Now that Ethanol Is Being Produced at Record Levels, Where Is It All Going?

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Back in the year 2000, when all of the talk of banning MTBE as a fuel additive and replacing it with ethanol was emerging, petroleum refiners were wondering how such a small industry would be able to supply enough ethanol to go around.

Today, record levels of ethanol are flowing out of the Midwest from the Corn Belt and the question refiners are asking today is - where is all that ethanol going and how is it going to get there?

Pipelining ethanol will more than likely never happen. First, quantities are small. Secondly, ethanol absorbs water contaminating the product and thirdly, a staging area would have to be built in the mid-west along with transmission lines, and with the low volume it would be difficult to justify a pipeline system. It's also too costly to continually dewater a pipeline system to handle ethanol.

The fuel ethanol market has grown some 40% over the past two years. 95% of the operating fuel ethanol plants are located in the Midwest. The reformulated gasoline markets that the product supports are located on the west and east coasts. Transporting ethanol to these markets can only be achieved economically and efficiently by rail.

Every day, ethanol moves from the Midwest to the east and west coasts via major rail haulers through the "Virtual Pipeline". Once the product reaches its unloading destination; the product is moved to the petroleum storage terminals where it is blended into the fuel system at a 5.9% level.

The blended product is then transported from the terminal to the filling station ultimately winding up in the gas tanks of Californians and New Yorkers.

As states continue to pass legislation to ban the use of MTBE and if Bush's energy bill ever gets passed, ethanol may end up in the gas tank of every American. Money will have to be spent at the terminal level for blending systems and to add or convert tanks to handle ethanol.

For more information on trends in the Ethanol industry, tune in to Industrialinfo.com Radio's Industry Today Radio Show featuring Synthetic Fuels Industry Manager, Jay Brunson, 8:30am (CST) Monday, June 21, 2004, as he talks about the past, present, and future of the emerging ethanol market. If you miss the show, Click Here to hear this or any of the over 100 previous Industry Today shows covering topics important to industry spending, including trends, outlooks, and focus segments on specific industries.