American Petroleum Institute Argues for More Pervasive Ethanol Use at Lower Blend Ratios Instead of E85
13 October 2006
In a speech to the USDA/DOE Renewable Energy Conference, Red Cavaney, President and CEO of the American Petroleum Institute (API), argued for wider use of ethanol at lower blends of up to E10, rather than localized use of E85 in flex-fuel vehicles.
His remarks come at a time when politicians such as Senator Richard Lugar (R-IN) are arguing for aggressive programs that would make virtually every new car sold in the US a flex-fuel vehicle; ensure that at least 25% of filling stations in the US have E85 pumps; and dramatically expand ethanol production to levels up to 100 billion gallons per year by 2025 (earlier post). On the other side, organizations such as Consumer Report and Public Citizen are pointing to shortcomings in current E85 products and strategies.
Cavaney started out by asserting that more than 90% of motor fuels consumption will still be petroleum-based by 2030. (This is in conflict with the goal of the Department of Energy, which is seeking a 30% biofuels mix by then.)
Already, it is becoming clear that, going forward, the mix of our fuels will be more diverse. However, we feel a free market will determine the technologies and fuels that work best.
Some industry critics erroneously claim that our industry is “opposed to ethanol” and is doing all it can to discourage its use. Nothing could be further from the truth. Our companies are in the business of producing and supplying transportation fuels, with individual companies following differing strategies and approaches. There is a bright future for the full range of alternative sources.
Our companies have been working hard to markedly increase the ethanol content of the nation’s gasoline pool. Nearly half—46 percent, to be specific—of all gasoline now consumed in the US includes ethanol. Some 4.6 billion gallons of ethanol will be used this year—exceeding the RFS-required 4 billion gallons for 2006. In our view, ethanol is here to stay, and it is a very important part of our nation’s gasoline pool.
Cavaney then went on to argue that reliability in the introduction of a new type of fuel is key, stating that consumers’s first experiences with biofuels should “be a positive one”, and then went on to tackle E85.
We are concerned that some ethanol proponents are focused exclusively on E85 fuel. While the industry does not object to E85 in a free market, so long as it meets standardized technical specifications and is of reliable quality, a national emphasis on increasing ethanol volumes through E85 can prove unnecessarily expensive and risky. If we are to encourage more long-term use of ethanol, we need to avoid surprising consumers with unanticipated problems.
Recently, Consumer Reports put a 2007 US manufactured SUV FFV through an array of fuel economy, acceleration, and emissions tests, and interviewed more than 50 experts on ethanol fuel. Their findings were consistent with EPA’s annual reporting of FFVs running on E-85 compared with gasoline. FFVs operating on E-85 incur a 25-30 percent fuel mileage penalty. In short, their miles-per-gallon rating suffers a 25 percent reduction. Interested consumers need to be aware of these facts before they make their purchase decisions.
Looking at demand, more than 97 percent of cars on the road today are not designed to operate on E85, without risk of damage. We appreciate automakers’ efforts to produce more flex-fuel vehicles. However, given that the current useful life of new cars is in excess of 15 years, it will take decades for significant market penetration of these new flex-fuel vehicles to occur. In fact, EIA projects that FFVs will comprise 6.5 percent of the US light-duty vehicle fleet in 2025, compared with 2.6 percent today.
More than 90 percent of the 169,000 retail gasoline stations nationwide are owned or operated by independent entrepreneurs—typically small businessmen and women. They will decide whether or not to offer E85 to consumers, balancing customer demand with per-station investment and conversion costs that can range from $10,000 to as high as $200,000. This investment hurdle is a major concern to many, since most service station owners will insist on seeing demand aplenty before making this level of investment commitment.
We believe allowing market forces and consumer preferences to determine where and how ethanol is consumed is the most effective and least costly way to integrate ethanol into the nation’s transportation fuels pool.
Cavaney then went on to argue against state ethanol mandates.
Just as the patchwork approach of boutique fuels has made it much more difficult to deal with tight supplies and get fuel to where it is most needed, state ethanol mandates will have the same effect on both our industries. As you know, ethanol cannot be moved by pipeline and requires its own supply chain to serve consumers. That means a longer reaction time between when supply problems arise and when relief fuels can be sourced into the market under pressure. State ethanol mandates will significantly add to that reaction time. This development is bad for both the oil and ethanol industries, and particularly bad for US fuel consumers.
The uniform national RFS enacted last year is a much better alternative. It will integrate more ethanol into the nation’s gasoline pool at concentrations of up to the maximum permissible 10 percent per gallon. It can also be utilized in the entire US automotive fleet without vehicle modifications or fear of engine damage. And, E85 can grow in those locales and instances where it meets regulatory and marketplace demands.
The response from the NEVC was swift.
To have the President and CEO of the American Petroleum Institute making such a big deal of such an infant industry is gratifying and unexpected. The members of the American Petroleum Institute, which made a combined $38 billion in profits last year, may wish to consider investing more of that money in renewable energy such as E85 rather than simply trying to poke more holes in pristine portions of the Gulf of Mexico or Arctic National Wildlife Refuge.—Curtis Donaldson, Chairman of the National Ethanol Vehicle Coalition
The clash is predictable (a GM executive not at all happy with the oil industry’s approach to E85 noted that if someone were trying to take away 85% of his product that he’d resist that too), but also comes at a time when other organizations such as Consumer Reports and Public Citizen are focusing on the current downsides of E85.
Public Citizen in particular is taking Ford to task over what the organization asserts are misleading claims about its flex-fuel vehicles.
Ford is misleading consumers into thinking they are buying efficient and environmentally friendly cars, while taking advantage of a perverse system that rewards car makers for building vehicles that do just the opposite. Ford’s flex-fuel vehicle is grossly misnamed; it isn’t flexible and doesn’t run on alternative fuel.—Public Citizen President Joan Claybrook
Public Citizen, which has for some time maintained to the NHTSA [National Highway Traffic Safety Administration] that the effect of the FFV loophole is to lower the average fuel economy of the overall vehicle fleet, has filed a complaint with the agency against Ford.
Public Citizen maintains that Ford has misled the public about the capabilities of some of its flex-fuel vehicles (2003 to 2005 Taurus and Mercury Sable FFVs) and that the company has thereby escaped as much as $135 million in fines for failing to comply with federal fuel economy standards.
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