By James Ronald Skains
Journal Correspondent

Henry Ford, who became a major figure in American history, stated unequivocally that he preferred to burn ethanol in his Ford cars than hydrocarbon produced fuels.

Ethanol has long been known to burn cleaner with less emissions than gasoline produced from oil. However, that fact has been kept hidden in the United States for many years.

Indy race cars have for years used methanol as their fuel. Methanol, like ethanol, is produced mainly from renewable energy feedstock.

Brazil and several other countries have become basically energy independent from commitments to develop alternative fuel sources, with ethanol leading the program. Most ethanol in Brazil is produced from sugar cane. This is ridiculed in the United States and Louisiana as a "pie in the sky concept."

Recently in the Louisiana legislative session, a movement led by Representatives Francis Thompson and Jim Fannin, Senator Noble Ellington and Commissioner of Agricultural Bob Odom attempted to bring the use of ethanol as a alternate energy source to the forefront in Louisiana. Despite strong opposition, they were able to get to get "the nose under the tent" for a push to showcase ethanol as one of the fuels for the future.

Ethanol as an alternative source of fuel would not only benefit the consumer but also the farmer. As Commissioner Odom stated, "It's time the farmers got a little slice of the energy pie other than just being a consumer of fuel."

Ethanol is typically made from renewable energy sources such as agricultural crops.

Corn is the preferred raw material in the corn belt states in the Midwest. However, soybean oil is also high on the list of feedstock for ethanol and is the leading feedstock for the production of bio-diesel.

The chemical process to make ethanol is "on the shelf technology" and is used in both very small manufacturing operations and a few fairly large commercial facilities. Some farmers in the mid-West have small, usually portable units to produce fuel for their farm equipment from their crop production.

Other countries such as Brazil have huge commercial ethanol manufacturing operations that significantly affect the energy position of their country. Ironically, General Motors and Ford both produce cars in Brazil and South America that can run on pure ethanol without being diluted with hydrocarbon fuels.

Apparently, the major automobile companies adhere to the old adage, "When in Rome do as the Romans do," in their facilities in South America. If the people want ethanol fueled cars, we will make cars that run on ethanol or a mixture of ethanol and gasoline, seems to be the modus operandi of the car companies.

In the United States and parts of Europe and the Middle East, the oil companies are the best friends of the automobile companies and vice versa. The more fuel inefficient the vehicles produced, the more hydrocarbon fuel is refined.

Since the new breed of vehicles, the SUV's and mini-vans began first appearing on the U.S. car market in the 1980's, the consumption of oil has nearly doubled worldwide. In 1985, use stood at 60 million barrels per day. Today, consumption of oil worldwide is 111 million barrel per day.

At best, the struggle for ethanol to be a major factor in future energy is a David and Goliath scenario. At worst, which is the current case, it is like comparing a small slow running stream that you can easily step across to the Mighty Mississippi River as it passes New Orleans.

Oil companies have unimaginably amounts of money tied up in drilling rigs, production platforms, oil refineries and pipelines. Politically, no other single industry can match the campaign contribution strength of the oil companies.

In addition, two major oil companies are major components of the Dow Jones Industrial average that seems to control the ups and downs of the stock market.

Any significant trend away from oil would send stock markets worldwide into tremors and convulsions.

Today, the cost of producing a barrel of oil with all the modern technology and investment money required is slightly less than $12. Oil company profits on a barrel of oil refined into gasoline and/or diesel is approximately $38.

Forty years ago, Arkansas-born Texas oil wildcatter H. L. Hunt had a hoard of cash estimated at over $600 million, of which most if not all came from his oil business. Fifty years ago, oil was selling for $1 per barrel. It was so cheap that most rural roads in Texas were sprayed with oil coming directly from gathering tanks in the oil fields.

In addition, the oil companies essentially control the distribution of not only hydrocarbon fuels but also ethanol. Although ethanol is produced mainly from above-the-ground renewable feedstock, the distribution of ethanol to the consumer then must go through the hands of the oil companies.

To blend ethanol with gasoline to produce either E-85 or E-90 fuel, the ethanol must be blended in that ratio with regular hydrocarbon fuel. The oil companies make up nearly 99% of the blenders in the U.S. who have federally-regulated Title 637 licenses.

On the other hand, ethanol has a number of its own challenges to overcome. Foremost is the enormous amount of by-product that must be disposed of. The by-product is in essence an animal feed but to find buyers of a significant amount of this material is a difficult to say the least.

Where ethanol production works best is in the mid-west states where there is not only an abundance of corn and other feeds stocks grown but also a high concentration of cattle and hog feed lots. Another factor is that the more demand for the feed stock to make ethanol grows, then the price of the feed stock goes up creating a Catch 22 situation.

There are a few important factors that will most likely determine the future of ethanol as a viable fuel source in the United States. At present there are only two huge agricultural companies in America who are active in the ethanol industry, ADM and the privately owned C argill Company in Minnesota. If both of these giant companies make a determined push into ethanol, then the gap between big oil and the use of ethanol will diminish slightly.

Another factor to watch is the blending scenario. If more independent operations secure 637 licenses to blend the ethanol with the hydrocarbon fuels, that again is a plus for the ethanol industry because under the current set-up, the blender is the one who receives the federal ethanol production subsidy. Even if that scenario were to develop, the independent blenders would still have to buy their gasoline from an oil refinery.

Another factor in the rise of the ethanol industry in the U.S. is if a more cost-efficient bulk transportation system for ethanol can be innovated over the current system of trucks and tank cars.

However, the two most important factors that will determine the success of the ethanol industry in America are:

First, if some of the ethanol producers become viable public companies and allow the public to decide if they want to invest money in ethanol company stocks.

Secondly, if the ethanol industry or a company within the industry begins to market their product outside of the current gasoline distribution system of gas stations and set up their own brand name fueling stations.

Both these scenarios are basically a set of circumstances where by the consumer gets to vote with their pocket books between the status quo of high fuel prices produced from oil or make a change in the use of ethanol fuel.

Once we begin to see advertising slogans proclaiming a fuel that comes "from the field to pump," or "from the stalk to the pump," we will begin to determine if ethanol will be a major factor in our energy future or just an insignificant footnote in American history.

Back