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Why does Ethanol additives cause gas prices to rise?

Posted on 04/27/2006 11:21:18 AM PDT by John Geyer

Edited on 04/27/2006 11:47:26 AM PDT by Admin Moderator. [history]

I would assume that ethanol, being produced by fermenting American grown corn into a useable fuel, would make gas cheaper, not more expensive. Instead of making the price of gas rise, I would believe that it would fall because we are using a renewable, home grown form of fuel. I guess I'm an idiot for not understanding the reasons behind this, but I ask for someone with more experience to explain it for me. I was telling my father how ethanol would make gas cheaper, and now I feel like a complete moron. Help me understand.


TOPICS: Your Opinion/Questions
KEYWORDS: energy; ethanol; gasprices; metalkpretty1day
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1 posted on 04/27/2006 11:21:20 AM PDT by John Geyer
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To: Admin Moderator

How=Help


2 posted on 04/27/2006 11:21:50 AM PDT by John Geyer
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To: John Geyer
Why does Ethanol additives cause gas prices to rise? ^

They does?

3 posted on 04/27/2006 11:23:54 AM PDT by Maceman (Fake but accurate, and now double-sourced)
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To: John Geyer
The answer is complicated, but the short version is that it takes more energy to produce Ethanol then Ethanol itself gives back in the form of fuel.
4 posted on 04/27/2006 11:24:20 AM PDT by Pukin Dog (Psst. Hey, do you know anything about roofing? You're illegal? Damn! Now, did I ASK YOU?)
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To: Pukin Dog

Oh, so it's a lot like hydrogen powered cars and such.


5 posted on 04/27/2006 11:25:06 AM PDT by John Geyer
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To: John Geyer
The Gasoline companies charge high prices

Because they can.

6 posted on 04/27/2006 11:26:17 AM PDT by ASA Vet (Those who know don't talk. Those who talk don't know.)
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To: John Geyer

There are several reasons that costs are higher with ethanol-added reformulated gas.

The market for the ethanol-added gasoline is not large - primarily the Midwest - and only a handful of refineries in the region are even producing ethanol.

Ethanol cannot be transported via petroleum pipelines because it tends to soak up water. It is typically transported by tanker truck, which limits the regions where it will be used.

Ethanol evaporates more quickly than other additives, so it must be mixed with low-volatility gasolines to meet government standards. These low-volatility gasolines are more expensive to make.


7 posted on 04/27/2006 11:26:27 AM PDT by nhoward14 (I am an engineer. If it ain't broke, it ain't got enough features yet.)
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To: John Geyer

Then why is ethanol gas in Iowa 20 cents cheaper than the "real" stuff in Illinois?


8 posted on 04/27/2006 11:27:27 AM PDT by sarasota
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To: nhoward14

see #8.


9 posted on 04/27/2006 11:28:07 AM PDT by sarasota
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To: nhoward14

I love your tag!

TT


10 posted on 04/27/2006 11:28:16 AM PDT by TexasTransplant (NEMO ME IMPUNE LACESSET)
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To: sarasota

transportation costs + taxes


11 posted on 04/27/2006 11:28:40 AM PDT by nhoward14 (I am an engineer. If it ain't broke, it ain't got enough features yet.)
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To: John Geyer

Because we allow it to.


12 posted on 04/27/2006 11:29:01 AM PDT by HEY4QDEMS (Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.)
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To: John Geyer

The problem is the DEMAND for Ethanol. Big Oil is bidding the price up (and if I were REALLY cynical, I'd think this is a consipiracy to price Ethanol out of the market and to force the hands of those states who have outlawed MTBE, which is a known carcinagen).

The assumptions you've made would be correct under ordinary circumstances. Unfortunately these are not ordinary times.

Similar things will occur when domestic hydrogen automobiles are introduced.

Big Oil companies had a 19% increase in profits last quarter, they intend to keep it that way. The easiest way is to force Ethanol out of the competition and to create ill will against Ethanol at the same time.


13 posted on 04/27/2006 11:29:11 AM PDT by Iowa Granny (One size fits all panty hose generally DON'T)
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To: Pukin Dog

This is no longer true. You get more out of ethanol than you put in, but the balance is not overwhelmingly positive. It is not equal to the balance you get from drilling oil, for example.

The real reason prices rise with the addition of ethanol is that ethanol is more expensive to make than gas (though the energy balance is positive), and it is much more difficult to transport and store. Until ADM and others can ramp up ethanol production to meet demand and the oil companies get off their lazy bums and develop a distribution system for ethanol, you'll see shortages from production and distribution. Combine that with general market panic, and prices rise....


