The Energy Information Administration (EIA) reports for August that U.S. ethanol production rose in August to an all-time high, production averaged more than 869,000 barrels per day (b/d).  The Renewable Fuels Association who also collects data calculated ethanol demand at all-time high as well at 911,000 b/d in August, up from 734,000 b/d a year ago.

The U.S. is closing in on the million barrel per day milestone.  Cheers in some sections, groans in others, but for America, slashing off the equivalent of 750,000 b/d of imported oil is a good thing.

Most groans come from the odd couple of the oil business and the special mis-interests of food vs. fuel.  The oil business, god bless’em, are in a quandary – one side is hell bent on doing the business as done for 150 years – another is ready to resist and protect its market and share – another is investing and researching with a realization that every bit of energy in fuel has market and profit potential – and a few have jumped into ethanol grabbing some facility during the ethanol build up bubble for cents on the dollars.  Some companies work at some or all of the quandary barriers.  Its quite interesting to watch.

The mis-interests meanwhile have a hard time making way, the corn they so love is as a practical matter human inedible – sweet corn its not – while the ultra cheap high fructose corn sweetener of considerable concern in the fattening and obesity of Americans is getting closer to the price of sugar.  Factually, sugar whether from corn or sugarcane or sugar beets is still cheap – for food it’s the processing and packaging that costs the big dollars.

Foreign Exchange Reserves Minus External Debt by Country. Created by Arthur Gunn at . Click image for the largest view provided here. Larger versions are available from the creator and Wikipedia.

The ethanol production effort is having a major impact now on the U.S. balance of payments to foreign countries.  The threat of oil embargoes, wars, and the multitude of risks from importing a third of the daily fuel supply are shrinking.  The risks are not gone, but the length of the lever has shortened up and is getting shorter.

Lots of very smart people make good, true and compelling cases that ethanol isn’t such a good idea.  On the naked face of it they’re right, ethanol competing with $70 oil still has trouble, but so does Gulf of Mexico oil drilling and Canada’s oil sands – two critical sources of oil supply.  The case isn’t clear, but the ethanol incentives save taxpayers billions in farm programs to keep protein and starch foods on American and world tables.  Exports of the major food commodities, wheat, corn and soy are continuing unrestricted.

At 10% blends ethanol is a slam dunk.  Exports of ethanol are also growing – a value added export from simply shipping corn.  The big consumers are the Netherlands where major refineries operate, Mexico whose market and vehicles track a few years after the U.S. and Brazil of all places are taking undenatured, or not despoiled product for non beverage use that came to a small 12.5 million gallons for the month of August. Our northern neighbors took up 10.5 million gallons denatured for fuel use.  The UK and Jamaica round out the major importers of American production.

Still, the exports come to only about 2.5% of production.

Yet the huge gain comes from that not imported oil or semi finished gasoline from foreign lands.

Say what you will, but the U.S. has a huge import bill to work off and ethanol is shrinking and has shrunk it down.

On the consumer side the auto manufacturers are still trying to be all things to everyone.  E-85 in particular and EPA problems might have a role in getting the thermal efficiency up with higher engine compression.  From Gale Banks of the hot rod world to MIT the lure of ethanol’s ability to revamp engine design is a powerful opportunity to recover the “lost” mileage than many find easily with an engine compression boost or careful Flex-Fuel vehicle choice.  E-85 works, but getting the payoff, the lower per gallon prices with more mileage and power is still an aftermarket project.

This writer is looking for a Flex-Fuel used vehicle out of warranty just to get an engine that could be uprated for ethanol and save some fuel money and gain some extra power.  E-85 is readily available where this writer lives.  It’s an opportunity with considerable savings, both in investment and operating costs, but the choices are still vague.  Engine modifiers and aftermarket suppliers take note . . .

Many that I admire diss ethanol, but views held narrowly make fine cases, while views held broadly are more difficult to make.  750,000 b/d comes to about $60 million a day, every day.  Over a few years, and more growth is coming, ethanol will payoff better than understood today.


6 Comments so far

  1. Matt Musson on November 10, 2010 10:54 AM

    With corn at $6 bushell, I wonder how the ethanol market will hold up.

  2. mus302 on November 10, 2010 3:11 PM

    I think that you have made the case for ethanol better than the ethanol industry groups have.

    You are right that in this country we tend to try to boil things down to their simplest terms then attack that simplified logic. I agree that when the big picture is looked at, ethanol is a winner. Along those lines I would probably have added the national security aspects associated with depending on foreign source of energy as well.

  3. Aureon Kwolek on November 15, 2010 10:05 AM

    I would also look at the economics of the byproducts. About half a dozen corn ethanol refineries have bolted on oil extraction technology. This is a biodiesel feedstock byproduct from corn ethanol, which can be consumed locally, by the farmers who grew the corn. It represents an additional 4% fuel on top of the volume of ethanol produced. That also increases profit and improves the carbon footprint of the biorefinery. Look to see every plant extracting crude corn oil in the next decade.

    The main byproduct, distillers grains, is expanding in the global market place – Exports doubled last year. When you look at offsetting the trade deficit with ethanol, also look at distillers grains, ethanol’s co-product, in the same way.

    Next will be corn cobs and light stover converted into more ethanol from the same corn crop. And after that will be onsite algae production integrated into the corn ethanol waste stream – Algae growing on the nutrient-rich waste effluent centrate, waste heat, and abundant waste CO2. Corn ethanol has a waste stream that will become a valuable resource.

    There are numerous other cutting edge technologies coming for the ethanol sector. Any time now, you can expect to hear the term “second generation” corn ethanol.

    So you take feed corn, and you make three or more value-added products out of it – That are worth many times more than the corn itself. That’s good economics. On top of that, you enhance National Security, you generate three levels of tax revenue, create over 400,000 jobs, displace over 10% imported oil with a cleaner burning domestic fuel, and put downward pressure on the demand and price of gasoline.

    Look for ethanol to make many inroads into other uses, even as a watered down supplemental fuel, introduced as a vapor through the air intake. Even as a replacement for heating oil and coal.

    Take a look at cutting edge ethanol engine technology. See this report:

    E-100-4 The Revolutionary Fuel – Just Add Water

    Read the first 9 pages here – for free:

  4. jerry trancik on November 19, 2010 12:49 PM

    As the commodity buyer for our company I have first hand seen what the ethanol market has done to food prices. Even the corn syrup supplies site the rising ethanol market as one of the main reasons for rising corn syrup prices. And when corn rises so do soybeans and wheat rise in sympathy.
    I would rather see some biofuel made from a plant that can be raised on aired land such as jatropha. I believe that would keep the food prices down and provide massive amounts of biodiesel. A win win in my estimation.

  5. Advanced BioFuels USA » Ethanol Production Nears A Million Barrels Per Day on November 21, 2010 4:16 PM

    […] …From Gale Banks of the hot rod world to MIT the lure of ethanol’s ability to revamp engine design is a powerful opportunity to recover the “lost” mileage than many find easily with an engine compression boost or careful Flex-Fuel vehicle choice.  E-85 works, but getting the payoff, the lower per gallon prices with more mileage and power is still an aftermarket project.  READ MORE […]

  6. Silva Sasuille on December 21, 2010 10:30 PM

    Oooh, you’re such an inspiration. I love this blog!

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