Growing Pains

The ethanol industry is having some growing pains. According to this story, the price we will pay for gasoline this summer is going to be significantly higher because there is not sufficient distribution facilities to get the ethanol where it needs to be causing shortages of fuels in some markets.

But there's trouble looming: The ethanol industry might not be ready to satisfy the expected summertime jump in demand. And by crimping the overall supply of motor fuel, this could contribute to a spike in gasoline pump prices at the start of the country's peak driving season.

That, at least, is the view of the Energy Department, which issued a report last month detailing the challenges midwestern ethanol producers will have in getting their fuel to key markets along the East Coast because of railroad, trucking and other distribution bottlenecks. The report also highlighted concerns about the limited output capacity of an industry still in its infancy.

It appears that the oil industry is completely phasing out MTBE, a good thing, in favor of ethanol but the ethanol, since it cannot be transported by pipeline, is going to be in short supply to make up for the MTBE.

Energy analysts said it is unclear whether ethanol producers can manufacture and distribute enough supply once U.S. refiners phase out the use of a petrochemical called methyl tertiary butyl ether, or MTBE, which enables gasoline to burn more completely, and thus more cleanly, but carries some public health risks.

The refining industry says it warned Congress for years about the difficulty ethanol producers would have in offsetting the loss of MTBE, which accounts for about 10 percent of the volume of every gallon of gasoline with which it is blended.

"When it comes to ethanol, Congress is guilty of more irrational exuberance than on any other issue," said Bob Slaughter, president of the National Petrochemical and Refiners Association.

So, we might not make enough ethanol or have the capabilities of transporting it to where it needs to be for the oil industry this coming summer. The solution? Imports.

While U.S. ethanol producers have the capacity to produce roughly 4.3 billion gallons per day in 2006, the near-term crunch means more imports will be needed from Brazil, Dinneen said. The United States imported more than 150 million gallons of ethanol in 2005.

So the plan to reduce foreign dependence on Middle Eastern oil means we will be dependent on South American ethanol. What a plan. I know, the industry will work out the kinks in the US to supply the needs but it strikes me as really funny that the way to make us energy independent is to import more energy from a foreign country.

I will also point out the ethanol industry is taking off and going to be supplying the US with more energy with out the need of mandating that ethanol be put in our gas by the government like the state of Montana did. I claimed all along, while Montana was discussing passing the law, that if ethanol was economically viable a mandate was not necessary to get the business going. I was a voice in the wilderness that nobody listened too while Montana passed the absurd 10% law and now look, ethanol is taking off just like I predicted now that the oil prices are high. The market is working as designed. Amazing isn't it.

The four most beautiful words in our common language: I told you so. Gore Vidal