President Barack Obama's
tough fuel economy program for vehicles could put another damper on the
struggling ethanol business, because the alternative fuel packs a lower
energy content than gasoline.

Obama on Tuesday introduced the most aggressive proposal yet to
boost U.S. auto fuel economy standards -- a bid to reduce vehicle
emissions of climate-warming gases. [ID:nN19424837]. The proposal would
require passenger vehicles to average 35.5 miles per gallon by 2016.

It's going to be a headache for the ethanol industry, said Daniel Flynn, an analyst at Alaron Trading in Chicago.

Ethanol producers have intensified efforts this year to boost demand for the fuel as stockpiles rise.

They have pushed for wider development of service station pumps that
offer a blend of 85 percent ethanol and 15 percent gasoline. The fuel
is burned in specially made flex-fuel vehicles that can also run on
pure gasoline.

But flex fuel cars typically get 20 to 30 percent fewer miles per
gallon when they burn E85 due to ethanol's lower energy content,
according to the Web site

The industry has also called on the government to hike the level of
ethanol in gasoline burned in normal cars to 15 percent from 10 percent.

Unless ethanol makers convince the struggling auto industry to make
specially-built engines that overcome the mileage difference, Obama's
plan could be another blow to the industry that had been a big part of
former President George W. Bush's strategy to begin to wean the country
off foreign oil.


Over the past year ethanol distillers have battled record prices for
corn, their main input; overcapacity; tight credit; and anemic fuel
demand. This week, subsidiaries of Pacific Ethanol became the latest in
a long string of ethanol plants to file for Chapter 11 bankruptcy

It looks like they are going to lose out, Sarah Emerson, director
of consultant group Energy Security Analysis Inc in Boston, said about
the effect on the ethanol industry of the Obama program. I think the
fuel economy (plan) trumps the biofuels.

She said ethanol should remain popular near its Midwest production
center and be one of a portfolio of alternatives for cars. Those
include alternative fuels such natural gas and biodiesel as well as new
technologies such as hybrid cars, plug-in hybrids, and battery-powered

But, she said: We may see less movement for vehicles that use 85
percent ethanol. Federal mandates for mixing more ethanol into gasoline
also may need adjustment because of the slow pace of developing
next-generation cellulosic ethanol, which can be made from non-food
crops like grasses and fast-growing trees.


The leading U.S. ethanol industry group praised Obama's plan, saying
advanced engines could help ethanol-fueled cars go nearly as far as
gasoline-powered vehicles.

New engine technologies are in development that will capitalize on
the increased octane available from ethanol blended fuels, reduce any
mileage difference that may exist, and increase engine performance and
efficiency for future automobiles, Bob Dineen, the president of the
Renewable Fuels Association, said in a release.

But so far development of those technologies has been limited and it
is uncertain whether those engines will become common any time soon.