It Isn’t The Blending Wall We Should Be Worried About

New Math At The EPA

If you look at consumption statistics from the EIA you would find that the US consumed about 42 billion gallons of diesel and 136 billion gallons of auto gas in 2009.  Those stats show a decline in diesel usage and a tiny increase in auto gas usage over 2008, a year when both stats declined over 2007.  In 2009 the EPA mandated that 10.2% of that total consumption of 178 billion gallons of liquid hydrocarbon fuel be from renewable resources.  That would result in about 18 billion gallons of renewable fuel of which at least 10.5 billion gallons had to be fuel ethanol as outlined in the table in EISA 2007 (Section 202, page 31).  What is strange is that .6 billion gallons had to be “Advanced Biofuel” resulting in the total RFS requirement of 11.1 billion gallons.  So what was the other 6.1 billion gallons required by the EPA?

The EPA has just announced the 2010 standard.  The EIA 2010 projection is:  “Consumption of motor gasoline rises by 50,000 bbl/d, or 0.6 percent, and distillate fuel consumption increases by 80,000 bbl/d, or 2.1 percent.”  This would result in a diesel usage of  almost 43 billion gallons and an auto gasoline usage of  almost 137 billion gallons for a total of 180 billion gallons of liquid hydrocarbon fuel.  The EPA has set the renewable fuel mandate to be 8.25% or almost 15 billion gallons of renewable fuel.  Quite a drop don’t you think?  Of the total 12 billion gallons has to be fuel ethanol and .95 billion gallons has to be “Advanced Biofuel” for a total RFS mandate required by EISA 2007 of 12.95 billion gallons.  So what is the other 2.05 billion gallons of renewable fuel required by the EPA?  Anybody know?

Now here is the real problem, discounting the math which doesn’t obtain.  This year there was supposed to be 100 million gallons of cellulosic ethanol in that .95 billion gallons of “Advanced Biofuel” number according to the hard coded table in EISA 2007.  The EPA has lowered the quantity to 6.5 million gallons required.  Anybody noticing the huge difference! The change was made after 30 companies said they could not produce the required 100 million gallons.  Thirty companies couldn’t come up with 100 million gallons of cellulosic ethanol?

Do you know how many years the government has been throwing your tax dollars at cellulosic ethanol?  According to The Cellulosic Ethanol Site “Modeling and experimental studies on dilute hydrolysis systems were carried out during the first half of the 1980s. DOE and USDA sponsored much of this work.”  The industry has said that a viable commercial cellulosic ethanol process is five years away for the last three decades and today they still say that “we are only five years away from a viable cellulosic ethanol process”.  And according to the above site your tax dollars are still being showered on them:  “In March 2007, the US government awarded $385 million in grants aimed at jumpstarting ethanol production from nontraditional sources like wood chips, switchgrass and citrus peels. Half of the six projects chosen will use thermochemical methods and half will use cellulosic ethanol methods.”  Apparently none of those 2007 grants produced much of anything since 30 companies can’t even make 100 million gallons of ethanol this year.

But the real crux of the problem is that after 2015 all of the increase in the ethanol mandate in EISA 2007 must be met by “Advanced Biofuels”, corn ethanol will be capped at 15 billion gallons.  In 2015, 6.5 billion gallons of “Advanced Biofuel” must be produced of which at least 3 billion gallons must be cellulosic biofuel (ethanol).  Never mind that the ethanol blending wall will be met no later than 2012, the true idiocy of the RFS mandate in EISA 2007 will be totally exposed when there is no way to get from 2015 to 2022.  Of course none of it will be needed unless the ethanol industry, Congress and the auto industry figure out how to move to E85 which was the whole point of EISA 2007 in the first place.  Read the act, it is a corporate welfare act for E85.  E10 is never even mentioned and there is no corporate welfare for E10, E15, ad nausea other than the blenders credit which actually pays for infrastructure upgrades for the oil distribution industry.

