blend wall

According to Bloomberg, the Obama administration will momentarily announce that current blend limits of 10 percent on ethanol in gasoline will be increased to 15 percent (E-15).  Research has been ongoing on the impact of higher blends on the functioning of vehicles not built to handle higher blends.  Older cars and other types of gasoline-powered vehicles such as boats are believed most as risk.  Access the Bloomberg story here.

The fact that auto companies are still opposing this change is a worrying sign, and supports the idea that the timing of this announcement is political, to strengthen Democratic support in the farm belt.  Pro-ethanol DomesticFuel.com discounts opposition to allowing E-15 blends in all cars as another round of the "usual suspects" opposing any and all pro-ethanol actions.  Yet, there is no obvious reason auto companies should care about what fuels are used in their cars unless they really believe it could cause vehicle problems, driving up warranty repairs and consumer complaints; and driving down brand image. The opponents have submitted their own technical data contrasting ethanol-industry sponsored research that found no problems with E-15 in any cars.  Interestingly, DomesticFuel.com included the Natural Resources Defense Council on its "usual suspects" list, despite many, many years of work by the environmental group to promote expanded biofuels in the US.

When I wrote about the push for higher blends last year, I suggested that many of us are very suspicious that the pro-ethanol lobby is sacrificing the service life of our automobilies (the second largest capital purchase for most people, exceeded only by their home) in the pursuit of higher profits for them.  The industry could address this concern simply and quickly:  by  cutting a deal with manufacturers to buy reinsurance on the existing warranties that would cover any ethanol-related damage that did crop up.  If the risk of vehicle damage is as low as the ethanol industry says, purchasing insurance coverage to protect the manufacturers should be easy and inexpensive.  If the ethanol boosters are unwilling to put their own cash on the line on the issue of vehicle damage, or if the reinsurance policies are very expensive, it ought to be a very big red flag, agruing against rapid allowance of higher blends.

Update:  The final decision allowed higher blends only in model year 2007 and higher, a much better outcome than boosting blend rates for all vehicles, without certainty the higher blends wouldn't damage the vehicles.  A nice summary by Geoffrey Sytles on how this ruling will or will not alter the competitive strategy of the fuel marketing sector can be found here.  As the RFS, expansion of the EPA ruling to more model years, or financial inducements lead to more service stations selling E15, it will be interesting to see how stations prevent owners of more sensitive vehicles from inadvertantly filling up with higher-than-recommended blends.

Ethanol Producer Magazine notes that the "industry optimistically awaits E15 waiver decision."  Faced with market mandates that drive up demand for all the ethanol they produced, but technical constraints on how much they can stick in each gallon of gasoline we buy, the industry has one again worked the political angle on the problem.  The limits on blend rates incorrectly estimated the concentration that would damage vehicle fueling systems, the argument goes.  We can really stick in 50% more ethanol without doing damage.

Here's the rub:  the ethanol industry doesn't own our vehicles, and doesn't have to pay for vehicle damage if they are wrong about their fuel impacts. 

While I'm happy that the Renewable Fuels Association thinks this is the right move, its hard to say their incentives are aligned with that of fuel consumers.  So when even GM, a company that has long promoted high ethanol blends, has concerns about a rapid national roll-out, we ought to pay attention. The American Automobile Association has also come out in opposition, though unlike RFA they collect the same member dues regardless what ethanol blend I use in my car.  Impacts on vehicle warranties also remain unresolved, should the higher blends turn out to damage vehicle systems.  With the US backing warranties on some GM vehicles as part of its stabilization plan for the auto sector, this creates a further complication and potential subsidy to the sector.

If RFA's Bob Dineen and Matt Hartwig were willing to pledge their own houses and future salaries as collateral to pay for any damages to vehicle fueling or emissions control systems, I'd have a great deal more confidence in their support for rapid adoption of higher blending rates nationally.

As an aside, the article mentions 136,000 jobs created, apparently based on this paper.  It is a rare article on any form of energy now that doesn't make some claim about job creation -- good jobs, clean jobs, green jobs.  Maybe not net jobs, and maybe lower than average rates of job creation per million dollars in the US economy in general, but who's counting?  We need some central clearing house to fact check all of these job claims; there is no way they can all be right.  Some general principles on comparing created jobs are also needed: gross versus net; temporary versus permanent; domestic versus foreign; well distributed versus available only in a few parts of the country; rapid rampup versus years in the future.