There appears to be a bit of a tug-of-war between auto manufacturers, agriculture companies and U.S. regulators over how much ethanol should be put into gasoline.
Ethanol, which is derived from corn in the U.S., may move up from a blend of 10 percent to 15 percent. The U.S. Environmental Protection Agency and Energy Department are studying the subject and whether a higher ethanol blend makes sense. However, the EPA has put off deciding on a 15 percent ethanol blend until the fall much to the dismay of companies like Archers Daniels Midland (ADM).
Reuters analyzes the subject. In a nutshell, automakers are against the higher ethanol blend and ethanol producers obviously like the idea. Reuters also concludes that critics against a higher ethanol blend don't have much of an argument. Why? Brazil mandates 20 percent to 25 percent ethanol in its gasoline.
Let's assess a few moving parts from the Reuters story:
- Older cars would struggle with higher ethanol blends.
- Technically new cars could adapt.
- If the U.S. wanted to move to higher ethanol blends it could.
- There would be some costs for the auto industry, which would have to modify production lines.
- Brazil's automakers took four years to adapt to higher ethanol.
The one thing that wasn't addressed in the Reuters article was ethanol's potential impact on food costs. Yes, raising ethanol blends would eliminate a glut of the fuel. However, ethanol could raise the price of corn, which is found in basically everything you eat. In Brazil, ethanol is derived from sugar cane, something the country has plenty of.
. In the long run, ethanol can't compete with the food supply. DuPont said it makes sense to look for ethanol's successor and engineered plants that produce higher ethanol levels.
DuPont’s Tom Connelly, chief innovation officer, said:
There is a widespread recognition that we cannot continue to use more of our grain supply for production and fuel. The competition between food and fuel use for grain is something that must be avoided so you can see that the grain consumption in biofuels production is something we expected to level off or certainly the growth rate will decline.
Shouldn't the U.S. figure out the food vs. fuel issues before raising the ethanol blend requirements?
This post was originally published on Smartplanet.com