E15 Will Make No Difference Now

By delaying a decision about allowing E15 in our gasoline for at least another six months, the EPA has sealed its fate as a non issue in avoiding the blending wall, especially considering the conditions it is talking about, like allowing it only for cars made on or after 2001 and not allowing its use in the marine industry and small engines.  These kinds of special conditi0ns will severely limit the ability to deliver any significant amount of E15 in time to avoid the blending wall.

Clearly government bureaucrats don’t have a clue about gasoline distribution and delivery.  We have the same problem on the state level here in Oregon, a mandatory E10 state.  E10 is causing economic dislocation in the marine and aviation industry and poses a threat to the public safety industry.  We have exceptions in our law for all of those users, but it is permissive, i.e. they have to find the supply.  Suffice it to say not many outlets want to supply it because ethanol free gasoline cannot affect the delivery of any other grade of gasoline.  And there is the rub.

The vast majority of gasoline stations only have two tanks for gasoline, and maybe one for diesel.  The distributor supplies premium unleaded to one tank and regular unleaded to the other tank.  If the station supplies mid-grade it is blended in the modern three button pumps you see in most gas stations.  In Oregon, both grades must be E10.  Any station is “allowed” to sell ethanol free gasoline if they can find it, but if they choose to pump ethanol free premium, the mid-grade must still be E10.  Do you see the problem?  Two tank stations cannot pump any ethanol free gasoline in Oregon, even if they wanted to, and more than 90% of the gas stations in Oregon are two tank setups, plus branded stations wouldn’t be allowed to sell ethanol free premium, mid-grade E10 and regular E10 by their brander.  So practically nobody offers ethanol free gasoline unless the station is an oddball that had an additional tank and manifold for off road diesel or is an unbranded three tank station, both setups I have run into.  Out of more that 1600 stations, and the number is declining every year, less than 30 of them offer any ethanol free gasoline in Oregon, along with 43 marinas and 1 airport.

Lets see how this applies to the E15 waiver.  Remember, the vast majority of the gas stations in the country have only two gasoline storage tanks.  If the E15 waiver restricts E15 only to cars made on or after the 2001 model year, who will choose to pump the E15?  All of the two tank stations will have to choose, either E10 or E15.  They don’t have tanks to store both E10 regular and premium and E15 regular and premium.  Do you think any station outside a few major metropolitan areas that can reasonably target those chosen new car E15 customers will choose E15?  If they do they cut their clientele significantly while the station that chooses E10 can serve all comers, even though E10 causes property damage and is a threat to public safety.

There are a couple of other problems having to do with infrastructure compatibility and liability.  There is a knotty problem with U/L approval of pumps and there are problems with storage tanks.   So how many service stations in this economy are going to jump at the chance to pump E15 without U/L approval for their pumps and possibly damage their storage tanks?

And, so called, “Blender Pumps”, the darling of the ethanol industry right now because they can “dial a blend”, aren’t going to provide much relief either.  They have an even bigger problem with U/L because they can theoretically blend anything between E10 and E85 and they represent as big an infrastructure upgrade as E85 and in this economy how many stations can afford to replace all of their pumps with new more expensive blender pumps and hope one of their tanks can withstand E85?

There is one further small wrinkle in this scenario nobody addresses, and that is the refinery product used to make ethanol blended gasoline called BOB.  Somebody needs to do some serious research on whether one BOB can be used for multiple blending levels.  I hear conflicting reports about this problem but gasoline refining is an opaque business and I haven’t seen anybody with knowledge discuss it.  I brought it up with the only refinery representative I know and he said information about BOB was confidential.

On top of that we are months away from any decision and the clock is ticking.  Next year more than 12 billion gallons of ethanol must be blended with gasoline, enough to take at least 120 billion gallons of gasoline E10.  That would take 88% of all of the gasoline consumed this year E10, but gasoline consumption is declining so that number may actually be closer to 100%.  Whenever the E15 decision is made it is going to take months if not years to figure out the logistics of which stations are going to take the risk to pump E15, and actually get product delivered.  By that time the ethanol industry will be up against the blending wall again.  Time is of the essence and time is running out.

