Categorized | Hot Sector Spotlight

The Ethanol Fraud

While the viability of the electric car is still heavily debated, the other attempt to reduce our dependency on foreign oil is making news again. And the news is not good.
Ethanol fuel currently comprises up to 10 percent of a gallon of gas. There is a movement underfoot, primarily led by 54 ethanol manufacturers, to increase this to 15 percent per gallon. This request is based on the current government mandate that 10.5 billion gallons of ethanol be blended into gasoline this year, and rise to 36 billion gallons by 2022.

Look at it this way: there likely won’t be enough demand for that many gallons by 2022 at the current 10% blend, so the only way to reach the target is by increasing the blend to 15%, perhaps 20%.

If it were only that simple.

Already, there are numerous reports of engine failure due to ethanol blends that are higher than 10 percent. Simply put, existing engines are being destroyed at a 10 percent blend. A higher blend will accelerate the process. The other big problem: auto manufacturers’ warranties cover fuel blended with up to 10 percent ethanol. Increasing the blend to 15 percent will void all factory warranties, and rightly so.

But here’s the real rub: just a little over a week ago, the Obama Administration proposed raising mile-per-gallon requirements by 2016. This would raise the required fleet average from the existing 27.5 to 35.5 mpg. Cars would see the biggest increase in fuel economy, from the current requirement of 27.5 mpg standard to 39 mpg in 2016. Light trucks would see the requirement rise from the current 24 mpg to 30 mpg.

The problem with all of this is these requirements are to be met by 2016, in the middle of the timeframe to increase the use of ethanol in a gallon of gas (remember, 36 billion gallons by 2022).

The problem is that ethanol is less efficient that gasoline!

A gallon of E85 (85 percent ethanol currently used in “flex-fuel” vehicles) has approximately 27 percent less energy than a gallon a gasoline, according to drivingethanol.org. This translates into a 10-25 percent loss in fuel economy.

So on one hand, the government is requiring that more ethanol be blended with gasoline by 2022. This will undoubtedly lead to lower fuel economy. On the other hand, the President just proposed a major increase in fuel economy be in place by 2016.

Time will tell how this plays out. But I hope that the increased fuel standards take effect and we can finally end the ethanol fraud.

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This post was written by:

Christian Hill

Christian Hill - who has written 104 investment articles on Investors Daily Edge.


Christian is the resident Research Analyst for Investor’s Daily Edge.  He attended Eastern Michigan University, where he graduated Cum Laude with a Bachelor of Science degree in Finance.  After college, Christian spent the next 5 years in the mortgage industry before serving a short stint with The Street.com.  The experience with The Street reinvigorated Christian’s infatuation with the market and led him to his current position with Investor’s Daily Edge.    Christian was born and raised in Michigan and a few years ago he decided that he had enough of the Midwest’s cold winters and short summers. When the opportunity to relocate to the warmth of South Florida presented itself, there was no turning back.


13 Responses to “The Ethanol Fraud”

  1. Bode Oladuja says:

    Do we now be skeptical about the workability and the efficacy of ethanol as a major subtitude for fossil fuel?

  2. Peter Lecoq says:

    Germany tried ethanol (E10) a couple of years ago, but abandoned it after only 3 months. Why? The German citizenry was up in arms because the ethanol fuel content was befouling the fuel injection systems of their automobiles to the extent that suddenly there were too many cars broken down on the highways and a paucity of wreckers to service and attend to the increase in derelict vehicles.

    I have a Mercedes, and ever since the advent of E10, I’m constantly having to insert chemical additives to my gas tank in order to keep the fuel lines, injectors etc. clean. Moreover, I have begun replacing the fuel filter every 3 months.

    • Rod says:

      The E10 is cleaning the junk out of your system. If it had ben there from new it would not have the problem because you would not have all the gunk inthe system in the first place.

  3. Rod says:

    Hey before you start bashing ethanol you need to get your facts straight. It may have somewhat less energy than straight gasoline it actualy burns more complete. I don’t know the exact figures,but that factofsets a lot of the btu jumbo. E85 is 85% ethanol not 15%. I have 2 pickups that have nearly 200000 miles each on them and have always ran E10 in them and not an ounce of trouble. It will clean the fuel system out and if you have been running straight gasoline for long enough may plug some filters for awhile due to the gunk it is cleaning out of the system. After it is cleaned out the problem will be gone. If want to advise people about things like this please get yourself educated BEFORE you start bashing something YOU obviously de not understand or know much about.

    Sincerly
    Rodney Sansom

  4. Christian Hill says:

    Hey Rodney,

    Thanks for writing in. You are correct, E85 is 85% ethanol, not 15% ethanol. I made a revision to the article.

    However, I think you are overlooking the main point of the article. The intention was to point out that the current Administration is putting itself in a no-win situation. On one hand, they have mandated that more ethanol be blended into gas, which evidence shows reduces gas mileage. At the same time, they have mandated increased fuel economy starting in 2016. They can’t have both.

