“America is addicted to oil,” the President proclaimed in his State of the Union speech on January 31, 2006. Since then, and with the continued high prices of crude oil and gasoline, there have been a flood of proposals, each promising energy independence for the United States. Foremost among these are calls to make greater use of ethanol.
The Department of Energy’s Energy Information Administration projects that the United States will need almost 50% more energy in 2030 as we consume today. It also projects that even with more rapid advances in technology, fossil fuels—oil, gas, and coal—will continue to provide 80% of our energy needs. A similar global forecast has been by the International Energy Agency.
The United States is a mobile society and will remain one. For this reason as well as reasons of economic resiliency and national security, it is important that we explore the potential of all energy sources, especially those that can provide abundant and affordable transportation fuels.
Using the products of American agriculture or other sources of biomass for transportation fuel, such as processed vegetable oil, have garnered the most attention, with the President even singling them out for special emphasis in his 4-point energy plan of April 2006. While biomass-derived fuels for transportation offer a rich set of options for substituting petroleum-based gasoline, they are not without their own challenges. The barriers to rapidly expanding the use of ethanol are serious and deserve serious consideration. For instance, the Energy Information Administration forecast assessments show only limited growth in the use of ethanol even under assumptions of high oil prices through 2030. Today, ethanol consumption represents 2.8% of the gasoline we consume. By 2030, daily consumption of gasoline could be as much as 525 million gallons. The U.S. produced only 4 billion gallons of ethanol last year and is projected to produce about 7 billion gallons by 2012. In addition to technical considerations, far greater use of ethanol would require enormous investments in plants, transportation and storage.
The technical capacity to produce gasoline from biological sources predates the automobile. Yet, this method was abandoned when it became apparent that petroleum was a cheaper and more effective source of fuel. Cost differences and the technical immaturity of the more advanced techniques remain significant barriers to expanded use. To date, the recent national discussion, and subsequent media coverage, of a shift to ethanol has not provided a detailed assessment of these costs and technical issues.
This paper reviews those factors, placing them in a context that allows for a fair assessment of their contribution to America’s energy future. As a nation, we should rise to challenges but also be mindful of the dangers of exaggerated expectations.
— William O’Keefe, Chief Executive Officer
Jeff Kueter, President