Ethanol. Right. Now.

Energy independence through fuel choice, ACE Conference keynote by Anne Korin

Anne Korin, co-director of the Institute for the Analysis of Global Security, presented a keynote address at the ACE Ethanol Conference on the topic of energy independence through fuel choice.

She began by mentioning the recent mandate by the U.S. Congress that all television switch over to a digital signal – we have a real problem with our leadership, she believes, if this is what they are willing to focus on instead of real problems like oil.

“We need to change the focus of our leadership,” Korin said.  “We need to make it clear what the problems are we’re trying to solve.”

National security issues really relate to oil, she said, stating that three-quarters of world oil reserves are in places where radical Islam is on the rise.

“It’s very unlikely that we’re going to win this war if we continue to fund both sides,” Korin said.

Korin believes there is confusion in Congress about the issue of energy and how to solve the problem.

“When it comes to oil, the national and economic security vulnerabilities that we face do not stem from our level of consumption – not even our level of imports,” she said.  “Oil is a strategic commodity.”

Oil’s status as a strategic commodity is discussed in her recent book with co-author Gal Luft, “Turning Oil into Salt: Energy Independence through Fuel Choice.”

In centuries past, salt was a strategic commodity as oil is today.  Salt was the only method for preserving food, and was therefore extremely important to society.  But when other methods of food preservation were developed – canning, refrigeration, etc. – salt’s status as a strategic commodity was broken because people now had other options.  Korin noted that the world consumes way more salt today than in the past, but it’s not important to anyone where we get it or who holds the reserves.

“Oil’s status as a strategic commodity is because of its monopoly over transportation fuel,” Korin said.

Korin believes the solutions on both sides of the energy debate are completely irrelevant and completely tactical – they don’t address the core issue.  On one side you have “drill, baby, drill” (produce more) and on the other you have calls for conservation and increased efficiency (use less).

“These are essentially useless tactics when it comes to energy independence,” Korin said.

She notes that we are facing a cartel, OPEC, that sits on three-quarters of the world’s oil reserves, yet only accounts for 40 percent of the world’s oil supply.  During the Arab oil embargo, OPEC produced 30 million barrels a day; today, OPEC produces 29 million barrels a day, even though global demand has dramatically increased.

What does OPEC do when we drill more or use less?  When oil went to $147 a barrel and gas was $5 at the pump, she noted that people drove less and consumption dropped by 1 million barrels a day.  In response, OPEC cut production by 4 million barrels a day.  “We use less, they drill less,” Korin noted.

Every time non-OPEC countries increase production, OPEC drops production.  If there’s a net increase in production, OPEC reduces supply to drive prices up.

“The same old tactics are not going to work to change the playing field,” Korin said.  “OPEC is literally in the driver’s seat.  We need to open the market to fuel competition.”

Specifically, what can be done?  According to Korin, it must start with the cars.

“Vehicles have to be platforms on which fuels can compete,” she said.

Korin believes that Flexible Fuel Vehicles (FFVs) and an Open Fuel Standard are key.  If FFVs were tweaked slightly to allow the use of methanol in addition to gasoline and ethanol, she believes we could form an undefeatable coalition.  Methanol can be made from coal and natural gas, and bringing these interest groups into the fold with the traditional agriculture and biofuel supporters would strengthen the coalition by gaining us key votes in U.S. Senate leadership.  For example, any FFV bill gets referred to the Commerce Committee in the Senate – Sen. Rockefeller from West Virginia, a coal state, and Sen. Hutchinson from Texas, a natural gas state, would look upon the bill much more favorably if it benefited their constituents as well.

“If you start to put these producers together, all American producers of energy, it’s very hard to argue against that kind of political clout,” Korin said.

Gasoline became an alternative fuel in Brazil in 2008, she noted, and we can do the same here.

“We want an open and competitive fuel market,” Korin said. “You should have the right to choose, just as consumers in Brazil choose.”

