The Hindu Business Line : Exploring ethanol

"Great explorers that you are, you must give me a viable solution for the fuel crisis," the Almighty declared to Vasco da Gama and Christopher Columbus. He went on, "America consumes around 300 billion gallons of oil a year. This is in spite of many manufacturing jobs going to China and India and its population being much less.

"One main reason why the US needs more oil is because of the number of gas-guzzlers it produces and its poor fuel efficiency...Go to earth and find out what alternative sources of technologies are in the pipeline."

First voyage

Columbus suggested, "Let's go to the country that is least dependent on the Middle-East for oil."

Vasco da Gama did some research and declared, "Then, we should go to Brazil."

They found themselves at a gas station in Brazil. One sign read, `E85 pump.' They asked in his native language what it was. He replied, "This is an ethanol-based fuel. This is the reason our country achieved oil independence. We celebrated this freedom on April 20, 2006."

Vasco da Gama mused, "I remember the time when Brazil imported more than 85 per cent of oil. How did the change happen?"

The well-informed attendant said, "Well, in 1973 when the Middle East oil embargo sent gas prices soaring, Brazil was on the verge of bankruptcy. But then the country not only made progress in finding oil in its local oil wells, but also accepted ethanol as a substitute for oil. Today, more than 40 per cent of fuel that is being used by Brazilian cars is ethanol. No other country can come close to Brazil for effective usage of ethanol-based fuel.

"In fact, instead of blending ethanol with gasoline, Brazil uses ethanol as a mainstream fuel. We made big progress converting sugarcane into ethanol and requested vehicle manufactures to manufacture cars and SUVs that can use regular oil as well as ethanol.

"These vehicles that run on gasoline or ethanol or any combination of these two are called flex fuel cars. This lowers our country's economy by not depending on foreign oil. It also helps many people to get back to farming, as more feedstock is needed to produce ethanol to satisfy the nation's fuel."

Second voyage

During their journey to North America, the explorers talked among themselves. Columbus said, "Ethanol is basically alcohol produced from feedstock. Feedstock is basically raw material required for an industrial process. The most common feedstock for producing ethanol in the US is corn. So, I think the answer lies there."

Vasco da Gama seemed to agree. "Yes. I think the dependence on oil can be greatly reduced by blending ethanol with regular gas. Why not we stop at a gas station and suggest this?"

In New York, a gas attendant to whom they mentioned the idea told them: "Ah, your solution has already been researched here. True, you can blend ethanol with regular gasoline and supply as a fuel. The percentage that is allowed to be mixed and sold in regular gas stations is 15 per cent. Thus, when you go to the gas station and fill your car's tank, it gets filled with 15 per cent ethanol and 85 per cent unleaded gas. Even though this reduces the dependency on gas to some extent, still the country has to get foreign oil."

Columbus argued, "I think ethanol has many advantages like less pollution, is renewable and uses local production from farm land."

"But, Columbus, we have overlooked one major disadvantage," Vasco da Gama interposed. "Ethanol cannot be transported via pipeline owing to its volatility."

"That's true," said the gas attendant. "As of now, the fuel is transported by trains. America's land is quite vast and only in mid-west farming is popular — places like New York and Atlanta don't have major lands to produce corn. Making the entire nation use ethanol-based fuel might remain a distant dream. In addition, there are around 2,00,000 gas stations that sell gas for the retail market whereas there are only 585 pumps that supply E-85 fuel. However, most of these gas stations do price ethanol-based fuel and regular gasoline very differently. Thus, consumers are not motivated to replace their cars."

Columbus didn't want to give up the ship. He asked, "What if everyone in US buys flex fuel cars?"

Vasco da Gama replied, "I think even then the country is projected to produce only 7.5 billion gallons of ethanol-based fuel by 2012. Compare this with 300 billion gallons of gas that is needed annually. Even though 7.5 billion might make a small difference. It is still not sufficient to lessen the dependence on foreign oil." When the explorers presented themselves before the Almighty once again, He said with a smirk on his face, "So?"

Vasco da Gama said, "We found out that the use of ethanol helps the nation to lessen its dependence on foreign oil. In addition, since it comes from sugarcane and corn, the renewable fuel helps to keep the environment clean. Even though Brazil achieved its energy independence from foreign sources by effectively producing sugar and converting it to ethanol, it is really impossible to predict whether ethanol alone can be a saver for the rest of the world."

Columbus, for his part, said: "There are a few companies that are already big in producing ethanol-based fuel. This is expected to make a big difference in the future. Such companies include Pacific Ethanol (PEIX) and Archer Daniels Midland (ADM). These companies produce ethanol and supply across various regions.

"I should warn, however, that it is hard to predict whether ethanol would be like the dotcoms of 1990s or really an alternative energy. Investors have a hard time getting the answer. The PEIX stock went from $10 in January 2006 to $40 by May. However, after May it started coming down and now stands at $22."

The Lord said, "Columbus, you went to look for India, and discovered America. Now you went to look for oil independence and have come back with an investment option. Always you end up discovering something great."

The authors are publishers of www.wisepen.com

Racy@TheHindu.co.in

More Stories on : Non-conventional Energy | Racy Cases

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
West Asia crisis

Exploring ethanol

What to do when child labour is the means of a family's subsistence?

An unending tale?

Conversion of arrear interest into loan

Taxability of commission income

People make the difference

CFA, a better bet

Qualities of a leader

Just Do IT

Is there any safety net for small investors?

Do you have an HR auditor?

Attitude plus behaviour = goal