A Market of Contradictions: Ethanol Mandates, Motor Gasoline and the Blend Wall
Ethanol from corn as a motor gasoline blend stock seems like a good idea. As an oxygenate it is supposed to clean up the air, and as a U.S grown renewable it reduces our dependence on fossil fuels and foreign oil. The catch is that ethanol is being mandated under a morass of mind-numbingly complex government regulations, some of which conflict with each other, or worse yet are out of step with the realities of the market. For example, the mandatory volumes of ethanol required may soon exceed the quantity that the market can use. At the same time, high corn prices have driven margins on ethanol manufacture into the red forcing many ethanol producers to shutter their operation, reducing ethanol supplies. And if that were not enough, a government program created something called the renewable identification number – RIN – a 38-digit serial number that ‘tags’ batches of renewable fuels and has resulted in all sorts of complications. Today we’ll begin an examination of the ethanol market to understand how we got in this predicament and where we go from here. In Part I we tackle one of the most intractable problems – the Blend Wall.
