Larry Kumins: Ethanol Use May Peak Soon

The Oil and Gas Journal of 11/26/07 published an article by Larry Kumins of the Energy Policy Research Foundation, Inc. of Washington,D.C. titled, "Energy system limits future ethanol growth." It says the rapid growth of ethanol between 2002 and 2006 "will prove to have been a one-time event that captured two thirds of the ultimate near term market."

The argument boils down to the assertion that ethanol was substituted for MBTE as an octane booster when MBTE was banned for environmental reasons. That "natural" ethanol component of gasoline amounts to about 500,000 b/d, which is around the present usage and roughly 5%.

The author maintains there is a 10% or 15 bg/y "cap" to the amount of ethanol that can be blended with gasoline given automobile technology and ethanol distribution difficulties. He says that ethanol production capacity is approaching that 15 billion gallons per year, a serious over- capacity problem that will result in much lower ethanol prices.

Any amount of ethanol over 15 bg/y would require car manufacturers to make many more E85 or flex-fuel vehicles and for consumers to buy them, both doubtful developments. In addition, and at least as important, the distribution system for ethanol would need major changes to become more robust. Thus, the "easy" ethanol use goals have already been largely reached.

Comments

[IsThisRight:]

Going from 5% to 10% is Half-way there.... not two-third.

Why is it doubtful that the car industry and the consumer will not accept E85?

2008 Feb 07 04:52 PM

[User 132367:]

How much are writers for Seeking Alpha paid by the oil majors for publishing this crap??? Get off the ethanol slamming binge. It is our only play against the oil giants. If you do not believe me, ask them or, better yet, ask them why they are paying the educational institutions thru grants to belittle ethanol as a viable alternative. They give the universities research grants then, provide them with tainted data. I know...I was a researcher.

2008 Feb 13 12:34 PM

[David Jackson:]

In answer to the comment above: Seeking Alpha is strictly independent. See the section on Editorial Principles here:

seekingalpha.com/page/...

If you want to submit a pro-ethanol article to us, our editors will consider it for publication.

In the meantime, we do have rules about comments. They are best expressed by in words adapted from Kara Swisher's:

We will not tolerate comments that contain personal attacks or question the motives, rather than the views, of others. If you think the author of an article or the people or companies written about are wrong, feel free to say so and to argue why you think so. We welcome such critiques and alternate views. But we will remove comments that call people corrupt, or stupid, or contend that they are taking positions because they are evil or immoral.

2008 Feb 19 09:01 AM