Big Oil Sees Problems with Bush’s Ethanol Pitch

The Oil Daily via NewsEdge Corporation : President Bush is talking up the benefits of E85 – a fuel blend of 85% ethanol and 15% gasoline – and other alternatives fuels in a week-long effort to sell his new energy initiatives to the American people and reduce US oil imports. The Republican-controlled Congress is also showing equal interest in promoting E85 and other alternatives to gasoline.

But major oil companies are cool to E85, questioning its ability to compete with conventional gasoline – at least for now.

After meeting at the White House with key senators on energy issues last week, Bush is traveling across the nation to pitch his energy initiatives announced in his State of the Union address (OD Feb.2,p1).

“There’s a lot of folks in the Midwest using what’s called E85 gasoline – This is exciting news for those of us worried about addiction to oil,” said Bush, participating in an energy conservation and efficiency panel in the Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL). Similarly, speaking in Michigan Monday, Bush said it was “a positive development” that cars and trucks with minor modifications could run on E85.

However, oil companies are wary of encouraging E85 given the current conditions. Exxon Mobil, ConocoPhillips and Royal Dutch Shell made their views known to Sens. Richard Lugar (R-Ind.) and Tom Harkin (D-Iowa) who sought the perspectives of six oil companies to improve the availability of E85 at retail stations.

Shell Oil Co. President John Hofmeister, for one, pointed out that only a few vehicles could use E85. Also, separate storage tanks and dispensers would have to be made available for E85. “In addition, we are concerned that widespread introduction of E85 alongside conventional gasoline grades would further increase supply chain complexity, which in turn may increase vulnerability to supply disruption, especially during times of regional or national crisis,” he said.

Exxon Vice President Dan Nelson said customers were price sensitive and “E85 cannot compete with conventional gasoline at present given the price of ethanol.”

E85’s poor fuel economy performance – at about 75% of the fuel economy, on a mile per gallon basis, compared to gasoline – is a problem, according to ConocoPhillips CEO James Mulva. “We remain concerned that consumers have not been made fully aware of this aspect of the E85 fuel,” he wrote.

The letters only demonstrate the need to increase the use of flex-fuel vehicles (FFVs) capable of using E85, said a spokesman for Sen. Harkin, indicating the interest in Congress to push forward.

Indeed, auto makers Ford and General Motors are welcoming the president’s and lawmakers’ push for FFVs. “We believe focusing on alternative fuels such as ethanol will bring this issue where it belongs – to the forefront of the national agenda,” Ford CEO Bill Ford said in a statement.

Critics, however, are busy picking holes in Bush’s energy strategy, noting that the president is not providing enough money for research and development to make his rhetoric on alternative fuels a reality. The administration initially cut NREL’s budget – which would have laid off several scientists – only to reverse it partially over the weekend in time for the president’s pitch for his new energy initiative.

Source

soyatech.com Feb. 23, 2006.

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