Of course the whole scenario is absurd.  Anyone who has actually ever read the federal RFS mandate in EISA 2007 knows that it has nothing to do with E10 or E15 or even E20 or E30.  They are never mentioned in the act.  The only ethanol blending level that is mentioned is E85 and copious amounts of your tax dollars are offered to any taker that will invest in E85 infrastructure, supply and delivery or make flex-fuel vehicles and sell them.  It is a giant corporate welfare act for E85.  You get nothing more than the blenders credit for any other level.

So explain to me again how E15 is going delay the blending wall and save the ethanol industry.  The only thing that might save the ethanol industry is to invest in E85 delivery infrastructure and design and build E85 only engines, ones that use ethanol efficiently.  Flex-fuel vehicles are dinosaurs already.  They are neither efficient gasoline powered cars, nor efficient E85 cars.  They are nothing more than a computer controlled Rube Goldberg contraption.

Only 30 Days Left For EPA To Rule On E15 Waiver … Or Maybe Not

It will be interesting to see how EPA rules on the E15 waiver request.  It could go a number of ways.  Whichever way it goes there are going to be some major repercussions, both economically and legally.

Lets examine some of the scenarios.

1.  The EPA could do nothing, just as they did when the 10% ethanol waiver was proposed years ago.  By doing nothing, E15 will be allowed.

2.  The EPA could rule in favor of the E15 waiver.

3.  The EPA could allow the E15 waiver with exceptions.

4.  The EPA could deny the E15 waiver.

5.  The EPA could deny the E15 waiver and prohibit the blending of ethanol in all premium unleaded gasoline.

In scenario 1 & 2, the lawsuits will fly.  There are no car warranties that allow ethanol blend levels above 10%.  Maybe the EPA plans on using TARP money to pay for the damage to cars, boats and small engines.  Actually, nothing will probably happen for quite some time.  The distributors are going to have to think about the liability of selling E15.  They will probably be targets of the damage suits.  Service stations are going to have to think about their liability, since they will also be the targets in the damage suits, plus they have no U/L approved E15 pumps, so in some states they may not even be allowed to sell E15.  Any way you look at it, it is going to be a long time before E15 starts showing up in the marketplace widely.

Scenario #3 is the most interesting and troublesome for the ethanol industry.  The EPA could allow E15 for certain cars and might possibly prohibit the blending of ethanol in all premium unleaded gasoline so that those users that must have ethanol free gasoline have a universal source, like the marine and aviation industry and public safety.  Of course if that happens there goes 10-12% of the gasoline supply that they could be putting ethanol in.  Perhaps the ethanol industry shot themselves in the foot in their greedy haste.  After all the federal RFS mandate was supposed to be incentivising the production of E85 and flex-fuel vehicles, not making all of the gasoline in the country E10.  Since the EPA is the only department in the government responsible for ethanol policy and oversight, the liability rests on their doorstep.  The economic damage and possible deaths that occur because of ethanol blended fuel being used in equipment that it should not be used in will be entirely the result of their policy decisions.

Scenario #4 will have interesting consequences.  It will force the distributors to put ethanol in every last drop of gasoline they can find in the next two years as they hit the blending wall, resulting in more economic damage in the marine and aviation industry and small engine and public safety areas.  The ethanol industry will make a bald attempt at buying the corn state senators to force an E15 bill through congress.  Those senators are already making loud noises about such a bill.

Scenario #5 is the most ironic.  I’ll leave it to the reader to figure out the consequences.  The ethanol industry should be careful what they ask for.  If the EPA reads EISA 2007, this would be the logical scenario, then they would tell the ethanol industry to figure out how to make E85 viable.

But then again the EPA may not rule by 1 December 2009:  http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE5A84XO20091109 Which makes no sense, because whatever they finally rule lawsuits or congressional action will ensue.

