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Marketing E-85

Agriculture.com Staff 04/19/2007 @ 6:56am

The development of a new industrial sector like ethanol faces two major challenges: Production and marketing. The first challenge has been met by corn farmers who have financed and organized ethanol cooperatives to provide added value to the low priced corn they were producing. As they developed the industry they lobbied for and received fuel tax credits, tariff protection, and in some states the mandatory blending of 10% ethanol in the gasoline as an oxygenate to reduce some forms of air pollution.

In some ways ethanol is like the aging actor who suddenly finds herself in a hit TV series with the press all abuzz as they proclaim her an "instant success." It only took 30 years of casting calls and bit parts to achieve "instant success."

With high oil prices due to Hurricane Katrina and Middle East instability, ethanol went from inside pages in farm publications to front page news as the President and auto company officials proclaimed ethanol to be an important element of the nation's quest to reduce its dependence on oil from politically unstable regions.

Add to this concern about global warming and the role played by the burning carbon from fossil sources and the number of ethanol plants in the planning process began to mushroom as private investors joined farmers in seeking to become a part of the ethanol boom. Major oil firms began to reposition themselves away from seeing themselves as petroleum suppliers to envisioning themselves as energy suppliers.

None have done this clearer than BP. BP has used its initials to proclaim that BP means "Beyond Petroleum." As they say on their global Web site, in addition to "the development of new ways in which to produce and supply oil and gas -- through clean fuels, through greater efficiency and through substitution -- particularly of gas for coal in the power sector," Beyond Petroleum involves "working to bring the next generation of biofuels to market."

Here comes the current marketing challenge facing ethanol producers. Despite the verbal commitment of BP and the other major oil companies to renewable energy, an April 2, 2007, Dow Jones news story reports "oil-company policies make it [hard] for many service stations to stock a fuel called E-85, a blend of 85% ethanol and 15% gasoline."

According to the story, the major oil companies make it difficult to sell E-85 through a series of policies including: (1) requiring stations "to purchase all the fuel they sell from the oil company" and the oil company does not produce ethanol, (2) limiting local service stations from advertising E85, (3) not allowing service stations to charge E-85 on oil company credit cards, and (4) requiring "that any E-85 pump be on a separate island, not under the main canopy."

As a result less "less than one percent" of fuel stations "stock E-85." The story reports that "some experts say that to really take hold and be seen as a viable alternative to gasoline, [E-85] would have to be available at, roughly, 10% of stations." One way to achieve this goal would be for non-petroleum based companies like supermarkets and big box stores to offer E85 at their fuel stations.

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