Oligopoly power blocks ethanol
Everyone seems to be pushing ethanol. Sure, there are some objections that it is costly to make and that it is enriching Archer Daniels Midland and factory farms, but when President Bush, Detroit, pro-ecology groups, and farm bureaus all agree on something, it's a miracle.
But there is one group that using its oligopoly power to slow down the move to ethanol, according to a recent Wall Street Journal story ("Fill Up With Ethanol? One Obstacle Is Big Oil." 4/2/07),
Of course, there are still many cars that cannot use a high Ethanol blend and the cost of Ethanol is no cheaper than gasoline when you work out miles per gallon. Some technical problems have not been fully solved (corrosion is one), and the gas station owners need to install expensive new tanks.
But demand is building, even while only a small number of gas stations are selling ethanol now, and Big Oil is partly responsible. As the article puts it: "Although some oil executives voice enthusiasm for alternative fuels, oil-company policies make it harder for many service stations to stock a fuel called E85, a blend of 85% ethanol and 15% gasoline."
The vast majority of gas stations in the US carry the name of one of the big oil giants, and those firms lose sales every time a motorist fills up with ethanol. They have in place restrictive clauses in the contracts of the franchisees, so that they make it very difficulty for them to offer ethanol. For example, "At BP, guidelines for stations that carry the company name bar any mention of E85 on signs on gasoline dispensers, perimeter signs or light poles. The stations also can't let buyers use pay-at-the-pump credit-card machines." Similar policies are in place at other Big Oil chains.
As a result, less than 1% of the US's 170,000 service stations stock E85. And as the article points out, "Some experts say that to really take hold and be seen as a viable alternative to gasoline, the fuel would have to be available at, roughly, 10% of stations."
Ethanol enthusiast are pushing the product to both large retail chains that sell gasoline, and also to smaller, independent stations, none of whom have to follow Big Oil's orders, but it is an uphill battle. Wal-Mart is considering selling the product at its 400 or so service stations, and that may give a big boost.
Big Oil doesn't have the power to stop the rise of alternative fuels, but it certain has the power to slow it down. Companies from Chevron to ConocoPhillips have decided they will hold the floodgates of disruption back for as long as they can, while having the government help subsidize their operations with cheap oil from public lands.
