The " Ethanol " Issue !

A few decades ago we were worried that the world oil supply was going to be depleted and OPEC had it's hand on the oil spigot, forcing up prices for what seemed a finite product.   How different that situation is today !    The world is literally awash with oil and the price has plummeted to a low of thirty dollars a barrel.

Several things have resulted in this change. Technology now allows for oil wells deeper under the oceans and more oil is being discovered, and better extraction is draining pockets of oil that were previously uneconomic.  At the same time, we have discovered new oil fields in sedimentary rock that can be tapped by what is called "fracking " and "horizontal "drilling.   Oil is now in over-supply and much of this is being stored in the surplus fleets of oil tankers, awaiting the oil majors to cut back production and raise prices to economic levels.

Back in those times of oil scarcity the wonder fuel that seemed to solve our problems was Ethanol. It was possible to run our cars on a fuel that did not come out of the ground but was grown in a paddock and harvested - and the preferred ingredient was corn, although other vegetation - including sugarcane - was possible.   A plan was devised to offer a petrol/ethanol mix in which ethanol provided ten percent of car fuel to make what we thought was a dwindling supply of oil last longer.

So petrol stations began to offer a product designated "E-10 ".   Many car owners were very suspicious and suspected it could harm their engines.   It delivered slightly less distance per litre than pure petrol and it was discounted accordingly, but only 2.5% of the fuel sold in New South Wales is E-10 and the target expected was to achieve 6%.

The Manildra group is the main producer of E-10 and this present glut of cheap oil has not been kind to them.  There is no doubt that E-10 is perfectly suitable for most mass produced cars, but those in the higher performance group need petrol with a higher octane rating and there is a distinct and quite irrational resistance to using Ethanol across the broad spectrum of car owners.

Strangely, the state government seems determined to force both motorists and the service station industry to meet that six percent Ethanol sales quota and draconian legislation is in the pipeline to  force all resellers to offer the product.   At present, many resellers do not stock E-10 in the cities and it is rarely available in country towns.   Many older petrol stations would need to completely replace their underground storage tanks and their pumping equipment to add this new product to their offering range - and that could be an expense that was uneconomic.

This legislation is certainly heavy handed.  A fuel reseller who does not offer E-10 would face a fine of $65,000 for a first offence - and should they continue to decline to offer that product the next fine would increase to $550,000.  The legislation is facing a mutiny in the New South Wales parliament and the government whip - Peter Phelps - has resigned from holding that post because of his opposition, foregoing the $20,000 a year salary increase the position delivered.

Implementing that six percent E-10 target would deliver an additional profit of $ 1.38 million to |Manildra, but basically it would be at the cost of "forcing people to buy something they don't want from people who don't want to sell it ".

Welcome to the mysterious world of politics.  Irrationality usually masks many a hidden agenda !