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One seemingly simple answer to breaking down the blend wall is to do a better job pricing E85.

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Here we are again .. The RFA continues with the E15 nonsense ..and Bruce Babcock.. continues to show his support for E85..and tells it like it is

 

 

 

The biggest challenge facing the ethanol industry today is one that was identified nearly 10 years ago with the passage of the Renewable Fuel Standard.

 

In 2005 ethanol began replacing methyl tertiary butyl ether, or MTBE, as the oxygenate component in gasoline. With the blend cap set at 10% ethanol in gasoline, economists were quick to point out that consumers would need to choose higher blends of ethanol for the industry to continue growing; Otherwise the 'blend wall' would become a reality once 10% ethanol was blended into every gallon of gasoline across the U.S. That day has, for all intents and purposes, arrived.

 

Though the blend wall may fluctuate according to fuel demand, it appears to be around 13 billion gallons of ethanol.

Even so, Bob Dinneen, president and CEO of the Renewable Fuels Association, boldly claims this is the year the blend wall will fall. With E15 slowly catching on, the question is how. Dinneen also notes that only 13 million gallons of new ethanol capacity are currently under construction.

 

 

 

E85 should be cheaper

 

One seemingly simple answer to breaking down the blend wall is to do a better job pricing E85.

 

Iowa State University economist Bruce Babcock notes that consumer demand will increase if E85 is priced at or below parity. He defines parity as the point at which E85 equals E10 economically due to its lower energy content; it should cost less since it returns fewer miles per gallon.

 

If E10 (regular gasoline) is priced at $3.30 per gallon, E85 should be a max of $2.55 per gallon, Babcock notes. Instead, many stations are pricing the higher-ethanol fuel at a 15- to 25-cent reduction.

 

“I don’t think [E85] is a failed fuel,” Babcock notes. “I think it hasn’t been priced right.”

 

By his calculations, if it were priced at parity, the ethanol industry would see another 600 million gallons worth of consumer demand materialize overnight. If it were priced below parity, the number jumps to 800 million gallons.

 

Taking it a step further, Babcock said the fuel industry needs to do a better job marketing E85 in areas with the highest concentration of flex-fuel vehicles. By number of FFVs on the road, Texas is number one, followed by California, Florida, Michigan, Illinois, Ohio and New York.

 

Babcock’s numbers indicate if 3,500 new E85 stations were placed in key locations within these states, another 2 billion gallons of demand is possible. Of course, that’s if the fuel is priced at or slightly below parity.

 

This price parity concept is not far-fetched. Before running the numbers, Babcock researched the E85 market in Brazil. He found the same basic consumer economics exist there also.

 

In the end, it appears Americans are willing to buy more of this homegrown fuel. It just has to be slightly more pocketbook friendly.

 

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I commend Mr. Babcock for his work - this is the same thing he said at the National Ethanol Conference back in February. From my experience thus far, I can say that this is not news to the ethanol industry.

 

Of course, yellow hose is doing a fantastic job proving this to be true. We are now moving 450,000 gallons of E85 out of the plant PER MONTH. If you include sales at the pump out front, this number jumps to nearly 490,000. What baffles me is that few others have caught on so far.

 

When last I spoke to the RFA, I made it very clear that those of us who are advocating for ethanol advocate for ethanol as an alternative fuel, not just an additive.

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Once in awhile , I'd like to see someone come up with an honest assessment of where the ethanol industry is..

 

 

Don't see  alot of it from the giant -sized ag companies ( Poet, ADM, Abengoa).  Documentation that would lead to 

 

an accurate figure of how much it costs to generate a gallon of EtOH ---

 

 if  grain costs are X,  Nat gas costs are Y,  Enzymes and finishing costs are Z, .:.   then ethanol is $x.xx / gal. ( approx.)

 

 

I haven't followed the Governor's Ethanol Coalition for awhile..  don't know if it still  exists....

 

seems they had put a similar document together when the industry was first getting started. 

 

 

 

Don't believe we'd get an honest answer about production costs from the oil industry,  at least not more than the base

 

(floor)   price they'd accept for domestic crude,

 

 As consumers  and part of a captive audience,  you'd think this would've been widely asserted by the motoring public...

 

$3.50/gal  is alot to pay out each day for something as necessary as gasoline.  Why no revolt, yet ??

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Don't even get me started on the oil industry stats, Greengenes. Anyone who knows of me in the biofuels community knows how outspoken I am about my criticism of the oil industry. We do not have any clear energy return on investment (EROI) numbers for oil. And to honest, it's difficult to produce that number when you consider how many different sources there are for the oil. Iraq oil is NOT tar sands oil. In Iraq, one essentially only needs to stick a straw in the ground, and the oil is gushing out. Very high production rate correlating with a relatively low energy input requirement. Again, there is no specified EROI for this source of oil, but I've heard numbers ranging from 15 to 20 (for every unit of energy used to produce the oil, 15 to 20 units come out). Shale is yet another discussion.

