E85 ethanol will not soak up US output soon – gasoline sellers

17 February 2010 16:26  [Source: ICIS news]

ORLANDO, Florida (ICIS news)--The 85% ethanol blend known as E85 is unlikely to be much help in soaking up US ethanol production in the near term because of lack of acceptance from consumers and retailers alike, officials from two oil companies said on Wednesday.

"Right now the public doesn't want it," said Tom McKinlay, senior vice president for manufacturing at Murphy Oil, which operates more than 1,000 gasoline stations across 21 US states as well as two oil refineries.

Speaking at the National Ethanol Conference in Orlando, both McKinlay and Cliff Cook, senior vice president for supply, distribution and planning at Marathon Oil, cited the challenges of getting E85 into service stations and then getting motorists to buy the flexible-fuel vehicles (FFVs) that can use it.

"The retail issue is one of the biggest issues we face," said Cook, drawing a link between service station operators' concerns over safety and liability issues and car maker Toyota's recent and spectacular fall in public opinion following a massive product recall.

"[Toyota] went from being the number-one car company to where people are now afraid to buy the car because of safety issues," Cook said.

The US ethanol industry has been fretting about the so-called blend wall, which is the looming point at which production of the biofuel will saturate the market for the 10% mix called E10 that is in general use for ordinary vehicles.

Ethanol critics and car makers warn that higher blends, such as the 15% E15 mix that the biofuels industry wants, could damage engines and void vehicle warranties.

Cook said there were simply too few FFVs on the road capable of using E85 to believe that segment could stave off the potential supply-demand imbalance ahead.

One solution could be to take some of the government funding earmarked to support the ethanol industry and direct it into a $200 (€146) tax rebate for FFV buyers, Cook suggested.

Such a move could add 4bn gal/year to ethanol demand in the near term, he said.

Government targets call for 12bn gal of ethanol consumption in the US this year.

Marathon operates seven oil refineries in the US with a combined capacity of 1.2m bbl/day, and owns around 1,600 service stations.

The National Ethanol Conference is sponsored by the Renewable Fuels Association (RFA) and ends on Wednesday.

($1 = €0.73)

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By: Stephen Burns
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