THE FUTURE OF AMERICAN GASOLINE

Excerpted from Matt Badiali’s article from Dr. Steve Sjuggerud’s DAILY WEALTH Newsletter

Henry Ford was almost a century ahead of his time. Ford’s design for the original Model-T, in 1908, called for the engine to run on a special form of alcohol - a substance called ethanol. After all, ethanol comes from corn, a plentiful resource. It’s safe and renewable.

He even called ethanol the fuel of the future. Ford, however, didn’t end up using alcohol. He found it less costly to go with leaded gasoline. This was a blend of gasoline and tetraethyl lead - a fuel additive that made engines run more efficiently.

Massive quantities of this lead-based additive were produced as America began its driving addiction. The thing is, lead is nasty stuff. Overexposure causes blindness, kidney failure and cancer. Workers in lead production were poisoned. So by 1979, the perils of tetraethyl lead caught up with it and its use was banned.

A new additive, and the first “new gasoline” was found to replace leaded gas. The new additive was MTBE (methyl tert-butyl ether). MTBE was hailed as a cleaner, safer alternative to tetraethyl lead.

Folks thought it was a silver bullet. It helped engines run smoother, and it burned clean as a whistle. The new gasoline burned so clean, it reduced airborne pollution, and some gasoline was “reformulated” with twice the MTBE content as regular gasoline. If a little was good, double was better. Gas with MTBE quickly took over as the “new” new gas, and air pollution-prone cities, like Denver and LA, soon required the use of it.

Today, we use 200,000 barrels of MTBE per day. The problem is, MTBE isn’t as safe as we thought. America recently discovered that MTBE leaks into the nation’s water supply, potentially causing major health problems and therefore requiring complicated treatment at taxpayers’ expense. There was so much MTBE in groundwater by the 1980s that legislators decided to do something. By 2004, six states outlawed the use of MTBE.

As of May 5, 2006 – every gas company in the nation, all the way from the tiny mom and pop station down the street to the biggest of the Big Oil companies, must replace the MTBE in their fuel lines with ethanol, or they face serious litigation.

This changeover is arguably the biggest shift in American energy policy of the past 27 years.

If it were up to Big Oil, they wouldn’t change a thing. This “switch” could cost them an additional $25-$80 billion dollars over the next 12 months. But this mandate comes directly from the U.S. Congress and President Bush himself.

The U.S. Government mandates that Big Oil must add Henry Ford’s fuel of the future – ethanol – to all gasoline produced in the United States.

There are a handful of reasons for this mandate. But the biggest one is this: Gas burns cleaner with ethanol added — it’s more environmentally friendly.

The deadline has Big Oil scrambling to install ethanol-infrastructure in their refineries, and to buy up as much ethanol as they can get their hands on. This frenzy is not only causing a boom in the price of ethanol, but a construction boom as well. Right now, there are 97 ethanol plants in the United States. That number should double in the next few years. Over 30 plants are currently under construction. There are plans for another 150 new plants and extensions.

You see, according to Section 1501 of last summer’s Energy Policy Act, America has to use 7.5 billion gallons of ethanol and biodiesel annually by 2012,” nearly 90 percent increase over today’s usage. That’s a guaranteed long-term market for ethanol.

While ethanol may just be a short-term fix to a long-term energy problem that’s only intensifying in its severity, ethanol is, at least for the next 6 years, here to stay.