Neither A Whimper Nor A Bang … just a letter:  Here

Mythbusters: E10 Reduces Our Dependence On Foreign Oil

It has been said over and over, ad infinitem, “E10 reduces our dependence on foreign oil.”  That should be ad nauseum, because there is no evidence whatsoever that it does or has.  It was stated repeatedly by the ethanol lobby and the ethanol booster politicians in Oregon in 2007 when the state passed its mandatory E10 law.  Strangely nobody questioned the premise, they still don’t, even after there was widespread anecdotal evidence right after implementation of E10 statewide, that it wasn’t true, or at the very least wasn’t provable.

THERE HAS NEVER BEEN A LARGE SCALE, STATISTICALLY SIGNIFICANT, INDEPENDENT STUDY OF MILEAGE BEFORE AND AFTER AN E10 PROGRAM HAS BEEN IMPLEMENTED.

Go ahead Google all you want.  Nobody has ever done one.  Oregon sure as heck didn’t do one.

And this is the key problem.  It appears that a lot of cars see mileage decreases in excess of the predicted 1 – 3% that all of the ethanol boosters say should happen.  If it did then they could rightly claim that E10 is reducing gasoline usage by maybe 7%.  But drivers are reporting mileage losses in excess of 10%, sometimes more than 30%.  If that is the case we may actually be using more gasoline under our mandatory E10 program than before the program.  So much for reducing our dependence on foreign oil.

So why could this be happening?  There is a very probable explanation, perhaps somewhat complicated, but it makes sense.  It dates back to the technology used by car manufacturers to meet the U.S. Clean Air Act requirements for 1981.  The new cars switched to sophisticated computer controlled electronic fuel injection systems.  Since that time there have been a number of versions of the fuel control and pollution control systems, the latest being Technology Class 5 vehicles manufactured from 1996 on, which are classified as Low Emission Vehicles (LEVs).  These hi-tech engine control units (ECUs or PCMs) are software programmed to control fuel injection and timing to provide optimum engine operation while minimizing tail pipe pollution levels in conjunction with pollution control devices such as the catalytic converter.  However the software algorithms and adaptive range capabilities for dealing with gasoline additives, such as ethanol, are proprietary.

Before 2006 there were no states with mandatory E10 laws and the highest ethanol blending levels were about 3% for certain areas with winter CO air quality problems.  It is doubtful that any of the ECUs had parameter tables, called fuel maps, that understood what was going on when 10% ethanol was put in the gas tank with its vastly increased oxygen level.

According to this old report, http://www.nmma.org/lib/docs/nmma/gr/environmental/32206.pdf (read the Technical Issues Section starting on Page 3), different ECUs may produce different results on higher ethanol blends.  In fact the latest ECUs may be programmed for very narrow oxygen bands:

“In certain vehicles, the oxygen sensor could have a limited ability to transmit voltage, and could be unable to transmit voltage levels commensurate with the level of oxygen present in the fuel (Cagle 1999).
NOx emissions may be elevated due to the PCM’s inability to compensate for higher oxygen levels. The argument further maintains that ULEVs and other future technology vehicles will require an air/fuel trim within a very tight range to achieve emissions compliance.”

It is doubtful then that any ECUs, or PCMs, built before 2006 have fuel maps that take into account 10% ethanol in fuel.  The report also states that the problems may be worse for earlier versions of ECU / pollution control systems.

Is this why many cars are seeing a much worse mileage decrease than is predicted by the 3% loss of energy in a 10% ethanol blend?

EISA 2007 Is A Hazard To Public Safety

Who will be the first human casualty of the unintended consequences of EISA 2007

Today is the last day to comment on the E15 waiver request that is before the EPA.  I have learned a few things from those comments, none of them bode well.

I wonder if anyone at the EPA actually understands the federal RFS mandate.  You would think they should because they are the federal department tasked with implementing the mandate.  Anyone with an ounce of sense would look at the ethanol production quota table in Section 202 and instantly recognize that the Act was designed to produce and distribute E85.  The production demands are so large that by 2011 – 2012 there will be enough ethanol produced to take every gallon of gasoline in the U.S. E10 and all of the tax incentives and corporate welfare built into the Act are for E85, E10 is never mentioned.

