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By Staff | Jan 25, 2013

Cutting to the chase on ethanol opposition, the entire controversy is between a new producer attempting to break into a market controlled by traditional producers.

The old guys own the market, or think they do, and have no intention of sharing it. Ethanol could sell for a nickel a gallon and they still would do everything they could to deny consumers market access to it.

The petroleum industry is seeing its market shrink as vehicle fleet mileage improves and transportation technologies evolve. On top of this, the ethanol industry displaced 10 percent of gasoline ostensively as an oxygenate to replace MTBE poison.

The Renewable Fuels Standard sets the course toward 20 to 25 percent of U.S. motor fuel consumption being met by ethanol by mandating 36 billion gallons of production.

The RFS is a knife poised at the gut of the petroleum industry and they are aggressively pushing back with their considerable resources and talent at shaping public opinion. They have mounted an extensive campaign to discredit ethanol.

Ethanol may cost consumers and taxpayers less, produce American jobs and allow us to retire aircraft carriers from cruising the Persian Gulf, produce clean air and sing “God Bless America” when it goes in the fuel tank – and the petroleum industry is not going to care.

They will lie, cheat and pay politicians to stop the RFS and block E-15 because that is exactly what they are doing. They care only about one thing, defending their share of the motor fuel market at the gas pump. The corn-based share of the RFS is 15 billion gallons at the max and the industry is producing over 13 billion gallons, almost there.

U.S. gasoline is limited to a 10 percent ethanol blend and E-10 demand has maxed out before the 15 billion gallon RFS has been reached.

We need to go to E-15 to have the consumer access to consume more ethanol to meet the corn-based RFS and to expand the ethanol market to accommodate advanced biofuels. They call this the blending wall.

There is absolutely nothing wrong with E-15, they use E-25 in all vehicles in Brazil, but the petroleum industry has done everything that it can to conjure risk in E-15 as a roadblock to defend their market share. The opposition to E-15 is commercially motivated and the arguments against E-15 are totally fabricated and contrived.

The oil industry has a lot of influence and skill at manipulating everything from the AAA to politicians to try to influence the Environmental Protection Agency. The difference between E-10 and E-15 is another 5 percent loss of market share of the motor fuel market for Big Oil, so they threw up every road block to E-15 that they can think of.

So far, they have had only limited success as they have slowed, but not stopped E-15 and blender’s pumps because the EPA has given limited clearance of E-15. They have challenged E-15 in the courts, lost, appealed and lost again. Federal judges are harder to buy than politicians.

The Grocery Manufacturers Association led the lawsuit against E-15 absolutely worried to tears that consumers may be damaged by ethanol. Yeah, like they care about which fuel we can buy. They have other motivation.

While the cellulosic ethanol RFS means nothing to the GMA, it is the stick poking the eye of the American Petroleum Institute. Tom Waterman, editor of Ethanol Monitor, noted, “There is a reason Big Oil is trying to unseat the RFS – they are very worried. When cellulosic ethanol production becomes a reality – this year in fact – it will be too late as Americans and politicians will have a front row seat – and the tide will have turned.

“Concerns about E15 have driven a campaign from Big Oil to impede in every way possible, any increase in ethanol use, in order to protect its monopoly. All that comes from Big Oil representation is how America doesn’t need biofuels to be energy independent – just fossil fuels.

“But E-15 is not the biggest concern – no, that’s reserved for advanced biofuels, and the impact it would have on oil consumption – particularly gasoline. It removes one of the biggest obstacles and arguments used against biofuels – the impact on food prices.”

“Despite a global recession, the cellulosic biofuels industry now has facilities and projects under development in more than 20 U.S. states representing billions of dollars in private investment. Enzyme costs are down 80 percent in the last decade and cellulosic biofuels are being produced for $2 per gallon or less today. The cellulosic biofuels industry has reached the commercial deployment phase.”

Cellulosic advanced biofuel commercialization is progressing to the degree where it is starting to look like it will amount to something. POET and DuPont are moving ahead with corn stover plants. Cellulosic ethanol will soon be coming to market in commercial quantities.

The EPA may have to modify the RFS to accommodate the pace of development, but not like the oil industry wants. The petroleum industry is likely to get desperate and shrill in their opposition to ethanol as every gallon of ethanol produced displaces a gallon of gasoline and 36 billion gallons is alot.

Congress reauthorized the $1.01 per gallon advanced biofuel subsidy in the fiscal cliff package and that will be a carrot to new production.

The petroleum industry will continue to beat the biofuel industry with as big a stick as it can find.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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