U.S. Ethanol Production Nearing One Million Barrels Per Day

The Energy Information Administration (EIA) reports for August that U.S. ethanol production rose in August to an all-time high, production averaged more than 869,000 barrels per day (b/d). The Renewable Fuels Association who also collects data calculated ethanol demand at all-time high as well at 911,000 b/d in August, up from 734,000 b/d a year ago.

The U.S. is closing in on the million barrel per day milestone. Cheers in some sections, groans in others, but for America, slashing off the equivalent of 750,000 b/d of imported oil is a good thing.

Most groans come from the odd couple of the oil business and the special mis-interests of food vs. fuel. The oil business, god bless’em, are in a quandary – one side is hell bent on doing the business as done for 150 years – another is ready to resist and protect its market and share – another is investing and researching with a realization that every bit of energy in fuel has market and profit potential – and a few have jumped into ethanol grabbing some facility during the ethanol build up bubble for cents on the dollars. Some companies work at some or all of the quandary barriers. Its quite interesting to watch.

The mis-interests meanwhile have a hard time making way, the corn they so love is as a practical matter human inedible – sweet corn its not – while the ultra cheap high fructose corn sweetener of considerable concern in the fattening and obesity of Americans is getting closer to the price of sugar. Factually, sugar whether from corn or sugarcane or sugar beets is still cheap – for food it’s the processing and packaging that costs the big dollars.

The ethanol production effort is having a major impact now on the U.S. balance of payments to foreign countries. The threat of oil embargoes, wars, and the multitude of risks from importing a third of the daily fuel supply are shrinking. The risks are not gone, but the length of the lever has shortened up and is getting shorter.

Lots of very smart people make good, true and compelling cases that ethanol isn’t such a good idea. On the naked face of it they’re right, ethanol competing with $70 oil still has trouble, but so does Gulf of Mexico oil drilling and Canada’s oil sands – two critical sources of oil supply. The case isn’t clear, but the ethanol incentives save taxpayers billions in farm programs to keep protein and starch foods on American and world tables. Exports of the major food commodities, wheat, corn and soy are continuing unrestricted.

At 10% blends ethanol is a slam dunk. Exports of ethanol are also growing – a value added export from simply shipping corn. The big consumers are the Netherlands where major refineries operate, Mexico whose market and vehicles track a few years after the U.S. and Brazil of all places are taking undenatured, or not despoiled product for non beverage use that came to a small 12.5 million gallons for the month of August. Our northern neighbors took up 10.5 million gallons denatured for fuel use. The UK and Jamaica round out the major importers of American production.

Still, the exports come to only about 2.5% of production.

Yet the huge gain comes from that not imported oil or semi finished gasoline from foreign lands.

Say what you will, but the U.S. has a huge import bill to work off and ethanol is shrinking and has shrunk it down.

On the consumer side the auto manufacturers are still trying to be all things to everyone. E-85 in particular and EPA problems might have a role in getting the thermal efficiency up with higher engine compression. From Gale Banks of the hot rod world to MIT the lure of ethanol’s ability to revamp engine design is a powerful opportunity to recover the “lost” mileage than many find easily with an engine compression boost or careful Flex-Fuel vehicle choice. E-85 works, but getting the payoff, the lower per gallon prices with more mileage and power is still an aftermarket project.

This writer is looking for a Flex-Fuel used vehicle out of warranty just to get an engine that could be uprated for ethanol and save some fuel money and gain some extra power. E-85 is readily available where this writer lives. It’s an opportunity with considerable savings, both in investment and operating costs, but the choices are still vague. Engine modifiers and aftermarket suppliers take note . . .

Many that I admire diss ethanol, but views held narrowly make fine cases, while views held broadly are more difficult to make. 750,000 b/d comes to about $60 million a day, every day. Over a few years, and more growth is coming, ethanol will payoff better than understood today.

By. Brian Westenhaus

source: oilprice