The first step, in her mind, is an Open Fuel Standard.  She urged ethanol supporters to focus Congress’ mind on this.

Near-term liquid fuel choice is “very, very doable,” Korin said.  “If producers had an incentive to expand capacity, if only they weren’t facing a blend wall, if vehicles actually enabled there to be a market.”

Korin believes this emphasis on flex-fuel vehicles and fuel choice integrates very well with new technologies like plug-in hybrid vehicles – flex-fuel plug-in hybrids.

“We’re going to go back to three-digit oil, there’s no doubt in my mind,” Korin said, if we emerge from this recession and oil consumption grows again.  The economy is going to decline again, she believes in a series of “w” shapes instead of an upward swing.

Energy is the second-largest household expense, and a spike in oil prices affects our entire economy.  “Everything we buy has an oil component to its price,” Korin said.  “A spike in oil prices affects our entire economy.”

She called fuel choice a “cheap insurance policy” against the economic and national security damage that oil is and can do against the United States. 

“Until we do this, we are at the mercy of countries who hate us and will do everything in their power to weaken us,” Korin said.

For more information about Anne Korin, visit the website of the Institute for the Analysis of Global Security:

http://www.iags.org/staff.htm

Empowering fuel choice, remarks by ACE's Brian Jennings

“We’ve chosen ‘empowering fuel choice’ as our theme for this year’s conference,” said Brian Jennings, Executive Vice President of ACE, “and it really embodies what ACE has been about for a long time.”

Jennings cited several years of progress on the idea of fuel choice and multiple fuel blends.  In 2007, ACE published an “optimal blends” study which found that blends like E20 and E30 can perform well in cars, and in some cases get mileage as good as with straight gasoline.  In 2008, ACE published the first technical guide for petroleum marketers on the topic of blender pumps.  Last year, ACE was proud to sign on to the E15 waiver application along with other groups, ACE launched the “Blend Your Own Ethanol” national campaign, and bi-partisan legislation was introduced in Congress to improve access to flexible fuel vehicles and blender pumps.

However, with all this progress, ethanol has been forced against a wall.

“The blend wall is real, and it’s here,” Jennings said.

“Congress is arguing over everything, and EPA continues to dither on the E15 waiver,” Jennings said.  “This is gravely serious for us in the ethanol industry, but it’s also important for every American.”

If regulations allowed more ethanol to a gallon of gasoline, every consumer would be able to save money at the pump.  This is being blocked today by 30-year-old regulations, and Jennings says the Administration doesn’t recognize the mixed signals it is sending.

“The RFS sends a signal to produce more ethanol, but a thirty-year-old Clean Air Act restriction that limits ethanol to ten percent per gallon of gasoline is sending a signal to limit the use of ethanol,” Jennings said.

He expressed the industry’s frustration over the multiple delays in the U.S. EPA’s decision on the E15 waiver.  After 270 days, they said they needed more time.  In June they said they needed even more time, and now they are leaning toward approving up to E15 only in 2007 and newer vehicles.

“We could say the EPA is slow-walking the E15 issue, but that would imply that some progress is being made,” Jennings said.

He points out that if EPA approves E15 in only 2007 and newer vehicles, only 2 out of 10 vehicles would be able to use it.  How many petroleum retailers are going to change their fuel slate for that small market?

A main focus right now is the ethanol tax credit, the Volumetric Ethanol Excise Tax Credit (VEETC).

“If VEETC expires, jobs will be lost and prices will rise for consumers,” Jennings said.

Jennings said that Members of Congress are expressing to ACE that, with only 20 days left in the Congressional calendar, we need to focus on what’s doable.  Part of that depends on grassroots advocates and their willingness to talk to their Members of Congress – especially during the August Congressional recess.

“The very best ethanol lobbyists are sitting here,” Jennings said.  He encouraged ACE members and all ethanol supporters to take advantage of the August recess and meet with their Representatives, invite them to visit your ethanol plant or meet with your board of directors.  “That’s how we get things done,” he said.