14 posted on 04/27/2006 11:29:45 AM PDT by eraser2005
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To: sarasota

I forgot another +

+ Illinois boutique gas formula requirements due to EPA Clean Air regulations.


15 posted on 04/27/2006 11:29:50 AM PDT by nhoward14 (I am an engineer. If it ain't broke, it ain't got enough features yet.)
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To: John Geyer

1. I think I heard the cost of the switch from MTBE to ethanol in the refineries has something to do with what you're seeing. But, since I'm in flyover country where MTBE has never been used, I haven't paid much attention to it.

2. It could be that the supply of ethanol cannot keep up with the sudden increase in demand. I do know many new ethanol plants are currently in various stages of planning/construction.


16 posted on 04/27/2006 11:29:52 AM PDT by newgeezer (Just my opinion, of course. Your mileage may vary.)
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To: sarasota

Because it is subsidized by the federal government.


17 posted on 04/27/2006 11:29:56 AM PDT by TFMcGuire (Either you are an American, or you are a liberal)
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To: sarasota
Then why is ethanol gas in Iowa 20 cents cheaper than the "real" stuff in Illinois?

You really need to ask that?

It is the same reason that Strawberries are cheaper in California, and Oranges are cheaper in Florida. Come on!

18 posted on 04/27/2006 11:30:25 AM PDT by Pukin Dog (Psst. Hey, do you know anything about roofing? You're illegal? Damn! Now, did I ASK YOU?)
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To: Iowa Granny

Gas companies pay a royalty to ARCO for MTBE - that lawsuite cost us at the pump years back - now that MTBE is being taken out, we should have a reduction in gas because that fee is no longer paid for that additive.


19 posted on 04/27/2006 11:31:05 AM PDT by edcoil (Reality doesn't say much - doesn't need too)
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To: eraser2005
You get more out of ethanol than you put in

Not true. I know what studies you might be referencing, and they do not take into account some of the refining, shipping and multiple 'cocktail blending' costs.

20 posted on 04/27/2006 11:32:07 AM PDT by Pukin Dog (Psst. Hey, do you know anything about roofing? You're illegal? Damn! Now, did I ASK YOU?)
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To: John Geyer
Other problems is that ethanol loves to mix with water (hydrophilic), unlike gasoline. Therefore it is harder to handle and ship. If you mix some water in with gasoline, they will naturally separate. To get water out of alcohol you have to redistill it.

Next, I don't think anyone has built ethanol pipelines yet, so ethanol has to be trucked to where it is used which costs more than just piping it.

Finally, anytime you change what goes into gasoline, refineries and shipping points have be shut down to handle the change over. Since refineries are running at close to 100% of their rated capacity already, there isn't any capacity to pick up the slack during changeover. That causes price increases and shortages.

21 posted on 04/27/2006 11:33:38 AM PDT by KarlInOhio (Congress, since you only understand Spanish here is my proposal: ¡Amnistía, no! ¡Deportación, sí!)
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To: sarasota

It also isn't cheaper when you consider it knocks mi/gal down by about 25%.


22 posted on 04/27/2006 11:34:51 AM PDT by TFMcGuire (Either you are an American, or you are a liberal)
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To: John Geyer
Refining.

You can't stick corn cobs in your engine can you?
23 posted on 04/27/2006 11:35:03 AM PDT by Red6
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To: John Geyer

Why would making something here necessarily make it cheaper?


24 posted on 04/27/2006 11:38:27 AM PDT by Brilliant
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To: Pukin Dog

See #17.


25 posted on 04/27/2006 11:38:46 AM PDT by sarasota
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To: TFMcGuire

I didn't know this. Got a link to a source?


26 posted on 04/27/2006 11:39:27 AM PDT by sarasota
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To: John Geyer
http://www.freerepublic.com/focus/f-news/1617340/posts
A keyword search on E85 and ETHANOL will give you scads of FReeper wisdom. The big thing is converting from MTBE, which was not water soluble and noncorrosive, to Ethanol; which absorbs water and becomes contaminated very easily, and is corrosive. Ethanol manufacturing is currently government subsidized. Some argue about that being good, bad or indifferent. It just is. Storage tanks must be cleaned and dessicated before delivering ethanol blends. Pump filters must be replaced, to prevent contamination. All of this costs money, and disrupts supply. Thus impacting cost.
27 posted on 04/27/2006 11:39:36 AM PDT by ARealMothersSonForever (Political troglodyte with a partisan axe to grind)
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To: nhoward14

You are exactly right! This material can never be supplied by pipe line without a complete overhaul.

It sucks up every bit of moisture around, you will have to add a water dispersal agent to your tank every time you fill up.

