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Ethanol’s glow bedimmed

“Everyone’s in love with corn,” a grower observed earlier this year about 2007 Mid-South crop prospects (and before droughty planting conditions and late freezes took some of the sheen off).

The raison d’etre for the love affair is, of course, ethanol; everybody and his brother seem to be jumping on that bandwagon, with dozens of new plants under construction or on the drawing boards, and existing plants being expanded.

Which leads one to wonder: What’s going to be done with all that ethanol?

Aside from what’s being used to replace MTBE in gasoline blends, and the meager number of stations (mostly in Midwest states) selling E-85, it’s still very much a petroleum-dominant world for U.S. vehicle owners.

An E-85 Web site trumpets that between 2003 and 2006 there was a 500 percent increase (!) in the number of stations selling the 85 percent ethanol/15 percent gasoline blend. Impressive as a percentage, all right, but the perspective is somewhat different when one notes that the 500 percent represented an increase from 200 stations in 2003 to 1,200 in 2006 — still spit in the ocean in terms of 168,000 gas stations nationwide.

The Web site shows no E-85 stations in Mississippi or Louisiana, only one in Arkansas, just four in Tennessee. The nation’s most populous vehicle state, California, has only four; New York only two. Minnesota, in contrast, has 300.

So, there’s a long, long way to go before ethanol will have any impact on most drivers’ fuel purchases. Progress will depend on infrastructure: trucks to move it, tanks to store it, pumps to dispense it, and very importantly, the cooperation of Big Oil in furthering the cause.

A recent Wall Street Journal headline summed it up pretty well: “Fill Up With Ethanol? One Obstacle Is Big Oil.”

The article noted: “Although some oil executives voice enthusiasm for alternative fuels, oil company policies make it harder for many service stations to stock (E85) … Oil companies lose sales every time a driver chooses E85, and they employ a variety of tactics that help keep the fuel out of stations that bear their company’s name.”

If you were the CEO of Exxon-Mobil, raking in billions of dollars in profits from gasoline, how accommodating would you want to be toward a product you didn’t control and that could diminish your burgeoning revenues?

So, although the government is providing a substantial per-gallon subsidy for ethanol to be produced, it has done precious little toward encouraging infrastructure for getting it to the consumer.

As if all that weren’t challenge enough, the NIMBY (not in my back yard) factor is coming into play as more and more citizen groups are opposing ethanol plants in their communities for a wide variety of reasons. There is opposition also to giving plants state/local tax credits.

And anti-ethanol editorials abound. This from Investors Business Daily as an example: “By heavily subsidizing … ethanol … Congress has, in effect, enacted a tax hike.” Also it said, higher meat prices as a result of more costly corn-based animal feeds mean the taxpayer “subsidy for ethanol has become a tax on food.”


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