EPA delays E15 decision once again

EPA is required by law to make a decision on the request to allow the use of cleaner burning blends of up to 15 percent ethanol, and by the time they actually make a decision, it will be a full year later than the law requires. Every addict needs enablers, but frankly we could not have imagined the Environmental Protection Agency would be one of the major defenders of the status quo that is now fouling beaches from Louisiana to Florida.

We also have to wonder who is influencing EPA when they agree it will be impossible to meet the Renewable Fuels Standard but refuse to remove the requirement that fuel contain a minimum of 90 percent petroleum. That decision can only be good news for the likes of BP and ExxonMobil, and anyone else who chooses to ignore the dangers of relying on unstable and hostile foreign regimes for our fuel, or the dangers of drilling two miles below the ocean.

EPA could be accused of slow-walking this E15 decision, but that would imply that progress is being made. This decision has been pushed back an entire year, and has gone from making cleaner burning E15 available to all cars, to only 2001 and newer cars, and now possibly to only those made after 2007. Those vehicles were practically fresh off the assembly line when the data was submitted proving blends beyond E10 are safe for all vehicles, and now two years and millions of dollars have been wasted as EPA defends the status quo. Meanwhile, oil has been spilling from the Gulf of Mexico for 60 days and counting. What do government bureaucrats need to see to be convinced that our nation desperately needs take action to reduce our use of oil?

When ACE met with EPA in March of this year, we were told that by mid-year EPA was planning to approve E15 for 2001 and newer vehicles, a commitment the Agency put in writing in a December 1 letter. While there are many practical challenges to implementing E15 for only 2001 and newer vehicles, it may have been better than the status quo of being limited to only E10. But to add insult to injury, EPA is now indicating that they will consider E15 for only vehicles made after the 2007 model year – only 20 percent of the U.S. fleet. Even if every single vehicle made after 2007 used E15 every time it filled up, it would barely allow the U.S. to meet the 2012 Renewable Fuels Standard requirement.

As oil is ruining livelihoods and closing businesses, the economic and job-creation benefit of ethanol is being told it must wait in the wings. With the price of ethanol being almost a dollar less per gallon than gasoline today, EPA’s approval of a 5 percent increase in the ethanol content could save the U.S. more than $19 billion in fuel expenditures every year – almost as much as BP has committed so far to clean up the damage that oil has done in the Gulf.

ACE is encouraging all ethanol supporters to contact their Members of Congress to urge their support of legislation for more flexible fuel vehicles and blender pumps, such as S. 1627, the Harkin-Lugar ‘Consumer Fuels and Vehicles Choice Act.’ More FFVs and blender pumps would bring flexibility into the U.S. fuel system and give consumers greater fuel choice, while bypassing the bureaucracy that is preventing the cleaner alternative fuels from reaching the marketplace.

Posted by: Brian Jennings

Ethanol offers big savings for motorists over Memorial Day holiday

With ethanol trading for nearly a dollar less than gasoline at the rack, motorists can capture those savings at the pump by choosing ethanol-blended fuel.  The savings over the recent Memorial Day holiday were significant.

According to fuel price data* published May 24, the E10 blend is an average 9.5 cents per gallon lower than straight gasoline right now.  Based on AAA’s expected travel distances** for the holiday weekend and a national average gas price of $2.85 per gallon, this 9.5 cent discount for E10 could have equaled $95.8 million in savings nationwide.

The savings on E15 would be nearly 14 cents per gallon.  If the E15 blend was available nationwide, the total savings for motorists this holiday weekend could reach $138 million.  The U.S. Environmental Protection Agency is expected to make its ruling this summer on whether to allow all consumers access to the 15 percent ethanol blend.

At the current ethanol price, the E30 blend is 28.5 cents per gallon less than gasoline, and E85 is 75 cents less per gallon.