Use this stuff in an older car the seals, gaskets and your rubber fuel lines go south. The "in tank" fuel filter is the first thing to go as the injection system becomes clogged. Your auto shop will love this!

No logical thought has gone into what will happen..Whats new?


28 posted on 04/27/2006 11:41:02 AM PDT by tiger63
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To: John Geyer
John,

The price of a gallon of ethanol is higher than the price of a gallon of gasoline. If you replace 1/10% os a gallon of gas with ethanol, you are adding a higher-priced product, which raises the price of the gasoline.

E85 gas is actually cheaper than regular unleaded gasoline right not, but that is due to a government subsidy which I understand is about $.50/gallon.

29 posted on 04/27/2006 11:41:34 AM PDT by Trust but Verify (( ))
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To: sarasota

The price of ethanol would logically be higher further from where it it produced due to logistical costs of transport from where it is made (primarily the Midwest). No matter where it is sold, no matter the purchase price - ethanol production is subsidized by a tax credit to producers of 50 cents a gallon. So, from general revenues to ethanol producers - courtesy of Senators and Representatives from the Midwest, whether you use ethanol blend fuels or not - you're paying for them.


30 posted on 04/27/2006 11:46:20 AM PDT by Wally_Kalbacken
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To: ARealMothersSonForever

Very good synopsis, grasshopper.


31 posted on 04/27/2006 11:46:49 AM PDT by Old Professer (The critic writes with rapier pen, dips it twice, and writes again.)
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To: sarasota

I am not sure which fact is being researched. Google it and if you can't find it, I'll get the link for you.

TMc.


32 posted on 04/27/2006 11:48:02 AM PDT by TFMcGuire (Either you are an American, or you are a liberal)
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To: John Geyer
John,

Ask yourself this:

How many gallons of gas does it take to farm the acreage needed to produce the number of bushels of corn needed to be be refined into a gallon of ethanol.

Now, add that to the amount of fuel needed to fire the still to refine the brew to a level of alcohol that it can be used as fuel.

It takes about 5 gallons of brew to get to about 1 gallon of usable ethanol.

Ethanol aint cheep!
33 posted on 04/27/2006 11:48:10 AM PDT by Al Gator (Remember always to pillage BEFORE you burn!)
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To: TFMcGuire
It also isn't cheaper when you consider it knocks mi/gal down by about 25%.

If you're talking about a 10% ethanol blend, 25% sounds awfully high.

EPA MPG estimates for E85 (85% ethanol + 15% gasoline) in flexible-fuel vehicles is typically 30% less than for gasoline. Also, ethanol has 30% less BTU (energy) than gasoline.

So, theoretically, if all else is equal, a 10% ethanol-blend should result in a MPG penalty of less than 5% when compared to straight gasoline.

At any rate, a 25% penalty from a 10% blend doesn't sound right to me.

34 posted on 04/27/2006 11:48:54 AM PDT by newgeezer (Just my opinion, of course. Your mileage may vary.)
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To: Brilliant
Why would making something here necessarily make it cheaper?

Transportation costs.

35 posted on 04/27/2006 11:51:44 AM PDT by Ditto (People who fail to secure jobs as fence posts go into journalism.)
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To: Iowa Granny

Isn't it simply that the wholesale price of ethanol is higher than the wholesale price of gasoline? So when you add it to gasoline the price increases.

Everyone is taking for granted that ethanol must be cheap, which is not the case.


36 posted on 04/27/2006 11:51:57 AM PDT by waverna
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To: John Geyer
let me do a calculation that may not be exactly correct;

1 gallon of gas = $ 3.00

1 US gallons = 3.7854118 liters; so

3.7854118 liters = $3.00

At the liquor store, 1.5 liters of vodka (assume 100 proof potato ethanol) = $11.00

Replacing 15% of gas with ethanol;

.85(3.7854118 liters = $3.00) = 3.22 liters = $2.55

3.7854118 - 3.22 = .57

(.57/1.5)11.00 = $4.18

so gas with 15% vodka should cost $2.55 + $4.18 = $6.73

which is why we do not use vodka to fuel our cars; however this points out an important fact; if ethanol were the price of gas or less we would have been using it long ago, but it is nowhere near that so when it is added, the price of gas will go up.
37 posted on 04/27/2006 11:52:29 AM PDT by Herakles (Liberals are stone stupid and proud of it!)
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To: eraser2005
You get more out of ethanol than you put in, . .

