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By Robert Rapier on Jun 11, 2013 with 17 responses

Oil Industry Declares War on E15

Tags: E15, ethanol

(RR edit: Some of you need to turn on your sarcasm detectors).

I just finished reading a story that made my blood boil. It was about how the oil industry is using dirty tricks to keep the ethanol industry in check. I need to sit down, take a deep breath, and make sure everyone knows of the atrocity that has happened in Kansas.

The problem started when the ethanol lobby requested — and subsequently received — a waiver from the Environmental Protection Agency (EPA) that would allow up to 15% ethanol in gasoline blends. The current limit is 10%, which is a problem for the ethanol industry because the mandate in the Renewable Fuel Standard already has the country at the 10% limit. It would be a huge boost to the ethanol industry if that limit was moved up to 15%, because that would increase the potential size of their US market by 50%.

Since the EPA allowed 15% — but didn’t mandate it — and because some automobile manufacturers have stated that use of E15 would void car warranties, I predicted that E15 sales would be essentially nonexistent.

And that is exactly what has happened. E15 has failed to win over consumers. Few stations offer it. Head ethanol lobbyist Bob Dinneen says that it is the oil industry’s fault that E15 isn’t being sold. Now comes evidence from Kansas that Dinneen may be onto something.

In Ethanol lobby sees red over a yellow gas hose in Kansas, Reuters brings us the story of Scott Zaremba, who owns Kansas-based Zarco 66. Zaremba says Phillips 66 (NYSE: PSX), his main fuel supplier, is telling him to stop selling gasoline blended with 15 percent ethanol. Well sort of. Actually, not really. Here is what the story claims:

On April 1, Zaremba received a notice from Phillips 66, the nation’s third-largest refiner, that he could no longer sell the E15 fuel from his regular black fuel hoses, as he had been selling it since last July.

Instead, any gasoline with more than 10 percent ethanol has to be served from a separate, yellow hose, according to a copy of the Phillips 66 guidelines seen by Reuters. The aim is to distinguish E15 from other Phillips 66-branded gasolines with 10 percent or less ethanol.

So they aren’t quite forcing him not to sell E15, but they are asking the impossible: For E15 — which many car makers have not approved — to be easily distinguished from E10 by dispensing it from a yellow hose. Now come on! A yellow hose? Do those even exist? Probably not. So in effect, they did force him to stop. The story goes on to explain that Zaremba has quite a dilemma:

He has other options, but they aren’t cheap – or very feasible. For example, it would cost $100,000 to $250,000 to install new stand-alone gas pumps for E15, Zaremba said. Or he can always pay a $412,000 fee to Phillips 66 to break his marketing contract – expensive options that have so far kept him in compliance with the Phillips 66 guidelines, the only way he said he could.

So, his choices were:

  1. Get a yellow hose
  2. Pay up to $250,000 for a new stand-alone E15 pump
  3. Pay $412,000 to Phillips 66 to break his contract
  4. Stop selling E15 and blame Phillips 66

Zaremba opted to stop selling E15. After all, what other choice did he have? Even if yellow hoses do exist, who wants to pump their gasoline from a yellow hose? Typical dirty oil company tricks. Monte Shaw, Executive Director of the Iowa Renewable Fuels Association couldn’t have said it any better: “They’ve essentially declared an all-out war (on E15).” I can only imagine the reaction of people who have experienced the horrors of war pulling up and seeing a yellow hose on a gas pump. I am sure it gives them flashbacks.

The oil companies already make it difficult for me to pump diesel into my gasoline-powered car. Now they want to make sure I am “aware” if I am putting in E15 just because it might void my warranty and I might blame them. It’s a sad day for Kansas, and a sad day for America. Yellow hoses indeed.

Link to Original Article: Oil Industry Declares War on E15

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By CarbonBridge on June 11, 2013 at 5:41 pm

    RR: Yellow hoses are customary on E-85 fuel pumps. Yet we don’t see many gasoline vending stations offering customers the E-85 variety of liquid fuels for their gasoline/ethyl alcohol cars equipped with $35 factory installed FFV chips. The FFV chips are the same mechanism used for 30 years in Brazil where most autos and light pickups combust “neat,” [slightly wet] hydrous variety of sugarcane derived ethanol.

    What ever happened to the free market and supply/demand pricing structure which tends to rule itself very well?

    • By Russ Finley on June 11, 2013 at 11:26 pm

      …answer: mandated government consumption.

  2. By PA32R on June 11, 2013 at 5:54 pm

    What? You are advocating having consumers have no ability to be aware that they’re putting fuel in their tanks that may void their warranty? Where I buy fuel, I already don’t know. The pumps say “The fuel dispensed at this pump MAY contain up to 10% ethanol.” I don’t know what it actually contains.

