Are There Disadvantages to Ethanol?

Ethanol can't travel in pipelines like gasoline, because it absorbs water and impurities along the way. As a result, ethanol needs to be transported by truck, train, or barge, which is more complicated and costly than sending it down a pipeline. As refineries begin to switch to ethanol production in 2006, changes in transportation needs will likely contribute to the rise in gasoline prices. Not only will gasoline production be limited, plant re-fabrication costs will likely also be passed down to the consumer. Some experts argue that the U. S. doesn't have adequate infrastructure for wide ethanol use but, as Ethanol production increases, so will the proliferation of Ethanol stations. Ethanol contains less energy than gas, this equates to less miles per gallon and more frequent trips to the pump. Until recently, a gallon of Ethanol was decidedly more expensive than gasoline, but with the specter of ever increasing oil prices, that may soon be just the reverse. What is the cost of producing E85 vs. Gasoline? Ethanol skeptics have argued that the process involved in growing grain and then transforming it into ethanol requires more energy (from fossil fuels) than can be recovered from the Ethanol produced by that process. In other words, they say the whole movement results in lost energy.

The Cost of Producing E85 vs. Gasoline

Ethanol skeptics have argued that the process involved in growing grain and then transforming it into ethanol requires more energy (from fossil fuels) than can be recovered from the Ethanol produced by that process. In other words, they say the whole movement results in lost energy. Michael Wang, a scientist at the Energy Department - funded Argonne National Laboratory for Transportation Research, says "The energy used for each unit of ethanol produced has been reduced by about half [since 1980]." Now, Wang says, the delivery of 1 million British thermal units (BTU's) of ethanol uses 0.74 million BTU's of fossil fuels. (That does not include the solar energy -- the sun shining -- used in growing corn.) By contrast, he finds that the delivery of 1 million BTU's of gasoline requires 1.23 million BTU of fossil fuels. Producing ethanol should get more efficient as new technologies help farmers grow more corn per acre, and allow ethanol producers to produce a higher percentage of fuel from the same amount of corn. The companies developing new corn technologies include chemical giant DuPont, and Monsanto which sells genetically modified seeds as well as chemicals for protecting crops.

Where Can I Buy E85?

There's a good chance you're already using gasoline mixed with Ethanol. E85 Gas stations around the country are currently selling a 10 or 15% Ethanol blend as MTBE is banned in many states. E85 has made an appearance in many regions of the country including the corn-belt Midwest, and states like California and New York. The Northeast and parts of Texas are currently beginning to experience wider sales outlets in 2006 with continued growth expected.

Cars in the U.S. can drive normally on E10 or E15, a fuel blend of more gasoline than ethanol also known as Gasohol. It has been in use for sometime and is considered safe for all gasoline engines. Only newer cars, and not all of them, are "flex-fuel" capable, meaning that they can run on a much higher concentration of ethanol, E85. E85, which is 85% Ethanol, is primarily sold at Midwest region gas stations, but availability is increasing across the country. Interestingly enough, the Midwest is also the largest corn production are in the US, so would seem logical that more E85 stations exist in that part of the country.

Why Impose Tariffs and Other Fees?

The current efforts by more regions to sell E85 would seem to mean that demand has grown and that combined with increased oil prices, results in yet higher prices for Ethanol. For example, when the New York harbor price for Ethanol was around $3 per gallon, gasoline was about $2.30 per gallon. So, while gasoline prices increase, you might expect it to eventually become higher than that of Ethanol but, as fossil fuel is used in producing Ethanol, it may take much longer to happen.
So how much of the market price is controlled by Ethanol production and distribution? In addition to heavily subsidizing the ethanol produced domestically, the U.S. government levies a 54 cent per gallon tariff on imports from other countries, such as Brazil, a lower-cost producer of Ethanol. This, of course, discourages the U.S. from importing Ethanol which while produced at a lower cost, can be more expensive after government taxes and tariffs.

Why impose Tariffs and other fees? The overall premise behind all tariffs is to foster domestic production of goods which could be imported. Amid the ongoing furor over high gas prices, the idea of repealing the Ethanol levy has steadily gained momentum in Washington, even though it would probably annoy many ethanol producers. Corn based refineries like agricultural giant Archer Daniels Midland, contend that removing the tariffs could have some benefits; It could help ease price pressures and might encourage Brazil to boost ethanol production. However, it's probably not a short-term solution as Brazil would not welcome any future tariffs should the lack of such tariffs become ineffective to US growth.
Brazil is undergoing an ethanol revolution far more drastic than that being waged in the U.S. Flex-fuel cars which can run entirely on ethanol are widely available in Brazil, and the ethanol supply is short enough that the government recently reduced the mandatory ethanol content in gasoline from 25% to 20%.

Brazil is the 'model" for how ethanol can be brought into use, wrote Citigroup analyst P. J. Juvekar in a recent report. But while buying ethanol from Brazil could be useful in the future, it is certainly not going to reduce the pain at the pump during a US road trip this summer. Who stands to benefit from increased Ethanol use? There is an ever growing crop of American ethanol producers. ADM is by far the largest, producing about one-quarter of total US production. MGP Ingredients is one of the many smaller companies; two other producers of note, Vera sun Energy, and Aventine Renewable Energy, have recently filed to go public. What does the future of Ethanol hold? At present commercial corn-based ethanol comes from corn kernels. One of the more exciting ethanol prospects on the horizon is cellulosic ethanol, which can be made from a number of plant by-products, including cornstalks. Although it's unlikely to be commercially available for at least a few years, cellulosic ethanol eventually could help substantially reduce costs. In other words, your car in the future could run on the refuse of farms across the U.S.