RFA President Confident About Ethanol in 2008

E85: Flex-Fuel Vehicles and Infrastructure
Another way of moving beyond the E10 blend wall is by increasing the use of E85 in the United States Fuels matrix. However, critics point out that only 1,300 out of 170,000 gas stations in the United States have E85 refuelling facilities. In addition, only 6 million out of 240 million vehicles are actually capable of running on E85 and most people that have a flex-fuel vehicle are not even aware that they have one. Bob Dinneen has a different perspective on the market for E85.

“U.S. automakers have indicated that by 2012, 50% of their automotives will be flexible fuelled. We purchase about 17 million vehicles per year in the United States. The U.S. automakers have about a 45% market share, which implies that by 2012, you’ll have an additional 4 million vehicles a year coming into the market place capable of running on these fuels. It won’t take very long, particularly if the foreign manufacturers also start producing flex-fuel vehicles before you hit what I would call a critical mass of 10 to 15% of the total vehicle fleet in the US. When that happens it’s going to be a lot easier to go to a gasoline marketer and say, convert one of your pumps. To do so today you’re asking him to convert one of his pumps for less than 2% of his consumer base, and only a fraction of those even realise they have the vehicle. The infrastructure will follow.”
Slow Consumption, accelerated RFS?
Even if flex-fuel vehicle market share would continue to grow after 2012 and the opportunity for higher blends opens up, the fact is that consumption, at a time that such issues are not yet having a significant effect, is lagging behind. Even though the RFA said at the start of 2007 that an expanded and accelerated RFS was not “the only tool in the toolbox” and that it “was not in the way to drive the biofuel agenda forward”, Mr. Dinneen illustrates how this year has been an eye opener in terms of market development. “In the beginning of this year an expanded RFS was probably not our top legislative priority. We wanted to see how the RFS was implemented, we wanted to make sure the market place could adapt to increasing volumes. We also were listening to our customers saying additional mandates aren’t really necessary, we are going to blend your product anyway. Indeed even the oil industry’s main trade association the American Petroleum Institute, had said quite clearly that ethanol markets would continue to develop and that they had recognized the value of ethanol and the mandates were not necessary. Well, quite frankly markets have not been opening up as rapidly as they should and many refiners and gasoline marketers have been leaving a significant amount of money on the table and have not blended ethanol where economics would certainly suggest that it made sense to do so.” The point is clear, a critical part of the supply chain is in the hands of an industry that will be cannibalized by growing ethanol consumption and even with economic incentives provided by the government, they are unwilling to blend the product. Mr. Dinneen probably illustrates his point best by mentioning how one oil company CEO was recently quoted as saying, “we will only blend as much ethanol as the government tells us to”. Subsequently, the RFA’s legislative priorities formulated at the start have now changed slightly. Referring to the oil company’s CEO quote, Mr. Dinnen says “we see that, we hear that, we see what’s going on in the market place and you than begin to think ok, maybe an expanded RFS does make sense.