So what happens when all of the gasoline in the U.S. is E10.  Something very interesting.  The Director of the Division of Air Resources, New York State Department of Environmental Conservation commented:  “E10 is not simply ethanol added to finished gasoline. Since most gasoline at retail contains ethanol, the industry factors the addition of ethanol into the formulation of the petroleum-based portion of the final blend. The chemical properties of ethanol and its dilution impact allow refiners to produce a petroleum-based blendstock which when combined with a specified amount of ethanol (or other oxygenate) results in a final blend with the desired legal and market properties.  The petroleum based blendstock, in most cases, would not qualify as gasoline or be legal to sell as gasoline.  For RFG this blendstock is RBOB. For conventional gasoline it is CBOB, and for California RFG it is CaRBOB.”

Does anyone at the EPA understand that there won’t be any ethanol free finished gasoline available for those engine applications that cannot run on ethanol belended gasoline?  Do they understand what will happen to the marine industry, aviation industry and public safety organizations that rely on small engines for their pumps, generators and portable tools?  Is the EPA prepared for the liability and litigation that will ensue from their decision to allow all of the gasoline in the country to go E10 or higher?  Liability will rest directly with the department since it is tasked with implementing the deeply flawed RFS mandate.

My final comment to the EPA for the E15 waiver can be read here.

Ethanol Free Gasoline Will Probably Disappear

There is a chilling comment in the E15 waiver process that is now before the EPA that indicates that it is likely that ethanol free gasoline will essentially disappear as we know it.  Maybe there will be small amounts available in drums just as leaded and special racing fuel is now but it will be prohibitively expensive.

This is what the Director of the Division of Air Resources, New York State Department of Environmental Conservation stated in his comment:      (Comments in italics are my comments)

“E10 is not simply ethanol added to finished gasoline.  Since most gasoline at retail contains ethanol, the industry factors the addition of ethanol into the formulation of the petroleum-based portion of the final blend.  The chemical properties of ethanol and its dilution impact allow refiners to produce a petroleum-based blendstock which when combined with a specified amount of ethanol (or other oxygenate) results in a final blend with the desired legal and market properties.  The petroleum-based blendstock, in most cases, would not qualify as gasoline or be legal to sell as gasoline.  For RFG (Reformulated Gasoline, the really clean stuff required in certain areas) this blendstock is RBOB.  For conventional gasoline it is CBOB, (this is what is coming down the Olympic pipeline to Washington and Oregon) and for California RFG it is CaRBOB.”

What this means is that not only will 91+ AKI premium unleaded disappear as we knew that it would, but 89 AKI CBOB used for making 91+ AKI premium E10 cannot be used for aircraft with the EAA STCs, low compression Petersen STCs, nor the 85 HP Rotax engines because it is not “legal” gasoline.  Essentially nobody will be able to order any ethanol free gasoline product.  Neither will the marine industry be able to find any legal ethanol free gasoline.

Please realize that the ethanol blendstock is cheaper to make for the refineries and results in more gasoline product because the AKI is lower, so they have a huge incentive to make this stuff.  We also know from the testimony of WSPA in the Washington state public hearings, for a marine protection bill, that CBOB is the only gasoline product that is going to be available at the terminals in short order in Washington.  It is already the only product delivered to Oregon since we are a mandatory E10 state.  We know that the only ethanol free product coming into Oregon is by barge from somewhere else, other than the Washington refineries.

Where Are The “Renewable Fuel” Cars?

Flex-Fuel Car Is An Oxymoron

“Renewable Fuel” is definde as E85 in the federal RFS mandate, EISA 2007.  So why doesn’t anyone make a “Renewable Fuel” car?  All we have are these bastardized Flex-Fuel vehicles that try to live in two worlds and don’t do either very well.  It all started out so car companies could get around the CAFE standards because flex-fuel vehicles had huge CAFE credits and big federal tax incentives, and when ethanol was $1 / gallon cheaper than gasoline, E85 was attractively priced even after your Yukon took a 30% mileage dive because it was just a regular gasoline engine with a big computer and bigger fuel injection rails.