“Every little bit of cost savings helps in a tight economy, and American families are saving money at the pump thanks to the availability of ethanol,” said Ron Lamberty, Vice President / Market Development for the American Coalition for Ethanol (ACE), the nation’s largest grassroots ethanol association.  “With the wide spread right now between ethanol and gasoline prices, the higher the ethanol content per gallon of your fuel, the higher the savings.”

“Motorists deserve to have access to these cost-effective fuels at the pump instead of just being limited by government red tape and Big Oil’s grip on the market,” said Brian Jennings, Executive Vice President of ACE.  “We need to give consumers the power to choose whatever fuel is most affordable by making flexible fuel vehicles and blender pumps more widely available.”

* Source: Oil Price Information Service (OPIS) Chicago Average Rack Price for the week ending May 21, 2010

** Source: AAA Memorial Day 2010 Travel Forecast, May 20, 2010

American consumers deserve fuel choice

This op-ed was written by Lars Herseth, President of the American Coalition for Ethanol (ACE).  It was published in the Omaha World-Herald on Saturday, May 8 in the "Midlands Voices" section.

As a farmer, rancher, businessman, former lawmaker, and current president of the American Coalition for Ethanol, it won’t surprise you that I support making renewable and homegrown fuels more widely available.  But just like you, I am also a consumer.

I believe that American motorists should have lots of choices at the pump – including fuel not blended with ethanol.

You may have read that statement twice, knowing that I am the president of ACE, a grassroots advocacy association for ethanol.  But ACE members believe that motorists deserve the right to choose what fuel to put in their cars, and we’re not afraid to have our fuel of choice – ethanol – compete with petroleum.  When consumers are given meaningful choices at the pump, we are confident they will choose ethanol.

Today, ethanol-blended fuel is the most affordable and clean-burning alternative to gasoline.  And more importantly, unlike some other promising alternative fuels, we don’t have to wait for ethanol because it is here now as the only commercially viable substitute for fossil fuels. 

ACE has partnered with others to support a waiver pending before the U.S. Environmental Protection Agency (EPA) to allow up to 15 percent ethanol per gallon of gasoline.  We have done so because today EPA arbitrarily restricts the volume of ethanol that can be blended into a gallon of gasoline to just 10 percent, and because our competitors work hard to block ethanol from gaining additional market access.

If EPA approves E15, consumers would pay less for fuel because wholesale prices for ethanol are currently at a significant discount to gasoline – in some places a dollar less per gallon.  Unfortunately, it is becoming increasingly clear that when EPA does approve E15 it will be on a limited basis, restricting its use to only model year 2001 and newer cars.  We are concerned this will cause unnecessary confusion for consumers and may even prevent station owners from choosing to offer the fuel.

So, in anticipation of an inadequate EPA decision on E15, ACE believes the focus should be on consumer fuel choice.  The power of fuel choice needs to be transferred from Big Oil back to the consumer, and the most straightforward way to do so is the combination of Flexible Fuel Vehicles (FFVs) and blender pumps.

If every automobile sold in the U.S. were an FFV, which is capable of using virtually any blend of ethanol and gasoline, we know ethanol will compete at the pump.  Similarly, blender pumps, which dispense ethanol-gasoline blends at various percentages at the retail level, empower consumers to choose the most affordable and reliable blend of fuel for their car.

To this end, ACE supports S. 1627, the “Consumer Fuels and Vehicle Choice Act,” legislation by Senators Tom Harkin and Richard Lugar to provide more FFVs and blender pumps.  ACE has launched an online petition at www.ethanol.org/petition, giving consumers a chance to express their support for this bill and for freedom of fuel choice at the pump.  I encourage you to sign the fuel choice petition today.

The longer we wait to provide Americans with real fuel choice, the more consumers will pay at the pump, the more the environment will suffer, and the more our nation will rely on foreign sources of oil.  Please make your voice heard at www.ethanol.org/petition.