The rapid acceleration in new ethanol plants over the last couple of years has resulted in current production capability reaching levels approaching the 2012 targets of the government mandates. Those mandates were for 7.5 billion gallons. Current production is estimated well over 5 billion gallons. Refineries currently under construction and/or expansion will add another 6 billion gallons of capacity if they are completed and come on line as planned.
By the end of 2006 we had achieved about 1.5% oil energy independence because of ethanol substitution according to the USDA. By 2017, if the massive growth they have forecasted actually arrives, we will be up to 3.7% oil energy independent compared to current purchases. This doesn't take into account the foreign oil used to produce ethanol in all of the various ways it works into the production process for corn etc. but if accounted, it would reduce these percentages by about one third.
Quoted yesterday in the Wall Street Journal (Thursday, October 11, 2007 page A8), "Without new legislation, there will be a 'natural barrier to growth in the industry', " says the legislative counsel for the American Coalition for Ethanol. That will be the quote of the day.
The energy value of ethanol is reported to be between 20-30% less than gasoline depending on the concentration of the mix. Since E85 competes with gasoline at the pump, its price has to reflect this efficiency disadvantage. Ethanol prices have plummeted since July from around $1.90 to near $1.50 as gasoline prices have increased. We are getting near the equilibrium point where ethanol substitution will be economically justified but as this happens, losses are mounting for refineries even with rather massive subsidies they enjoy.
So feed costs up 60%, food costs up 4%-7% and fertilizer prices doubling up nearly as we speak...take solace in the fact that 1.5% less foreign oil is required.