    And a gallon of E10 is worth less than a gallon of gasoline with no ethanol. E15 would be worth less still. This is simply a matter of the energy available in the fuel. But I get no discount. And now you advocate that I may blindly purchase fuel that is: 1) worth less to me; and 2) may void my warranty. I amazed.

    • By Robert Rapier on June 11, 2013 at 6:46 pm

      Someone needs to turn on their sarcasm detector. :)

  3. By PA32R on June 11, 2013 at 7:34 pm

    Oh. I’ve always been gullible.

    • By Robert Rapier on June 11, 2013 at 7:40 pm

      The story is quite real though. The guy was asked to make sure E15 was distinguishable, and his response was to quit selling it and blame Phillips for his decision. Perhaps nobody would buy it on purpose, so he didn’t want to call attention to it.

  4. By Ivor O'Connor on June 11, 2013 at 7:39 pm

    It’s a shame we even sell ethanol at all. Ethanol is a major boondoggle we should not have to pay for.

  5. By Russ Finley on June 11, 2013 at 11:17 pm

    LOL ….good one. You had me wondering until “I can only imagine the reaction of people who have experienced the horror of war pulling up and seeing a yellow hose on a gas pump.”

    In addition to yellow, you can also get red, green, and blue hoses:

  6. By ed on June 12, 2013 at 11:01 am

    I wish all vehicles were built with engines that would handle E 85 Could have been done but they did not. Over 75% of our current fleet would have been covered by now and then the consumer would have had a true choice. The better fuel at the best price would have won out. I originally fought the leaders of my industry organization, SEMA about the need for more Ethanol. I argued that it was better to grow our own fuel than buy it from the middle east. They convinced that 15% ethanol truly would damage engines that were not E85 compatible plus the millions of lawn mowers, motor cycles and the huge number of small engines used for generators , etc. Unfortunate but true. I say it is time to eliminate the mandate for any ethanol and let the consumer decide what is best. If 15% ethanol or for that matter a higher percentage is good for them, hten they wil buy it. Many changes in the bio fuel industries make it look totally different than it was 10 year ago. The recent discovery to be able to make ethanol into biobutanol moves that industry closer to a product that practically mimics gasoline and is actually worth more money than raw ethanol. Let the market decide what is best and good things wil happen.

    • By TimC on June 12, 2013 at 2:18 pm

      “The recent discovery to be able to make ethanol into biobutanol moves that industry closer to a product that practically mimics gasoline and is actually worth more money than raw ethanol.”

      Ethanol can be converted to gasoline. The process and the catalysts used have seen real progress in the last few years, and are now very close to commercialization. The new catalysts are water tolerant, so that they can even convert the “wet” ethanol vapor from a beer stripping column into a high-octane hydrocarbon mixture that is a drop-in gasoline replacement. Search “ethanol-to-gasoline conversion” for more info.

  7. By takchess on June 12, 2013 at 4:45 pm
  8. By TJW on June 13, 2013 at 11:50 am

    The ethanol industry is struggling with a different environment than existed when RFS 2 was passed in 2007. Back then. the industry lobbying efforts were on a roll. RFS 2, if fully implemented, would increase ethanol production to more than 2 MMBD. The strategy of painting “big oil” as the bad guys was working.
    But, gradually reality set in. First, the “David” (poor little ethanol plants) vs Goliath (big bad oil companies) narrative began to break down. A new player entered the picture: energy efficiency. Through improvements in CAFE, light vehicle fuel economy, etc., the same fuel savings could be achieved as promised with RFS. Second, RFS 2 was built on the assumptions of technology breakthroughs (cellulosic ethanol) that simply weren’t realistic, at least not in the timeframe envisioned by the RFS legislation. Third, came the boom in domestic oil drilling activity and production and the realization that while the US itself may not be able to achieve “energy independence”, it may be possible for North America. Fourth, like it or not the “food vs fuel” issue took its toll, especially when combined with the drought conditions and high corn prices. Devoting ever larger amounts of US corn production (now about 40%) to fuel simply doesn’t appear as wise as once thought.

  9. By FuelFix on June 13, 2013 at 7:40 pm

    Instead of starting war on ethanol, what America needs to focus on is removing some of the regulations so that consumers will have a chance at the pump. Natural Gas is the first step towards a change perhaps, but there’s still so much that needs to be done in order to accomplish this. As free citizens, we should be able to have a choice at the pump.

    • By Geoffrey Styles on June 14, 2013 at 9:32 am

      Choice is always good, but this story highlights the key question of who should pay to create it. Retailers might, if they saw a potential for profiting from their investment. Unfortunately, retail operates on very thin margins as it is, and introducing another product that only some of their customers can use is a tough call, particularly when they can’t charge a premium price for it, since it’s actually worth less ($0.07/gal less, at current prices.)
      So should taxpayers pay retailers to install E15 capability, when most of us won’t get any direct benefit from it, and actually risk repair costs if we accidentally put E15 into a car not certified by the manufacturer for it? That doesn’t pass the smell test. I’d rather see my tax dollars used–sparingly–to help make a truly alternative fuel available, such as CNG, for which the lack of infrastructure is a big obstacle to CNG vehicle sales.

