WASHINGTON -- In his State of the Union address, President Bush outlined plans to reduce gasoline consumption in the United States by 20% over the next 10 years through increasing the supply of renewable and alternative fuels and imposing new Corporate Average Fuel Economy (CAFE) standards.
Dan Gilligan, president of the Petroleum Marketers Association of America, told CSP Daily News, PMAA supports the increased use of alternative fuels; however, it is likely that, if enacted, the president's mandates would result in higher prices at the pump for American [image-nocss] consumers. As we have seen in the past, federal fuel mandates usually create shortages and shortages always create higher prices.
He added, We like biodiesel, we like ethanol. It has worked well in the 10% blend, and in some of the rural areas the E85where it has been priced properlyhas been a success. But the numbers the president was throwing around are just mind-boggling. It is imperative that as our country moves ahead with the further development and production of alternative fuels, the natural market forces of supply and demand are allowed to operate. Before advocating new mandates based on politically popular catchphrases, the federal government must adequately address the obstacles that continue to face alternative fuelsfrom developing more sustainable feedstocks, to transportation and supply difficulties, to fuel quality and efficiency concerns.
The president's plans drew comments from around the country. They could, for example, shift the economics and driving habits of millions of Texans, reported the Dallas Morning News. Ethanol derived from corn already has driven corn prices to their highest levels in a decade, cutting into cattle profits while spurring construction of five giant grain distillation refineries on the Texas plains.
We were very encouraged by what the president had to say, and with the support this issue is receiving from the White House and the Congress, Bill Pintak of Dallas-based Panda Ethanol Inc., which is building a $270 million ethanol plant in Hereford, told the newspaper. This is not about the choice of another motor fuel. This is a choice about national security.
Ethanol is now sold across much of the nation as an additive to gasoline, usually in concentrations of 10% ethanol. At current gasoline consumption rates of about 140 billion gallons a year, that would cover less than half of Bush's target of 35 billion gallons of gasoline savings by 2017, the report said.
Ethanol consumption hit 5.3 billion gallons last year, which reduced U.S. oil imports by 11.7 million barrels of oil, Ron Miller, chairman of the Renewable Fuels Association, told the paper. U.S. oil imports are way higher than that13.5 million barrels a day in December, according to the report, citing the American Petroleum Institute (API), or more than 60% of the nation's oil consumption.
To stimulate more alternate fuel consumption, ethanol makers want gas stations to install pumps for E85 (85% ethanol, 15% gasoline), which can be burned by flexible-fuel vehicles (FFVs). Ford, GM and Daimler Chrysler have promised to produce millions of FFVs, but there are fewer than 1,000 stations in the country that sell E85.
Gasoline marketers said they will resist efforts to make them install pumps and underground tanks for ethanol, according to the report, saying this would cost $30,000 per station. Instead, they want to promote new cleaner-burning types of diesel, including diesel made from soybeans and other organic material.
We're already seeing beef producers complaining about the price of corn, which is pumped up because of ethanol, and we're already seeing some concerns about the fuel efficiency of ethanol, Jeff Morris, president and CEO of Alon USA, which owns 1,200 Fina stations in Texas and six other states, told the paper.
Certainly with corn prices going up and gasoline going down, that has reduced margins, said Pintak. Our long-term view is the increase in the cost of corn is good for the industry. It incentivizes farmers to plant more, so we will find an equilibrium price for corn. And regardless of what the price of oil is, it's still an important national security issue.
In another example, Bush's plans could leave North Jersey consumers paying more at the pump and at the grocery store, added The Record. You'll pay more for Twinkies or Coca-Cola or Frosted Flakes, which are sweetened with corn syrup, because of the demand ethanol will put on the price for a bushel of corn, Eric DeGesero, executive vice president of the New Jersey Fuel Merchants Association, told the paper.
Most gas sold in New Jersey now is a blend of 90% gasoline and 10% ethanol, DeGesero added. E85 is not being sold in New Jersey. It's a chicken-and-egg thing, DeGesero said, explaining there's no demand for the blend because there are few cars on the road that could use it, but few E85-capable cars are sold because the fuel is not available.
DeGesero said making E85 widely available in New Jersey would require replacing stations' tanks and pumps, which would also drive up costs for consumers.
Meanwhile, U.S. Energy Secretary Samuel Bodman defended Bush's plan to reduce oil consumption without introducing a gasoline tax, saying such a proposal would be too divisive, reported the Associated Press. Bodman, a delegate at the gathering of world business and political leaders in Davos, Switzerland, said improvements in technology would make these goals possible, rejecting suggestions that fuel or emissions taxes could help spur the move to alternative energy sources.
The idea of taxing gasoline at an increased level, which is something that gets discussed from time to time, I view as a highly divisive matter, he said at a World Economic Forum panel including presidents, prime ministers and some of the world's top oil executives. People in New York view the taxation of gasoline as one thing. People in Texas, Wyoming, in areas where you have to commute very long distances, view the taxation in a very different matter. That's just in our country.
The Forum panelwhich also included Azerbaijan President Ilham Aliyev, Ukrainian Prime Minister Victor Yanukovych, Gazprom deputy CEO Alexander Medvedev, Exxon Mobil Corp. CEO Rex W. Tillerson and Royal Dutch Shell PLC CEO Jeroen van der Veercovered a range of topics from climate change to the rise of state-owned producers.
Tillerson and van der Veer stressed that traditional fossil fuelscoal, oil and natural gaswould remain the primary source of energy in coming decades, and the challenge would be to make them cleaner and more efficient.
And Knoxville, Tenn.-based Pilot Travel Centers said it would like to add biodiesel at its 34 stations in East Tennessee, but finding a large enough producer is holding back the company, AP said.
Even a plant on the boards for construction in Wartburg, Tenn., won't solve the problem. Pilot president and CEO Jimmy Haslam said it will not produce enough fuel. Northington Energy announced plans last month to build a plant that would convert locally grown soybeans to biodiesel.
Haslam said his travel centers would need 10 times as much fuel as Northington is talking about making. He said unless large plants are built in Middle or East Tennessee, Pilot will not be in the biofuels business. The stations already sells 10% ethanol fuel.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.