SELLING GASOLINE WITH BIG ETHANOL SURE TO BE A TEST

Bob Tippee
Editor

US refiners and marketers should get used to this kind of thing: "Big Oil is talking out of both sides of their mouth, but the words coming out of both sides say 'higher prices.'"

That's from Ron Lamberty, vice-president, marketing development, of the American Coalition for Ethanol (ACE), which calls itself "the grassroots voice of the US ethanol industry."

His reference is to warnings about price increases for reformulated gasoline this year as ethanol supply becomes pinched in a rush to rid fuel of methyl tertiary butyl ether (Editor's Perspective, OGJ Online, Mar. 3, 2005).

Lamberty's group issued a statement Mar. 8 criticizing "attempts by Big Oil to shift the blame over potential gasoline price spikes or supply shortages" and depicting refiners' moves away from MTBE as "their own choice."

This is distortion. Refiners, facing limitless jeopardy from opportunistic lawsuits, are replacing MTBE as quickly as they can with ethanol, supplies of which may come under strain this driving season. The Energy Information Administration has warned of price volatility until ethanol capacity catches up. Blame belongs with Congress for excluding limited liability protection for MTBE from the Energy Policy Act of 2005.

Because Big Ethanol got plenty from the energy bill, maybe ACE is just defending its benefactor. The original legislation contained a mandate for 5 billion gal/year of fuel ethanol by 2012. When Big Ethanol asked for 8 billion gal/year, Congress came through with 7.5 billion gal/year.

That's a requirement for a fuel additive already supported by a 51¢/gal federal tax credit and protection against foreign competition.

Most industry groups would bask in the spoils of political victory and stay out of other people's fights. But ACE can't resist the temptation to carp at oil companies.

"Consumers have suffered enough from tight fuel supplies and soaring prices at the pump, while the petroleum industry continues to reap record corporate profits," says Executive Vice-Pres. Brian Jennings in the ACE statement.

Only an industry sustained and inflated by politics could spew this kind of rhetoric. For refiners and petroleum marketers, selling gasoline alongside Big Ethanol will be a test.

(Online Mar. 10, 2006; author's e-mail: bobt@ogjonline.com)

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