http://online.wsj.com/article/SB1191..._us_whats_news

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    Re: Ethanol Boom Running Out of Gas

    I don't think it's a matter of too much ethanol being produced, but more of a lack of infrastructure. There are still many parts of the country that don't have ethanol stations.
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    Re: Ethanol Boom Running Out of Gas

    supposedly its not possible to use the ethanol in pipelines due to its corrosive nature

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    Re: Ethanol Boom Running Out of Gas


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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by spaz
    supposedly its not possible to use the ethanol in pipelines due to its corrosive nature
    Not exactly. You can run it through new or dedicated pipelines without a problem. If you run it through lines that have transported petroleum for a while, it'll flush out the system and come out black.

    This is probably why fuel filters clogged so easily when people first started using E-10.
    Last edited by IROCNROL1; 10-01-2007 at 09:12 PM.
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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by IROCNROL1
    Not exactly. You can run it through new or dedicated pipelines without a problem. If you run it through lines that have transported petroleum for a while, it'll flush out the system and come out black.

    This is probably why fuel filters clogged so easily when people first started using E-10.

    Ethanol has a tendency to absorb much more water than gasoline which will only take on approximately 0.02% water. This is why you cant run ethanol through the existing pipeline, the ethanol will still be good for use as a fuel though it will not be as efficient as ethanol that doesn't contain water.

    Also if you use anything above E-10 without the car being made for it the ethanol tends to eat through the rubber lines and such since it is an alcohol.

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    Re: Ethanol Boom Running Out of Gas

    Part of the problem appears to be that oil companies aren't able to blend ethanol into gasoline as quickly as ethanol is produced.
    Aren't able to or don't want to? I smell Big Oil hijinks here...
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    Re: Ethanol Boom Running Out of Gas

    Okay, just to clarify, ethanol is not corrosive, METHANOL (WOOD ALCOHOL IS). Most modern day rubbers are not affected by ethanol.
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    Re: Ethanol Boom Running Out of Gas

    The biggest enemy of ethanol is the Oil industry, they are fighting tooth and nail to keep it down. Exxon, BP, and other Oil companies will not let their franchised dealers install Ethanol e-85 pumps, making it almost impossible to provide nationwide availability..

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    Re: Ethanol Boom Running Out of Gas

    Let me get this straight......Ethanol is running out of gas because:
    1. Oil companies "can't blend ethanol into gasoline fast enough"....
    and....
    2. There is a glut of ethanol because most areas of the country still have NO ethanol pumps.

    Hmmmm.....am I the only one who can see what is going on here? Hello? What has to happen is the federal government needs to require the oil companies to install the pumps at a certain percentage of their stations in every area, and require them to blend this stuff. This all needs to start with them breaking up Exxon/Mobil which never should have been allowed in the first place. Instead of the massive tax breaks for hybrids which for the last few years has only favored Toyota (admittedly that was the big 3's own fault!), how about offering tax breaks for Ethanol use instead. Ethanol is produced here in the US. The American automakers have a massive lead in producing cars and trucks that run on ethanol. There are MILLIONS of cars on the road that are flex fuel vehicles that have been produced for years now. But, people with those cars in their driveways still have to burn OPEC oil because there are NO ethanol pumps within hundreds of miles of them.
    Last edited by JeffInDFW; 10-02-2007 at 07:06 AM.

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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by eaton53
    Aren't able to or don't want to? I smell Big Oil hijinks here...
    Exactly. Big oil is trying to kill it.

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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by Havasavana
    ........ investors increasingly decide that only the most-efficient ethanol plants are worth their money..........
    I should hope so.

    Like any start up industry, their will be some winners, and some losers.

    While I do support SOME subsidies and government support for the beginnings of a domestic ethanol production industry, at some point the government will need to back away and let the industry survive (or not) on it's own. The above quoted line seems to be an indication that the system is working.

    The ethanol production system is still being built (but it's well on it's way!). It's quite natural (and a good thing) that "less efficient" producers get weeded out.

    The ethanol DELIVERY system is definitely behind the production side, but is still being built up.
    Last edited by CaptainDan; 10-02-2007 at 08:07 AM.
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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by CaptainDan
    I should hope so.

    Like any start up industry, their will be some winners, and some losers.

    While I do support SOME subsidies and government support for the beginnings of a domestic ethanol production industry, at some point the government will need to back away and let the industry survive (or not) on it's own. The above quoted line seems to be an indication that the system is working.

    The ethanol production system is still being built (but it's well on it's way!). It's quite natural (and a good thing) that "less efficient" producers get weeded out.

    The ethanol DELIVERY system is definitely behind the production side, but is still being built up.
    I agree. Now that enough corn is being used to impact the price, and thus the prices of products using corn as an input, the total affects are beginning to be felt. I wonder where ethanol would be if Iowa were not an early-primary state such that all the presidential candidates have to take the ethanol pledge regardless of the cost/benefit involved.

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    Re: Ethanol Boom Running Out of Gas

    Quote Originally Posted by mstng1966302
    Ethanol has a tendency to absorb much more water than gasoline which will only take on approximately 0.02% water. This is why you cant run ethanol through the existing pipeline, the ethanol will still be good for use as a fuel though it will not be as efficient as ethanol that doesn't contain water.

    Also if you use anything above E-10 without the car being made for it the ethanol tends to eat through the rubber lines and such since it is an alcohol.
    I just passed on what I was told by a few different guys that worked at fuel storage facilities. I don't see how it would be exposed to water that much in a pipeline. I do know for a fact that it will dissolve varnish built up by using straight petroleum products.

    Also, these guys did say that they were fond of storing it. Ethanol tanks were the only ones they didn't have to drain water from, so it does pick some up during transportation/storage. I do doubt there is any automtive rubber being manufactured anymore that isn't able to handle the stuff.
    It sounded pretty good until I actually said it.

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    Re: Ethanol Boom Running Out of Gas

    I had no idea that ethanol prices had dropped so much until reading this article the other day. While the availability continues to be a problem, the low price certainly makes it a compelling alternative to gasoline. Heck, as long as Ethanol was, say, less than $2 per gallon, and regular gas is over $2.50, it's almost cheaper to use than gasoline. The linked article in the WSJ showed E85 around $1.50 or so in a graph. I'd certainly use it, and the energy security (i.e. no imported oil) aspects of E85 make it even more appealing.

    My guess is this is just a supply and demand imbalance. When ethanol was added to most gasoline instead of MBTI (or whatever that was called), plus all the hype and hoopla over E85 from GM and others, everyone wanted some...now that things are coming back down to earth, all the farmers who planted record amounts of corn, and all the refineries who went online in an attempt to capture the boom, have created more supply than there is demand for, at least in the current environment.
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