Global Ethanol Tops 85 Billion Liters as OPEC Complains

(article by Bliss Baker, published on the Cutting Edge News web site.)

Global ethanol production will top 85 billion liters (22.45 billion gallons) this year. The 2010 forecast predicts a 16 percent increase in global production over 2009 actual production despite a very challenging year for the industry particularly in the United States where the industry experienced margins squeezed by low fuel prices and higher than normal feedstock prices.

Despite this difficult year, the United States continues to lead the world in ethanol production and will produce over 45 billion liters (11.9 billion gallons) of the world’s output this year. (editor’s note, the Renewable Fuels Association put’s current US production rate at 12.5 billion gallons annually, and notes that total capacity is 13.5 billion gallons) The U.S. growth in production continues to be driven in large part by federal laws requiring mandated blending and a Congress obsessed with energy security and energy policy. Rules outlining the so-called “RFS2” were released last month providing for a 36 billion gallon market in the U.S. by 2022.

Not all jurisdictions had an easy time in 2009 convincing governments to adopt biofuels-friendly policies. Europe continues to twist itself into knots over sustainability issues being trumpeted by powerful NGOs on the continent….

In a somewhat ironic turn of events, this report on growing global biofuels production coincided last week with the release of a report co-authored by the former Secretary General of OPEC blaming biofuels for increasing world crude prices. The report suggests that under investment in drilling and oil exploration is a direct result of our growing obsession with developing biofuels markets. With ethanol production forecasted to replace approximately 350 million barrels of oil this year out of a total world demand for 85 billion barrels it seems highly unlikely that ethanol is driving global crude prices anywhere. That being said, it appears that after many years of dismissing biofuels and a petty annoyance, middle-east oil producing countries may finally have biofuels in their sights.

Our Take:
So what does ethanol mean for us? Minnesota’s 19 currently operating corn ethanol plants produce about 1.1 billion gallons of ethanol per year, or about five percent of the world’s biofuel production. Not bad. The latest economic impact report from Minnesota Department of Agriculture  found that in 2007, the combined ethanol and corn industries directly contributed a little more than $6 billion dollars to Minnesota’s economy and directly supported 26,000 jobs. When indirect impacts were accounted, the figures rose to more than 70,000 jobs and $12 billion dollars total economic impact. And that was when Minnesota produced 670 million gallons. Since we are now producing 50 PERCENT MORE ETHANOL than we did in 2007, it would be a fair guess that the direct economic impact will approach $9 billion dollars in Minnesota this year.

 

Europe isn’t the only place twisting itself in knots over the marginal impact of ethanol on other industries, which some experts believe causes shifts in land use. OPEC’s comment is very telling. Oil prices on the world market remain stagnant. What is going up is the cost of extracting oil across the globe, thanks to more and more energy intensive techniques required to reach a dwindling supply of oil. But thanks to ethanol, oil prices remain lower than they would be otherwise. One thing that every government policy must reflect, if it is going to shape energy production in a positive way, is an apples-to-apples comparison of all different fuels. When the carbon score of oil production reflects things like the strip mining of oil sands in Alberta, Canada, or the military cost of protecting oil pipelines and shipping lanes world wide, the picture of which energy source costs the highest environmental impact becomes crystal clear.

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