In the State of the Union speech, GW Bush mentioned Ethanol as a resource "we" should develop. There's been a big scramble towards Ethanol since. Ethanol has some interesting characteristics, in that it's a liquid fuel that's very compatible with gasoline. Unlike biodiesel, ethanol can be readily burned in a gasoline engine and, in fact, ethanol is widely used today in the U.S. Just watch for a sticker on the pump saying "This gasoline may contain ethanol".
Brazil leading effort to boost ethanol use discusses ethanol production and use in Brazil. During the 1970's the "military dictators" then ruling the country pushed for ethanol production and mandated its use in vehicles. That has turned into a golden spot in the Brazillian economy, and they use ethanol rather than gasoline in nearly half of domestic passenger fuel demand.
Brazil has an interesting advantage with all those sugar canes, in that it's sugar which produces alcohol.
This means the U.S. can't directly replicate what they're doing, we don't have domestic sugar cane production to any great degree. Further, when you mention Ethanol, the corn farmers in Iowa get dollar signs in their eyes, and the corn producer lobbiests have been controlling debate around ethanol.
But I want to gather up some details from the article, so here goes.
The article focuses on one plant that works "around the clock" that is distilling 92,500 gallons of ethanol daily that is trucked away for immediate sale at the pumps. But it can only do this during the sugar cane season, apparently (March to November). This means to cover the period outside that season they'll need fuel storage facilities.
This at the end seems to be a critical point:
In Sao Tome, the cooperative that owns the ethanol distillery is betting on its best profits since it bought the operation in 1993. Cocamar's production cost is $1.10 per gallon, and wholesalers are buying the fuel for $2.68 - up from $1.44 last year.
About the only thing that could hurt Brazil's ethanol industry now would be an almost unimaginable plunge in international crude oil prices, currently trading above $60 per barrel, said Almir Hawthorne, the distillery's industrial manager.
"Oil could drop to $35 or $40 per barrel, and ethanol producers would still make money."
They're making $1.24 per gallon more profit than last year, due entirely it would seem to the high price for oil. If oil prices did drop again it's clear their threshold for gaining a profit is around $40 per barrel. But I wonder if, at that price, they'll make enough profit to get the excitement that's circling around them.
That's been the sticker for most of the alternative fuels, whether their price per unit is less than the price for fossil fuel.
It seems every time the price for oil goes high, the makers of alternatives are in the limelight. Today that's ethanol (of several kinds), fuel cells, biodiesel, wind turbines, etc. Unfortunately when the price of oil drops again, the alternatives become less attractive.
This is simple economics, with the market (in its short sighted decision making) going to the source with the least cost. Another factoid in the article is that Brazil invested years of subsidies in its ethanol production industry. It's paying off now, and in the future Brazil will remain fueled even when the peak oil phenomena hits and oil is no longer available.
The point to that is in the energy industry it takes a very long time to develop alternatives. Brazil is an example, where it took years before their ethanol industry was self sustaining.
If the U.S. decisioning is based largely on the short sighted approach of "oh, the market will take care of it", well, I think the market moves too quickly for the development of new energy resources.
When they say "the market will take care of it" the scenario is that oil supply becomes tight, and the oil price rises, and then people start scrambling for alternatives that are cheaper. And, we're seeing this effect going on today. But when the real oil peak hits the supply is supposed to drop off very rapidly from the peak. That should cause a rapid rise in prices which would trigger the market to search for alternatives. But if it's going to take years to develop the alternatives, and in the meantime oil supply drops precipitously, "we" won't have those years.
I believe the current high oil prices are not the true oil peak, but instead based on the war(s) brewing in the Persian Gulf. Especially with the war we are threatening against Iran.
The current high oil price is making for an interesting training ground, inspiring the people go through the steps of finding an alternative to burning fossil fuels. Last year people were dumping their SUV's and motorcycles were becoming popular. This year they may be looking for ethanol.
I suppose if the oil prices stay high long enough, like they are now, the makers of the alternatives will have a long enough window to establish themselves. Here's hoping.
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