True North

Two years ago, Governor Pawlenty announced an ambitious plan to force (via government fiat) the market toward more and more use of corn ethanol. At that time, AAA and I (among many others) wrote copius posts about why forcing market acceptance of corn ethanol (at the expense of other fuels including gasoline). However, the Star Tribune reports that the market bit back at Governor Pawlenty.

It was announced with fanfare -- Gov. Tim Pawlenty's plan in 2006 to make highly concentrated ethanol fuel available "everywhere" in Minnesota within a few years to reduce gasoline consumption.

But now, with gas prices a torrid issue for voters, the number of Minnesota service stations installing pumps for E85, a blend of 85 percent ethanol and 15 percent gasoline, is far off the pace needed to reach the goal set by Pawlenty.

In a recent interview, the governor tempered his longstanding enthusiasm for corn-based ethanol, a politically potent product in a farm state, but one also blamed for increases in the cost of food.

Tepid consumer demand and perceived roadblocks to wider access to the fuel have been cited as reasons why many station owners are reticent to install E85 pumps, despite the incentive of state subsidies. The shortcomings demonstrate the fragility of any bold predictions on energy.

The Governor forgot rule one of a market economy - supply and demand. The demand for E85 is just not there YET. Ethanol can not be burned for long in a regular gas engine. Many mechanics have reported fuel pump and fuel injector problems as a result of burning E85 in a regular gasoline engine and there simply are not that many E85 flex fuel vehicles on the road right now. Under the current economic situation flex fuel vehicles are simply unaffordable for the vast majority of the population. Plus there is the growing uncertainty as to whether E85 is going to be the "final" answer.

Most service-station owners remain uncertain about E85's prospects, said Lance Klatt, executive director of the Minnesota Service Station Association.

"They're waiting to see what ethanol really's going to do," he said. "Is it really the future, or is hydrogen the future? They don't want to invest a lot of money and time in something that may be a fad."

Either way, sales of E85 is not what the Governor expected.

There's no sure answer for the owners of T&M Express, which installed E85 pumps in 2007 at stations in Nevis and Park Rapids. E85 volume has increased from 1 percent to 2 percent of their sales.

"People just don't have the vehicles for it," said Nancy Lewis, who manages the stores for her parents.

Emphasis mine. People don't have the vehicles, not necessarily because the automobile manufacturers aren't making them (as our esteemed Junior Senator testified) but because they are too expensive for most drivers.

I know that this is a radical thought for some people, but how about we let the market decide what alternate fuels are going to work best for retailers and consumers? We are never going to experience "energy independence" until we make it affordable for everyone. However, forcing consumers to go into debt even further just so we can meet some government imposed "green standard" is the wrong way to go.

Cross posted at Ladies Logic where your comments are welcome.