Natural gas fracking well in Louisiana

According to Bloomberg, the Obama administration will momentarily announce that current blend limits of 10 percent on ethanol in gasoline will be increased to 15 percent (E-15).  Research has been ongoing on the impact of higher blends on the functioning of vehicles not built to handle higher blends.  Older cars and other types of gasoline-powered vehicles such as boats are believed most as risk.  Access the Bloomberg story here.

The fact that auto companies are still opposing this change is a worrying sign, and supports the idea that the timing of this announcement is political, to strengthen Democratic support in the farm belt.  Pro-ethanol DomesticFuel.com discounts opposition to allowing E-15 blends in all cars as another round of the "usual suspects" opposing any and all pro-ethanol actions.  Yet, there is no obvious reason auto companies should care about what fuels are used in their cars unless they really believe it could cause vehicle problems, driving up warranty repairs and consumer complaints; and driving down brand image. The opponents have submitted their own technical data contrasting ethanol-industry sponsored research that found no problems with E-15 in any cars.  Interestingly, DomesticFuel.com included the Natural Resources Defense Council on its "usual suspects" list, despite many, many years of work by the environmental group to promote expanded biofuels in the US.

When I wrote about the push for higher blends last year, I suggested that many of us are very suspicious that the pro-ethanol lobby is sacrificing the service life of our automobilies (the second largest capital purchase for most people, exceeded only by their home) in the pursuit of higher profits for them.  The industry could address this concern simply and quickly:  by  cutting a deal with manufacturers to buy reinsurance on the existing warranties that would cover any ethanol-related damage that did crop up.  If the risk of vehicle damage is as low as the ethanol industry says, purchasing insurance coverage to protect the manufacturers should be easy and inexpensive.  If the ethanol boosters are unwilling to put their own cash on the line on the issue of vehicle damage, or if the reinsurance policies are very expensive, it ought to be a very big red flag, agruing against rapid allowance of higher blends.

Update:  The final decision allowed higher blends only in model year 2007 and higher, a much better outcome than boosting blend rates for all vehicles, without certainty the higher blends wouldn't damage the vehicles.  A nice summary by Geoffrey Sytles on how this ruling will or will not alter the competitive strategy of the fuel marketing sector can be found here.  As the RFS, expansion of the EPA ruling to more model years, or financial inducements lead to more service stations selling E15, it will be interesting to see how stations prevent owners of more sensitive vehicles from inadvertantly filling up with higher-than-recommended blends.