Big Oil's Big Effort

by Loretta Sorensen (MidWest Producer) The best way farmers and consumers can weaken the grip of giant oil companies and further reduce U.S. dependence on foreign oil is to start asking their fuel retailer to sell E15. Oil companies are not happy with the combination of declining U.S. fuel sales and increas-ed ethanol usage. They're putting more effort than ever into maintaining their market monopoly. Their attempts to derail sales of E15 are coming in many forms.

Among the opposition tactics is the introduction of legislation in February by U.S. Sens. Roger Rickers (R-Miss.) and David Vitter (R-La.) to block sale of E15 to retailers. ...

Oil refiners don't make the same profit in handling E15 as when they make gasoline. They don't produce ethanol, so they're reluctant to see that market increase.

...Oil companies have been known to adjust existing franchise agreements so fuel retailers cannot sell E15. One option is to require carrying premium gasoline, which is a very low volume option and profit center for fuel retailers.

"We know of one retailer with 35 percent of his business coming from ethanol blends above E10, like E15 and E85," White said. "If the franchise requires them to carry the premium gasoline and there's no terminal that handles E15 in area, the franchise has essentially taken away 32 percent of that retailer's profits. Fuel retailers are struggling the way it is."

In recent years, oil companies have divested ownership of gasoline stations, and Big Oil now owns less than 3 percent of all gas stations. Typically, gas stations are small businesses. Today, 60 percent of all gas stations are owned by single station owners. The ownership change strengthens the oil companies' argument that they have no viable means of delivering ethanol-blended fuels and that the Renewable Fuels Standard is unworkable.

"Those small business owners want volume and margin and E15 can do that for them," White said. "Big Oil just needs to get out of the way."

White noted that current gasoline quality is lower than it has ever been. For decades the gasoline standard has been 87 octane. However, 84 octane, suboctane, is often blended with ethanol, which increases the octane level.

..."Optimum mileage from higher octane fuel is only possible with higher compression and technology like turbo chargers that capitalize on the higher octane," White said. "Auto makers are working to design engines for the new CAFE (Corporate Average Fuel Economy) standards of 54.5 mpg. When engines are designed for ethanol and not fossil fuel, mileage improves." READ MORE