From: Timothy Gardner, Reuters
Published September 20, 2006 12:00 AM

Bumps on the Road for U.S. Ethanol Vehicles

NEW YORK — Brad Beldon bought a 2007 flexible-fuel Chevrolet Suburban that runs on either gasoline or a mostly ethanol fuel blend, thinking it would be good for the environment.


But Beldon, of San Antonio, Texas, can only find two service stations that carry E85, a fuel made from 85 percent corn ethanol and 15 percent gasoline. Both stations are clear across town, and he said he doubts whether he'd ever buy another flex-fuel car.


"You can only go so far in doing the right thing, but if you can't get the fuel, it doesn't help you much," said Beldon, who owns a roofing business.


What's more, he learned only after buying the sport utility vehicle that while E85 can cost less at the pump, it actually costs 20 percent more than gasoline because its lower energy content cuts fuel efficiency.


Driving flex-fuel sports utility vehicles on E85 15,000 miles (24,000 km) a year can cost consumers an additional $400 per year, according to the Department of Energy.


A recent study of 1,200 consumers by market research firm Synovate found 37 percent of drivers would consider purchasing a flex fuel vehicle, but that more than a third of those consumers lost interest when they learned about the reduction in fuel economy.


To be sure, ethanol is a growing source of domestic fuel that cuts greenhouse gas emissions. This year it has been growing into its role as a 10 percent additive in clean-burning gasoline, replacing suspected carcinogen MTBE.


But experts doubt that E85 will ever develop into more than a niche market, meaning many of the millions of flex fuel vehicles in the United States may rarely run on the corn fuel, if at all.


"If you look at it as a gasoline additive, ethanol has a lot of potential," said A.G. Edwards assistant energy analyst Eric Wittenauer. "As a gasoline substitute it loses all viability."


Wittenauer said that even if all the U.S. corn production had been put to ethanol last year, it would have only displaced about 15 percent of U.S. gasoline. Current production of the fuel replaces only about 3 percent of the fuel.


While U.S. ethanol production has grown to 4.8 billion gallons a year, it needs to grow 30 percent before it saturates the 10 percent gasoline additive market, according to the federal Energy Information Administration.


While Wall Street, Silicon Valley venture capitalists and Midwest farmers have combined to create an ethanol boom, consumers must wait years for some projects to come on line.


CAR MAKER BREAKS


There are about 5 million flex fuel vehicles in the United States. This is largely because government incentives since 1993 have allowed car manufacturers making flex-fuel cars to avoid paying a total of about $2 billion in fuel efficiency fines, according to the Union of Concerned Scientists.


But only about 700 of the 170,000 U.S. gasoline stations offer E85. California has 1 private E85 station, and 13 states, including eight in the East, have none. A lack of pipelines and the need to install new tanks at service stations for E85 make it hard to add more stations quickly.


Environmentalists complain that car markers could continue to get credits for making flex fuel cars, many of them low mileage vehicles, that rarely use the fuel. "This loophole is not going away," said David Friedman, a vehicles researcher at the Union of Concerned Scientists. "Unless something dramatic changes, there will be many more vehicles than there is fuel to keep them filled up."


Charlie Territo, spokesman for the Alliance of Automobile Manufacturers, said the flex-fuels program is needed to boost the number of E85 pumps.


Doug Durante, director of Washington, D.C.-based Clean Fuels Development Coalition, said the industry needs to saturate the gasoline additive market and then perhaps the amount of E85 will grow significantly.


Neither the Department of Energy nor ethanol industry groups are willing to forecast when E85 will become cheaper than gasoline on a national basis.


Fuel production might someday get a boost from cellulosic ethanol, made from plants such as switchgrass and poplar trees, which can grow on poorer land than food crops. But so far it is not being used commercially in the United States.


Whatever the fuel, the price has to be right. "Drivers will leave you for a penny or two a gallon," said Jeff Lenart, spokesman for the National Association of Convenience Stores, an industry group representing shops where 75 percent of U.S. gasoline is sold.


Source: Reuters


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