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Jen Alic

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U.S. Corn-Ethanol Gas Push: Small Step in a Grand Project

As efforts to reduce US dependence on foreign fuel imports gain momentum, along with soaring gas prices, the federal government is moving towards allowing the wide distribution of gasoline mixed with 15 percent ethanol, which could be ready for sale as early as this summer.

It is a small victory in a much larger biofuels scheme, and there are still hurdles to get past. Registration will require a new set of federal tests, individual states still must make the mixed gasoline a registered fuel, and distributors must still be brought on board to sell to gas stations.

The 15 percent ethanol mix (E15) represents a 5 percent increase in previous mixes. Currently, most passenger cars use gas that is 10 percent ethanol. Only vehicles manufactured from 2001 on will be able to use the new mixture.

E15 could run around 10 cents cheaper per gallon than the current gasoline available.

So far there are 20 producers of ethanol who have registered to sell E15, most of them with headquarters in the country’s biggest corn-growing states. The government is pushing the use of biofuels hard, offering subsidies, grants and loans for the installation of blender pumps for the use of biofuels – with a target of 10,000 in five years. 

Of course, getting E15 to the market has not been easy, with fuel and petrochemical manufacturers challenging efforts in court, and attempting to raise public skepticism by airing fears that E15 could damage vehicles, especially if uninformed consumers use it in older vehicles. 

Despite the blocks, the road to E15 would have been even more challenging had it not been for a unique, if not complete, alignment of interests among typically rival camps – the oil industry and ethanol producers. The biofuels momentum can no longer be ignored, and because oil refineries are under pressure to use more renewable fuels, the ethanol project will make it easier for them to meet new government requirements.

Consumers may balk at the lack of liability for anything that goes wrong with E15. While the EPA has approved E15 for newer vehicles, it is not approved for older vehicles or other gas-operated machinery such as lawnmowers and the like. Gas stations will carry clear warnings and labels and it is the consumer’s responsibility to stay informed. E15 would not have gotten this far had it not been clear that retailers and producers would not be held liable for problems arising in the sale of the product.

The E15 victory, however, is only part of the equation. The 2007 Renewable Fuel Standard law foresees 15 billion gallons a year of corn ethanol-blended gasoline, but at the same time calls for total biofuels blending to reach 36 billion gallons a year by 2022.

Where corn ethanol reached its limitations, cellulosic ethanol (for instance, from wood chips) was expected to make up the difference. Despite massive loans and subsidies, however, many large cellulosic ethanol producers have gone bankrupt.

The end result is that gasoline producers who are under pressure to provide biofuel blends are lacking the necessary product to do so and from their perception, punishing them is unjust. Instead, they are lobbying for more fossil-fuel processes, such as, according to one example cited by Forbes.com, Celanese, which makes ethanol by from hydrocarbons found in natural gas or coal, both of which are more plentiful.

Lobbying all around has become rather indecisive as the oil industry, corn-ethanol producers and gasoline refiners hedge their bets. Just as there has been an interesting amount of coalescence of desires over E15, there is also some degree of the same between corn and fossil fuels ethanol producers.

The ethanol lobbying effort for now is dominated by those who produce corn-ethanol, but they are not putting up too much of a fight just yet over lobbying by fossil-fuel ethanol elements. As Forbes.com pointed out, fossil fuel ethanol poses a competitive threat to corn-ethanol, as it would produce a cheaper gasoline blend without biofuels, but it still contributes to lessening the country’s dependence on fuel imports, which is in the profit interests of both camps.

In the end, though, it all comes down to the consumer and whether patriotism can trump consumerism, whether the long term can trump the short term. The liabilities question surrounding E15 is likely to get under the skin of many consumers, and the only immediate answer is for the American consumer to become more responsible.

According to British executive Philip New, the CEO of BP Biofuels, in the area of renewable fuels, Americans have something to be proud of and he warned against allowing lobbyists to undo any of the recent gains made by the EPA.

"Only in this country do we see the combination of farming and technology at a scale that puts anything that's happening anywhere else in the world to shame," New said during a biofuels conference in Washington, DC. "I speak as a European, and I regret enormously the contrast between what is happening in Europe at the moment -- and the confused state of regulatory support and incentive there that means there is effectively no robust, clear investment going into advanced fuels -- with what I see happening here."

By Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.

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