Oil prices are acting stubborn by staying above $50 a barrel. Our economy is adjusting to these high gas prices, but every consumer in America would like to see some kind of solution.
In August, Congress is expected to vote on an energy bill that has some quences for us. The mainstream media will spend most of the time talking about the drilling rights in Alaska, but there is a shorter-term and higher-impact portion of the bill that can offer you immediate relief.
Ethanol. Indiana residents, and especially our farmers, have had this silver bullet in the arsenal for years without much interest. It was primarily because the economics didn’t make sense. But with oil past $50 and, I think, on its way to $100 in the next three years, the prospects for ethanol get a lot more interesting.
Twenty years ago, producing ethanol consumed more energy than it produced. But massive efficiencies in production and better material management have changed that. At $50 a barrel, ethanol is about 30 percent cheaper than gas. If you burn E85 fuel in your car, which is 85 percent ethanol and 15 percent gas, you will realize only a 10-percent degradation in fuel economy, so you wind up saving about 20 percent right away in fuel costs.
Today, there are 5 million cars in America that can handle E85 fuel and a vast majority of the rest of the automobiles can be converted with a $100 computer chip. The savings at the pump would be even higher if the retail gas stations passed along the healthy government tax credit, but they usually end up keeping that.
There are a series of ethanol-enhancing incentives in the energy bill. In Putnam County, a new ethanol plant opened recently with the capacity to produce 65 million gallons a year. Local corn growers will see a 15-cent price boost per bushel if they sell to the plant. If your car can accept E85 fuel, assuming a few gas stations convert some of their pumps, which is cheap and easy to do, you will soon be able to tell those oil emperors in the desert to pound sand.
As a nation, we are close to cutting our oil consumption at least 10 percent if we really embrace E85 fuel. This has massive positive implications, particularly for Indiana.
There is even an immediate business opportunity for someone with a little gumption. Those conversion chips I mentioned earlier are not mass-produced. There are a few underground Web sites that sell them, but the chips are made in someone’s basement. Almost every car in America can convert with this chip. If you do this and make a billion dollars, don’t forget about us little people!
You can find more information about E85 fuel at www.e85fuel.com. The largest producer of ethanol is Archer Daniels Midland. The stock might get a boost if the energy bill passes, but right now the stock is not doing much.
Hauke is a local money manager. His column appears weekly. Views expressed here are the writer’s. Hauke can be reached at 566-2162 or at email@example.com.