The Short Term “Ethanol Factor”

A great article appears today on SmartMoney.com entitled The Ethanol Factor. The article correctly points out that right now, Ethanol is actually increasing the price of gas.  As MTBE is phased out of gasoline for environmental reasons, companies are making the switch over the Ethanol blending and prices have spiked.

The article makes another point, a key driver in the formation of a new business model that I’m working on.

One of the downsides of ethanol is that it’s extremely difficult to transport across great distances because it can’t be moved through a pipeline. Since the vast majority of ethanol production is concentrated in the Midwest, ethanol must be shipped via barge, railway or truck to blending facilities around the country.

Now, at the same time that energy companies are figuring out how best to transport ethanol from the Midwest to those hard-to-reach states making the switch, the entire country is shifting from a winter blend of gasoline to a summer blend, which is less likely to evaporate harmful chemicals during the warmer months. Each of those transitions can require that energy companies put extra trucks on the road (some hauling ethanol; others hauling summer-blended gas), but energy companies only have so many trucks. As a result, there were gas shortages earlier this month in places like Dallas and Norfolk, Va., which are transitioning to ethanol from making the MTBE.

Solving this transportation issue, freeing up the movement of Ethanol, and providing a smooth logistics management platform for it are key to prices coming down. 

The general public is beginning to believe that we can make the transition to energy independence and I’d like to assist  that same public  to be correct in its assumptions.

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