Tech Entrepreneurs Seek More Ethanol in Gasoline to Lower Prices

By Mark Drajem

(Bloomberg) — Do you want a return of $2-a-gallon

Before the recent jump in oil prices put low costs in the
rear-view mirror, American drivers had a brief taste of the
1990s at the pump. Now technology multimillionaires Eyal Aronoff
and Yossie Hollander and former Shell Oil Co. president John
Hofmeister say the U.S. could make low prices permanent if more
ethanol and methanol from cheap natural gas are added to the

Standing in the way, according to the Fuel Freedom
, is inertia from drivers and retailers, and an
obscure Environmental Protection Agency rule meant to prevent
drivers from tinkering with their vehicles to bypass pollution-control equipment.

“We will never get past the volatility of oil until we get
to alternatives to oil,” Hofmeister said Thursday at a forum on
the topic in Washington. For regulators, “the easiest job in
the world is just to say no.”

As refiners and drillers fight in Washington over the
federal Renewable Fuel Standard, which requires adding a certain
level of ethanol or biodiesel to fuel each year, Hofmeister and
Fuel Freedom say opening the market to more fuel choices could
accomplish more than the mandate. The group is an independent
nonprofit group in Irvine, California, that advocates for
policies to spur gasoline alternatives.

Cut Dependence

Fuel Freedom’s request that the EPA let drivers — or auto
mechanics — reset their car’s software has so far gone
unanswered. And without agency approval, getting new retailers
on board has remained an unfulfilled goal. The EPA also
prohibits the use of methanol in vehicles.

“EPA supports fuel choice innovation, however, modifying a
vehicle to run on a different fuel than it was designed for
could, inadvertently, cause increased emissions of pollutants
including those that form smog,” said Liz Purchia, an agency
spokeswoman. “The Clean Air Act prohibits modification of a
vehicle in a way that increases emissions so that they no longer
meet EPA standards.”

Cutting demand for gasoline requires getting retailers such
as Wal-Mart Stores Inc., Costco Wholesale Corp. and Wawa Inc. to
sell blends that exceed the 10 percent ethanol cap, Hollander
said. If ethanol or methanol were made from cheap natural gas,
they could be blended at 30 percent — so-called E30 — or even
as high as 85 percent.

Higher Blends

Ethanol and methanol boost octane in gasoline, and
automakers such as Ford Motor Co. have called for higher blends
to help them meet increasingly stringent federal fuel efficiency
standards. Boosting ethanol or methanol infrastructure would be
easier than building new pumps or charging stations for fuel
cell or electric vehicles, the proponents say.

“Having this high octane fuel in the mix would allow
better mileage,” said Brian West, deputy director for fuels at
Oak Ridge National Laboratory. According to West, 42 percent of
the energy in corn ethanol comes from natural gas.

Even though a gallon of pure ethanol has about 67 percent
of the energy provided by the same volume of gasoline, at
current prices a fuel with a higher mix could be sold at a
discount to gasoline, according to industry calculations. The
average retail price of gasoline rose 3.7 percent to $2.664 a
gallon this week, according to the Energy Information
Administration. Oil ended at $60.93 on Wednesday, highest since

Hofmeister said oil will increase to $80 a barrel by the
end of this year, from less than $50 in March.

Greenhouse Emissions

Two of Fuel Freedom’s founders, Aronoff and Hollander, are
former software entrepreneurs who sold their companies for
millions and now fund a variety of charitable causes. Emigrants
from Israel, they say they want to cut American dependence on
the combustible Middle East for oil.

Their plan has spurred criticism. Some environmental groups
oppose relying on ethanol derived from corn, saying the process
emits more greenhouse gases than gasoline production.

If a boost in corn production from more acres to meet
demand for the additive is taken into account, ethanol is worse
for the climate than gasoline, said Emily Cassidy, a researcher
at the Environmental Working Group, which opposes corn ethanol.

And ethanol or methanol from natural gas is not an
improvement over gasoline, said Dan Becker, director of the Safe
Climate Campaign, a Washington-based watchdog group.

“It takes an enormous amount of energy to produce them,”
he said. “The problem is that every one of these ideas sounds
great until you start looking at them closely.”

For Related News and Information:
House Lawmakers Say Renewable-Fuel Mandate Changes Are Probable
Biofuel Makers Seek to Ease Mandates to Head-Off Lawmakers
Refiner Annual Profits May Drop More Than 15% on Ethanol Credits
Stories on biofuels: NSE BIOFUELS <GO>
Top energy news: ETOP <GO>
Top climate news: TOP ENV <GO>
Global agriculture pricing: AGGP <GO>

To contact the reporter on this story:
Mark Drajem in Washington at +1-202-624-1964 or
To contact the editors responsible for this story:
Jon Morgan at +1-202-654-7370 or
Steve Geimann, Elizabeth Wasserman

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