Those days are gone.  But the ethanol quotas in EISA 2007 are hard coded, in ever increasing amounts, year after year until 2022.  The only way the ethanol is going to be used after about 2013 is if we have lots of cars that use E85.  So why isn’t anyone working of the design of engines that can efficiently use just E85, an engine with the high compression ratio that E85 allows and a computer that can figure the timing for that fuel.  If these engines were available for the car bodies people want, they should sell just as well as today’s cars that have engines that were never designed for ethanol.

Instead of raising the blending limit for non flex-fuel cars, why isn’t the ethanol industry demanding the solution that EISA 2007 was designed to do, E85 cars and the fuel delivery infrastructure to support them.  God knows that they got an incredible number of tax incentives in EISA 2007 to do just that.  So why are they putting their money on cramming E15 down our throats for cars and engines that were never designed for “Renewable Fuel”?  With all the negative publicity, property damage, lawsuits and possible deaths when public safety devices that have engines that were never designed to run on ethanol blended gasoline fail, you would think that the ethanol industry would be working on getting E85 car engines designed and E85 fuel delivery infrastructure in place for them.

Ethanol Industry Is Its Own Worst Enemy

On March 26, 2009, I testified before the Oregon Legislature on four ethanol related bills.  Another person testified that government has been giving taxpayer money to the ethanol industry for more than 20 years and the only result is the proof that the ethanol industry couldn’t survive without subsidies.  There were several ethanol industry representatives there begging for Oregon to stay the course with its mandatory E10 law, and even embrace the coming E15 waiver that is before the EPA so that the ethanol industry in Oregon could continue to “prosper”.  Of course they didn’t mention that the biggest ethanol plant west of the Rockies, the Cascade Grain Products 113 MGY plant in Clatskenie, OR was in Chapter 11 proceedings with a plant that never worked reliably in the 6 months it was in business.  And most interestingly they didn’t mention that even if Oregon repealed its ethanol mandate, nothing would change, because the federal RFS mandate, EISA 2007, is driving all ethanol blending in the country and there would be no reason for the gasoline distributors to change their blending habits in Oregon.  Why would they?  They are taking the federal blending tax credit to help pay for the infrastructure that they were forced to install by the state and they just pass along the higher cost of ethanol, now that it costs more than gasoline.  Oregon has the highest average gas price in the Northwest.  Plus, nobody mentions that the gasoline refiners are shipping “sub-octane” blending product into Oregon because all of our gasoline is E10, thus saving them production cost.  They are not interested in changing this gold mine, especially when so many cars get much worse mileage on E10.  Nobody knows if the gasoline producers are actually selling more gasoline now than before the mandatory E10 law went into effect.  The science has never been done.

But the stupidest thing that the Ethanol industry does is to completely ignore the property damage that ethanol blended gasoline does.  More than 80% of the public testimony was about the problems that E10 is causing to average citizens in Oregon every day.  You would think that the ethanol and gasoline distributors would want to avoid negative publicity and lawsuits.  But apparently that is just “the cost of doing business.”  The most telling testimony was from one of the representatives on the committee who said that her husband traveled some distance over to Washington to get ethanol free gasoline for his boat.

I wonder what it is going to take to get the ethanol lobby to recognize that they should only be selling their product to modern, computerized fuel injected cars.  By insuring that ethanol free fuel is universally available to everyone who really needs to have it they could save themselves a lot of grief.  If all premium unleaded gasoline was ethanol free, that would make it possible for those who need it to survive.  And lest you think this isn’t a serious problem, businesses are being ruined by the unintended consequences of EISA 2007.

I also wonder when we are going to read the first article where a generator or pump or portable power tool stopped working during an emergency because of ethanol, with serious consequences.  It is going to happen.  But it doesn’t have too if only the ethanol and gasoline industry would do the ethical thing and insure that all premium unleaded fuel was ethanol free.

EISA 2007 = E85 Corporate Welfare, So Why Are We Getting E10?

