Consumers Shall Lead Them?
Published in CSP Daily News
Ethanol producer says motorist demand will drive E15 acceptance by retailers
SIOUX FALLS, S.D. -- U.S. drivers looking to save a few pennies per gallon on fuel will push retailers to sell gasoline with higher levels of ethanol, the CEO of major U.S. ethanol producer Poet LLC said, according to a Reuters report. Retailers are not so optimistic.
The U.S. Environmental Protection Agency (EPA) on Wednesday approved the use of 15% ethanol (E15) in gasoline for vehicles built in 2007 and later, up from current levels of 10%.
Analysts said E15 will not be quickly adopted in the market because fuel retailers see too many costs and liabilities associated [image-nocss] with selling the fuel.
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The EPA will also approve by the end of the year E15 for vehicles built from 2001 to 2006, producers say, which could expand the market for alternative motor fuel made mostly from corn in the United States.
Valero Energy Corp, a top U.S. oil refiner which also makes ethanol, said it is hard to imagine any retailer selling the fuel without liability or warranty protection.
A CSP Daily News poll yesterday asked, "E15: Good or bad for the retail motor fuel/convenience store industry and your business?" Of the more than 100 respondents, 68% said "bad for the industry, bad for my business"; 15% said "it makes no difference either way"; 9% said "good for the industry, bad for my business"; 5% said "good for the industry, good for my business"; and 4% said " bad for the industry, good for my business."
Jeff Broin, CEO of Poet, a privately held company, told the Reuters Global Climate & Alternative Energy Summit on Wednesday that the higher blends will be cheaper on average than 100% gasoline. "We expect E15 to be a good value for consumers that will drive its adoption by retailers," he said. "If the consumer can save a few cents a gallon at the pump, we think that that will help drive the market."
He said "mom-and-pop filling stations" that are not owned by big oil companies and are located in the U.S. Midwest, the center of ethanol production, could become the early adopters of E15. Once gasoline stations owned by big companies see the demand, they too will sell the fuel in larger markets, he claimed.
Despite a recent surge in corn prices, Broin was confident that average ethanol prices will be cheaper than gasoline over the long run. "Today we have a short-term run up in the price of grain," Broin said. "Over the long term, we believe that ethanol will continue to be a value for consumers, just as it has in the past."
Fuel retailers said they would be forced to sell E15 at a cheaper price than E10 because cars get worse mileage on the higher-blend fuel.
But Broin claimed that the higher octane levels of ethanol mean that there is little, if any, change in fuel efficiency between the blends.
Analysts said ultimately the government may have to determine if the fuels should be sold at different prices.
Broin said ethanol should be cheaper than gasoline in coming years, even if better economic times increase demand for grains, because corn yields are improving. He expected them to double over the next 20 years.
In addition, ethanol producers are coming closer to making commercial amounts of cellulosic ethanol from waste such as corn cobs and husks, which could keep a lid on biofuel costs, said the report.