Tuesday, June 14, 2011
While ethanol represents a robust 10% of the national gasoline pool today, it represents a far larger share of our supply of domestically-sourced motor fuels. U.S. field production of crude oil was just above 2 billion barrels in 2010, while ethanol production topped 315 million barrels.
That means one out of every seven barrels of U.S.-produced liquid fuels was ethanol in 2010.
And because one 42-gallon barrel of crude oil yields only 19.5 gallons of gasoline, our domestic oil supply yielded about 39 billion gallons of gasoline. Meanwhile, some 200 biorefineries across the country produced 13.2 billion gallons of ethanol in 2010.
Thus, ethanol accounted for 25% — one out of every four gallons — of the fuel from domestic sources that was consumed by our nation’s gasoline vehicles.
Without question, ethanol is now a substantial component of the U.S. fuel mix, and its ability to extend oil supplies is clearly affecting world prices. And that’s exactly what has OPEC oil ministers worried. In confidential 2010 U.S. Embassy cables recently uncovered by WikiLeaks, Ambassador James Smith stated that the Saudi assistant petroleum minister had expressed concern that Saudis could be “greened out” of the U.S. fuel market by biofuels like ethanol. According to the cable, “Prince Abdulaziz (the Assistant Minister of Petroleum) noted that in 2009, the U.S. for the first time consumed more ethanol domestically than Saudi oil. Saudi officials watched the ethanol debate with great interest…”
You know you’ve officially arrived on the global fuels scene when you’re making Saudi oil sheiks sweat about losing market share. And increased competition isn’t something the Saudi oil juggernaut is looking for these days — they’re already a bit on edge as they come to terms with the “end of easy oil” and contemplate going after the costlier, dirtier oil that lies further beneath the desert sands. (Incidentally, all of the cables unearthed by WikiLeaks from the U.S. Embassy in Riyadh are worth reading. The Saudis’ concerns that their oil reserves have been overstated and their warnings about the effect of speculation on world oil prices are particularly interesting).
The message underlying all of this recent news about oil markets is clear. Whether it’s the surprising price spread between WTI and Brent crude, lower gasoline prices at the pump, or the frayed nerves of a Saudi oil minister, U.S. ethanol is clearly having a meaningful impact on U.S. and global oil supplies, demand, and prices.