 

As mentioned, tar sands is a completely different story. With tar sands, the tar rocks either have to be dug up in a quarry-style tar pit, or blasted up from underground. The tar sands/rocks then have to be blasted by incredibly hot water to separate the rocks from the tar, and then you have to load the tar sands either in a pipeline or on a train. I should note that even this far into the process, tar sands have to be diluted, or injected with numerous chemicals to lower the viscosity enough to get it to move. When you add in the exploration, the transport to the refineries, the added cost of upgrading the refineries to process this oil, and then the process itself of processing this oil, tar sands has a horrible ROI. There is no way in hell that tar sands has a higher ROI than ethanol. I am looking into traveling to a tar sands pit next month to explore these operations.

 

While the ethanol industry has essentially been forced to release EROI information, ethanol's EROI is significantly more transparent; there are fewer variables going into the equation, and as such, it is far easier to calculate the EROI for ethanol. Inputs consist of the agricultural equipment used to cultivate and harvest the corn (or other feedstock as it were), the fuel used to transport the raw product, the inputs used at the plant to produce the ethanol, and then the transport to the fuel station. That's it. When you add in the DDGs, corn oil, and other byproducts of ethanol production, the EROI for ethanol is at least 2.5, if not higher. Ours is around 2.8, last I knew.

 

But to your inquisition Greengenes, here is a [NOT] accurate assessment of the ethanol industry, and more specifically, the RFS. Besides making monumentally libelous claims without citations, some of the data in this PDF powerpoint is outdated. My personal favorite is the drought monitor. This guy (who appears to be affiliated with a Turkey federation, and appears to have been involved in the process of getting turkeys to the president to pardon) uses a drought monitor map from January 2013! This was right as the drought was beginning to decline, and is nowhere near what the drought is in the corn belt today! This data is so easily researched by the average Joe. The current drought monitor can be found here, and is updated weekly. It baffles me how incredibly simple it is to prove these straw man fallacies wrong! 

 

Below I've attached an image of the drought monitor this guy uses in his slideshow, and an image of the current drought monitor. Again, this is research that a simpleton could do - it requires little, if any, effort.

post-2293-0-63873000-1399949233_thumb.jpg

post-2293-0-47536500-1399949243_thumb.jpg

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I found a cute little graphic to share that sums production costs up nicely. Abit dated, but still close enough.

 

When I figure out how to bring it into the forum, I'll share ...

 

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Seriously, if EVERY ethanol plant were to distribute just 10% of their production locally through a network of e85 and blender pump stations that were priced competitively...  they would have that mythical "blend wall" shattered. The only "blend wall" is what the oil companies are REQUIRED to blend.  Going beyond this will require the ethanol industry to do their own marketing, distribution and leg work.

 

The more that the ethanol industry sells locally, the less they have available to sell to the oil industry as a blending agent, which would help push the price for this up...  win-win situation!

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Here's an interesting way of looking at it:

 

The last figure of known FFVs on the road in the US today was 16.3 million cars, and that was as of the middle of last month.

 

At the rate I've been going, I'm on track to use 2,000 gallons of E85 this year. I only hit 1,350 last year, so my rate of driving is steadily increasing. But let's assume 2,000 is the norm for now, and that this is about average for all folks out there.

 

Now let's assume the fuel is E78, which seems to be a reasonable year-round average ethanol content. If every one of those 16.3 million flex fuel vehicles used an average 2,000 gallons of E"85" a year, that's 32.6 billion gallons of E78 burned annually. Multiplying this number by 0.78 to calculate total ethanol used, that would be 25.428 billion gallons of ethanol consumed. This is not too shy of twice the current ethanol capacity in the United States (currently somewhere north of 14 billion gallons annually). When I told my dad this, he said that maybe it's a blessing in disguise that not everyone uses E85.

 

Again, this is simple arithmetic that requires little research and thought to do. This right here, along with the fact that we already have the technology to mass produce ethanol and burn high blends of it, are why we have no excuse for refusing to use higher blends of ethanol. There is no excuse for the blend wall, and thus, no justification. Mr. Babcock's work is going a tremendously long way in going one step further... proving that at good spreads, ethanol sells.

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I would rather that ALL ethanol was used for e85, which was voluntarily purchased by people choosing to put it in their FFV (or splash blend ;) )... 

 

ABSOLUTELY zero used for e10...  let the oil companies use their own dirty, expensive and possibly dangerous distillates to boost octane...  people that really have that ethanolphobia fear, they can rest easy knowing that their trusted friend, the oil industry, has their back!  Well, while their at it, their foot, leg, arm... anything else they can get.  Let them enjoy being a victim of a monopoly that constantly lies to them.  Every junky loves their dealer!

 

This would be a major boon for those states in the "ethanol belt" as we'd be keeping OUR fuel prices down, while other states would see sky rocketing fuel costs.  This would spur OUR economy, and screw other states.  But it would be their choosing.

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Don't believe we'd get an honest answer about production costs from the oil industry,  at least not more than the base

 

(floor)   price they'd accept for domestic crude,

 

Here's something to think about and I don't know if it's true. I read an article about the kidnapped girls in Nigeria. The jist of the story is if it is really just made up and an excuse for the USA to set up some more bases to help secure Nigeria for our interest. Does it cost anything to set up shop in other countries? Remember, there's oil in Nigeria.

 

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