Jun 8, 2008

BW: Ethanol mandates run into the "blend wall" (2007)

The 2005 Energy Bill requires refiners to use 7.5 billion gallons of ethanol per year by 2012. Combined with the existing 51 cents-per-gallon tax credit and soaring oil prices, that provision has triggered an ethanol investment boom. Production leapt to 5 billion gallons in 2006, and the industry will have the capacity to make more than 11 billion gallons by 2008.

The problem: That capacity bumps up against the so-called blend wall. Auto fuel that contains more than 10% ethanol is too corrosive to use in existing gas station pumps. Without new pumps, and cars capable of running on high-ethanol fuel, the U.S. can't use more than 8 billion to 10 billion gallons of ethanol a year.

~ BW, "Memo To Congress: First, Do No Harm; Capitol Hill's rush to promote alternative fuel could yield some damaging legislation," January 29, 2007, by John Carey and Eamon Javers

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