EISA 2007 Is Explicit:  Renewable Fuel Is E85

In Section 241 of EISA 2007, the term Renewable Fuel is defined as: “The term ‘renewable fuel’ means any fuel—‘‘(A) at least 85 percent of the volume of which consists of ethanol; or” (goes on to define the bio-diesel renewable fuel). The renewable fuel described is commonly known as E85.

There is no mention of E10 in the act.  So, why are the hard production quotas in the act turning all of the gasoline in the United States into E10?  The unintended consequences of this act are causing economic havoc for the people who have engines that should not use ethanol blended gasoline.  It is even putting some people out of business.

Stop the madness.  Write your congress critters and explain to them what is happening because of EISA 2007 and ask them to repeal the ethanol mandates in the RFS section and to pass a law banning the blending of ethanol in premium unleaded gasoline and accurately label pumps that have ethanol.  This is a matter of public safety.

Ethanol Mandates, A Black Swan?

Nassim Taleb defines The Black Swan as “The Impact of the Highly Improbable.”  It has led me to the conclusion that the ethanol mandates of the states and especially the federal RFS mandate of EISA 2007 are a Black Swan.  Who could have predicted the negative economic impacts that are being caused by the misguided government manipulation of the gasoline market by forcing ethanol blending.

First, everyone should understand that ethanol blended gasoline on a mass scale should only be allowed in computer controlled, fuel injected cars.  It has no place in fixed jet, carbuerated engines, especially in humid environments.  This is why every state that passed a mandatory ethnol fuel law provided for the availability of ethanol free gasoline for certain engine applications, most notably marine and aviation use, antique and classic cars and motorcycles, snowmobiles and like recreational vehicles, and small engines used in stationary applications like generators and pumps and 2 cycle engines used in tools.  None of the states, except Missouri, made ethanol free gasoline easy to get, but all of the statutes have exemptions.  Missouri did the right thing and prohibited the blending of ethanol in premium unleaded gasoline so it was widely and easily available for everyone that needed it.  Be advised that there are only five states with active mandatory E10 laws, the rest of you have no exemptions and no protection.

Having said that, one must wonder what the federal politicians were thinking when they passed EISA 2007.  It contains a massive production quota that does not take into account what the annual gasoline consumption in the US might be.  Of course the entire RFS portion of the bill is predicated on a massive build up of Flex-Fuel cars and fueling infrastructure to support them.  But there was no guarantee when the bill went into effect in 2008 that the auto industry was going to embrace Flex-Fuel cars on a massive scale and gasoline dealers were going to install the expensive infrastructure to support them, especially considering that this created a chicken and egg scenario.  The gasoline distributors and stations would only add infrastructure if there were cars to buy E85, and Detroit would only build cars if there was demand created by the availability of cheap E85 pumped at omnipresent gas stations.  None of that is going to happen in this crumbling economy.  But the inflexibility in the federal statute is forcing the gasoline distributors to put the ethanol in every bit of gasoline that they can find, even though in a couple of more years they will crash into the “blending wall“.

The blending wall is truly a Black Swan.  But there are so many others.  One of the most ironic is the battle over the blender pumps which is causing states to be sued by the American Petroleum Institute for putting into effect laws governing the delivery of ethanol that they believed would economically benefit their citizens.  Now the citizens get to pay for the lawsuits.

The most  unfortunate Black Swans are the economic damage caused by pigheaded greed that could have been avoided had people in the ethanol and gasoline industry recognized that ethanol blended gasoline can cause property damage and should have only been allowed for computerized fuel injected cars.  But it appears that greed and the politicians ignorance got the best of them and now ethanol will be in all of the gasoline, and the only remedy for those who suffer damages is to sue.  The saddest Black Swans are the people put out of business who don’t have the economic clout to sue.  The problems with ethanol and boats and airplanes and 2 cycle engines, etc. have been known for a decade, yet nothing has been done to avoid the negative publicity and lawsuits.  This particular Black Swan could have been avoided by prohibiting the blending of ethanol in premium unleaded gasoline and labeling all gas pumps accurately as to ethanol content.  But then that is what a Black Swan is, the impact of the highly improbable.  I am indebted to Mr. Taleb for helping me understand the world I live in.