Only if you farm the original corn using mules instead of tractors. There was a recent article posted from Popular Mechanics, and it discussed the refining cost only (energy cost) and did indeed show a small, but net energy gain. However, if you add in the fuel required to plant, cultivate, and pick the corn, you end up with a net loss of energy.
38 posted on 04/27/2006 11:52:42 AM PDT by Gorjus
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To: Old Professer
Thanks. I am still waiting for congresscritters to demand that "big, mean, profitable oil" give their pipelines to the ethanol producers for cost. Just like judge Green did with telecommunication pipelines. When most of the vehicles on the road become inoperable due to contamination, congress can simply pass another law to force mean old oil to pay for the repairs. Yeah, that's the ticket. (shaking my head in amazement and checking corn and sorghum futures...)
39 posted on 04/27/2006 11:53:00 AM PDT by ARealMothersSonForever (Political troglodyte with a partisan axe to grind)
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To: newgeezer

difference in the energy of the ethyl alcohol molecure as compared with the assorted HC molecules which make up the gasoline mixture.

E-85 would produce the "desired" resuts.

Although, emprically, it does "seem" like 10% C2H5OH knocks mileage of my 2001 Silverado down at least 10% as well.


40 posted on 04/27/2006 11:53:49 AM PDT by TFMcGuire (Either you are an American, or you are a liberal)
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To: John Geyer

There was no provision ot have a supply line for ethenol! Replacing the millions of gallons of the MTBE was no match for what supplys we had in place. this is the Senates fault. The companys had no alternative but to discontinue the additive to avoid lawsuits.


41 posted on 04/27/2006 11:54:13 AM PDT by Bommer
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To: John Geyer
Because gasoline is cheap relative to other energy products.

As of 5 minutes ago, worldwide gasoline spot market price (for June delivery) is $2.12/gallon. Worldwide spot market price for ethanol (May delivery) is $2.62/gallon!

It's a good thing our cars don't run on 100% ethanol--or we'd be paying about 50 cents/gallon more than we are for just gasoline.

I guess that the ethanol companies are 'ripping us off' even more than the oil companies then, right? (sarcasm--off)

42 posted on 04/27/2006 11:56:05 AM PDT by stockstrader
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To: John Geyer
Fuel efficiency is diminished with ethanol. Therefore, we buy more fuel.

This is the congessional solution to all problems. MAKE THEM WORSE.

43 posted on 04/27/2006 11:58:40 AM PDT by OldFriend (I Pledge Allegiance to the Flag.....and My Heart to the Soldier Who Protects It.)
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To: stockstrader

Another thing to consider is the btu rating of ethanol as compared to gasoline.

I don't know exactly, but I think gasoline is somewhere around 120,000 btu per part. Ethanol is only about 70 to 80,000 btu per part. That means that your engine needs to burn more ethanol to get the same performance as gasoline.

I'm doing this from memory. I don't remember the exact numbers, I read this in one of the popular science or mechanics mags.


44 posted on 04/27/2006 11:59:15 AM PDT by Al Gator (Remember always to pillage BEFORE you burn!)
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To: OldFriend

As Ronald Reagan used to repeatedly say, "Government is not the solution, government is the PROBLEM"!


45 posted on 04/27/2006 12:00:19 PM PDT by stockstrader
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To: John Geyer
The whole disgraceful ethanol story is right here in this thread.
46 posted on 04/27/2006 12:01:24 PM PDT by defenderSD (¤¤ Wishing, hoping, and praying that Saddam will not nuke us is not a national security policy.)
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To: Al Gator

Exactly. That makes gasoline even CHEAPER when compared to other energy sources. Again, another example of government intrusion (due to environmental issues) increasing the price of gas.


47 posted on 04/27/2006 12:02:03 PM PDT by stockstrader
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To: John Geyer
The correct answer is that the addition of alcohol doesn't cause the price of gas to rise, but that the withdrawal of MTBE's causes prices to rise.

The withdrawal of MTBE's from the market had the effect of reducing domestic fuel supplies. While ethanol now replaces MTBE's, previously both were available. The withdrawal of MTBE's also has the effect of making ethanol production wildly profitable, which will cause its production to expand, which will moderate the price.

48 posted on 04/27/2006 12:04:37 PM PDT by Mr. Lucky
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To: John Geyer

If ya ride, ya gotta pay the Piper.


49 posted on 04/27/2006 12:04:53 PM PDT by azhenfud (He who always is looking up seldom finds others' lost change.)
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To: newgeezer

I operate an ethanol "plant". I have two varieties as output: wine and beer. The yeast I use produces an alcohol content of around 13% by volume for the wine, and 6% for the beer. Now if the feds would only remove the restrictions for distilling it I would be a much happier brewer!


50 posted on 04/27/2006 12:05:25 PM PDT by Real Cynic No More (A member of the Appalachian-American minority -- and proud of it!)
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