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Continued: Ethanol makers may be looking for new markets

  • Article by: DAVID SHAFFER , Star Tribune
  • Last update: November 23, 2013 - 8:07 PM

With U.S. oil production rising, the industry’s trade group wants the RFS repealed, and contends the Obama administration’s proposed modifications don’t go far enough.

“If you tinker with a mandate that is fundamentally flawed, you are going to have a flawed, tinkered mandate,” said Dan Gunderson, a spokesman for the American Petroleum Institute.

Bruce Babcock, professor of energy economics at Iowa State University, said the policy was working.

“But the political forces at work weren’t going to let that happen. The oil companies, the anti-hunger groups, the environmental groups, the livestock groups — everyone lining up against the RFS was more powerful,” he said.

Expanding the U.S. market

One basic problem is that U.S. consumers aren’t flocking to higher-ethanol blends.

In a study released last week, the Fuels Institute found that in 2012 flexible-fuel vehicle owners, on average, pumped less than 20 gallons of E85 into their tanks during the entire year. E85 can only be used in flexible-fuel vehicles and is a good deal only if it’s priced about 20 percent less than E10 to make up for ethanol’s lower gas mileage.

“Consumers have decided they don’t want to use flex fuels possibly because of the price, or consumers are unable to find flex fuels,” said Jeff Lenard, vice president for strategic industry initiatives at the National Association of Convenience Stores, which founded the Fuels Institute.

Research by Iowa State’s Babcock concluded that if 2,500 additional U.S. gas stations put in E85 pumps, they could dispense another 800 million gallons of ethanol a year. But that’s nearly double number of E85 stations across the nation — about 2,700 today. The EPA says about 300 E85 stations are added each year. There are about 10.7 million flexible-fuel vehicles in the country, or about 4.7 percent of the nation’s cars and light trucks.

Retrofitting gas stations to pump higher ethanol blends can be expensive. Growth Energy, an ethanol industry trade group, has been attempting an end run around the oil industry by helping some gasoline retailers to upgrade pumps for higher ethanol blends.

Earlier this month, a Minneapolis station assisted by the group and subsidized by corn growers became the first in the state to sell E15. Growth Energy also helps retailers by sending mailings to nearby flex fuel vehicle owners when E85 stations open.

Mike O’Brien, the Minnesota-based vice president for market development for Growth Energy, said he doesn’t know how much extra ethanol could be sold domestically next year through such efforts. But the economics of higher-ethanol blends are favorable, he said.

“Let’s say there’s oversupply and the price of ethanol goes down,” O’Brien said. “Once you get ethanol into the retail level, the economics of it take off.”

 

David Shaffer • 612-673-7090 • Twitter: @ShafferStrib

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