  10. By ben on June 14, 2013 at 10:38 pm

    lTouche’ Robert, touche’ Now, if we can only get the knuckleheads in Washington to take half-seriously the misgivings that consumers have shown with their ambivalence toward E15.

    Bob Dineen and the corn hustlers (not to be confused with Cornhuskers for diehard OU fans:) have been spinning for so long they nearly believe their own press releases. Alas, so long as the members keep paying their dues, and Bob and team keep hauling down those hefty salaries, well, that really is what matters most, right. If I hear about the irrefutable virtues of “backing out foreign barrels of oil” one more time, I’ll probably enlist in the Foreign Legion.
    Some of these Ethanolistas are pretty shameless. To think, it all started with Dwayne Andreas at ADM (and Cargill, too) and the need to use all that surplus corn syrup as summer soda pop consumption fell off and the grain processors sought to keep on, ah, processing. Voila, ethanol! And more importantly, the introduction of robust demand courtesy of Uncle Sam’s magic called a renewable fuels mandate. An old associates was present at the creation when Dineen had little more than a twinkle in his eye—albeit an ambitious twinkle. Now, of course, he’s a big shots and a servile captive to his much too narrow constituency. And yes, these guys are still hiding behind Midwestern farmers to advance their ambitions in a typically Washington sort of way.
    After nearly two-and-a-half decades of “for the sake of energy independence and national security and rural jobs and environmental benefits and……” we are still hearing the same drum banging that we heard in the background when C. Boyden Gray whispered to “41″ how ethanol could prove a political winner in cutting a deal with Sen. George Mitchell (D-ME) on provisions of the Clean Air Act Amendments of 1990. I must say that the oxygenate standard and RFS has proven a helluva ride on the old Ferris Wheel. Thing is, not too many Ferris Wheels are still in operation around the country these days. One has to wonder just how long a run the corn-poppers out in America’s heartland will enjoy before the ticket line grows too thin to support all the grease and fittings:) I sense the tide has peaked and the slow ebb slowly plays out against the backdrop of rising NA oil and gas production and the very thin reed called
    “advanced” biofuels. Advanced? Hasn’t most of this stuff been around for a century?
    Wow, and to think we actually call it progress!
    As for Rapier and some of the other troublemakers writing for ETI, well, I think you must all be anti-patriots to keep questioning the virtues of the virtuous. Keep it up and we’ll be calling Homeland Security–who will show up in their gas-guzzling SUVs running on E10 blended fuel–for now, anyway:)


  11. By ua on June 17, 2013 at 2:07 am

    So they had some demand for e15, but the problem is that the demand did not warrent the gas station to convert one of their pumps to e15, and e15 only, since installing a yellow hose on a pump means you can’t dispense e10 from it any longer. The question should be: Is someone who’s stupid enough to put some other fuel in their car that they shouldn’t be, going to be deterred by the hose color.

  12. By flee on July 26, 2013 at 7:38 am

    If you’re an opponent of ethanol, describe the 50% increase, otherwise it’s only a 5% change, not much to be concerned with. Auto companies choose not to warrant or approve new fuel as this would be an extra expense such as proving to EPA all the variables of auto emissions. Engine technology is so advanced, it would be costly to engineer new fuels to achieve ultimate compliance and efficiency. Also, a burden to engineer to two fuel types. If your an opponent of ethanol describe the auto industry as refusing or voiding warranties otherwise, better to communicated per the example of not following approved/recommended tire pressure per automotive standards.

    Personally, I burn a lot of E85 ethanol in vehicles for years. Splash blending into older cars. I do my own maintenance and repair….no tell tale sign of damage, just better running engines and cleaner oil, spark plugs, and injectors. In the summer mostly straight E85 and in winter no more than E40. Also, plugs need to be gapped less or better to use the thin platinum premium plugs. Old two cycle chainsaws, mowers, leaf blowers, and outboards run good on E10. Just be aware to the EPA limits oil in gas per air quality standards and not per engine life. Change the oil ratio to 28:1 and forget the manual recommendations as they are legal doc’s per EPA standards. Ethanol mixes better with the synthetics if you want premium oil. Synthetics are vegetable oils which do improve lubrication. All the fuss about water and ethanol a red herring. It’s a benefit to have a fuel that has ability to wipe out water in your fuel. Water in gasoline a horrible condition. The mix will precipitate ugly chemical compounds that eat metal and plastic components. No, better to allow ethanol to absorb moisture and burn. It can safely carry a bunch especially higher blends. Gasoline is a better fuel with ethanol.

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