    Christian

  5. Gene Roberts says:

    I know about the no win with E-10 and E-15. What I want to know about is why no one is talking about Hydrogen!! Is it to cheep and will put to big a dent in big oil’s pocket?? Is it to powerful and give us better milage?? What is the answer to why no one will talk about Hydrogen?? I would like a senseable reply!!

    Gene

  6. gerry says:

    The whole ethanol-as-automobile-fuel story is a lot of political nonsense.
    First of all, the basic chemical reaction of fermentation
    ( formulated by Lavoisier in 1798 ) for creating ethanol results in half of the raw material (sugar/starch) being turned into CO2, the very hothouse gas we’re trying to minimize.
    Secondly, the food value of the grain used to produce a single car fill-up could feed a person in the developing world for 6 months.
    ( 2 billion people go to bed hungry every night ).
    What happened to American ingenuity? Where is the new “Manhattan Project” when it is really needed?
    Einstein was right: the only thing that is infinite is human stupidity.

  7. Francisco Salles says:

    It is recommended to look to Brazil’s experience. Most of the cars here are “fuel-flex” meaning they operate at 100% ethanol or 100% gas and any blend in beteween. Hydrated Ethanol costs typically 70 to 80% of gas, but has about 15 to 20% less efficincy mpg. We can choose at the gas station depending on the relation gas / ethanol, which varies along the year, it brings a good option for the users. Regarding effects on engines, we had this problem 15 or 20 years ago. At that time, car companies did not want to produce ethanol cars. They had later to follow this trend, and nowadays there are no major differences between gas or ethanol regarding maintenace or other issues.

  8. Bruce says:

    Christian, you only touched on the tip of the ethanol iceburg! It has a lower energy content, there is almost as much or more energy used in its production as you get out of it, and we the taxpayer are subsidizing its production while causing corn prices to go up, increasing the cost to farmers of feed grain for animals. Brazil produces far more efficiently from sugarcane, but the US puts a big tarrif on Brazilian ethanol, efectively excluding it, because of our farm lobby. Ouch. Distortions of reality abound, but politicians shun reality for local votes, sadly.

  9. Hello Christain,
    Your article is very pertinent in the Indian context since our government is proposing to increase the allowable adulteration from 5 to 10 %.
    I have taken the liberty of republishing verbatim the article under your name in our blogs.
    I hope you will not mind.

    Radheshyam

  10. Sohan says:

    I am sorry to point out that ethanol & its manufacturers are being crticized here without knowing the facts. My students have worked on alternate fuels for the last 29 years. The first student in 1980 or so worked on the use of 100% ethanol as fuel in an existing I.C. engine. There were problems after short term trials. We had to modify and change rubber gaskets and other plastic parts in the engine to complete successful trials. However now we know that in Brazil I. C. engines are running on 100% ethanol becuae it is cheap there and they do not have to depend upon the imported crode oil to make liquid petrol(gas). Government is supporting the industry. It is therefore not a bad idea, if we follow a developing country like Brazil to manufacture alcohol from sugarcane, beet roots and or crop residues to become self sufficient in energy. The auto manufacturers in USA should be encouraged to manufacture & market ethanol compatible I. C. engines for use in cars & other stationery energy heneration applications.

  11. Steve says:

    The debate about Ethanol as a fuel was with society when Henry Ford was producing the Model – T, it had the ability to run both hydrated Ethanol (what they use Brazil) and Gasoline.
    The business as usual approach, does nothing to solve today’s problems which society faces, therefore we need to move forward to solutions. Humans are the tool makers, we have the ability to use many fuel sources. Fossil fuels are regarded as conventional, however, they have relative short history and more importantly extremely short future when compared with biofuels.

    The Sun is the largest producer of energy currently we have available, the forms it takes are many, Solar heating, Photovoltaic, Wind, Hydroelectric, Biofuels and Fossil fuels are all a result from solar energy hitting the Earth. All which have their pros and cons, however, the latter is the only finite resource.

    One of the best ways in which we can reduce our energy needs is to improve fuel economy with smaller, lighter vehicles, and now these vehicles have growing market demand.

    The use of ethanol and other biofuels is the best short to medium term alternative to gasoline as it can utilize current gasoline infrastructure and very small modifications needed to vehicle in production, many car producers having made this change years ago.

    The REAL Ethanol fraud is the fact we have waited so long before using more of it.

    Regards
    Steve

  12. Igor Pilot says:

    While your article is correct in its general argument, you have poor understanding as to why ethanol leads to worse gas mileage. Because of article like this one, general public gets wrong information.
    Ethanol has less energy per unit of weight as opposed to gasoline. That is correct. But this has nothing to do with the loss in the fuel economy. The 20% or so loos in the fuel economy happens because of physical properties of ethanol — the combustible mixture simply requires more ethanol in order to burn as opposed to gasoline. During idle and cruise operation for example 14.7 parts of air to one part of gasoline is required. At the same time only 9.8 parts of air is required for ethanol, therefore increasing the amount of ethanol spent.

    Regards,
    Igor

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