Ethanol in gasoline

It’s been over a decade since the Biofuels Act of 2006 had mandated the addition of ethanol in our gasoline. Supposedly, it was to help our sugar farmers, decrease our dependence on imported fuel and save foreign exchange.

After all these years, none of the above has happened. Despite the incentives, there has been little local investment in distilleries to process the ethanol, we have not significantly cut down our dependence on imported fuel and we have not saved on foreign exchange.

Yet, motorists are being shortchanged. We get less mileage and efficiency from ethanol infused gasoline, even as we subsidize farmers — mostly in the United States who already get more than enough subsidies from their government.

Here are some specifics:

How much more per liter is it costing motorists? For 2015, it is estimated that the impact of ethanol on gasoline pump price was about P1.60/liter. For 2016, the impact of ethanol was higher at around P2.20/liter with the price of local ethanol peaking at P60.52/liter.

How much are we importing vs. local production? Currently there are 12 accredited local ethanol producers in the Philippines with combined rated capacity of over 350 million liters. Actual production on the other hand, only accounts for about 50 percent of the industry requirement at 10 percent blend.

In 2015, around 168 million liters were actually produced, just over 80 percent of the committed volume. This supplied around 40 percent of total demand. For 2016, compliance of local ethanol producers in producing committed volume was only at 81 percent.

Then again, we should probably be happy we are not buying more local ethanol because that would be more expensive. Using 2016 averages, ethanol imported mainly from the US was priced at P23-P25/liter. On the other hand local ethanol was sold to our oil companies at P60-P62/liter or more than the pump price of the gasoline it’s supposed to be blended with.

How much less power per liter does a motorist get in alcogas? Citing the US Department of Energy, “ethanol contains about one-third less energy than gasoline.” Vehicles are estimated to go three percent to four percent fewer miles per gallon on e-gasoline with 10 percent ethanol blend.

That’s what happens when legislators seek to grandstand by advocating fashionable causes abroad without due regard to local conditions. In this case, the culprit is Sen. Migz Zubiri who was trying hard to look environmentally responsible. But could it be he was just representing sugar producers/distillers close to his family?

The same thing happened with the Feed-in Tariff (FiT), which is a forced subsidy provided by all electricity consumers to producers of renewable energy. The subsidy varies by type of energy.

What is scandalous now is that solar energy producers still want to benefit from this subsidy even if solar energy has, by the claim of Leandro Leviste (son of Renewable Energy Law author Sen. Loren Legarda), achieved grid parity. Luckily, Energy Secretary Alfonso Cusi decided to step on the brakes.

The energy secretary noted that any fixed set of subsidy on per kilowatt hour (kWh) basis for solar is already a ‘no go.’ Cusi correctly declared that “for solar, the direction is that we stop it…we have to stop the FiT because we have been granting a very high FiT for that one technology source.”

“We want to drive electricity prices down because we are the highest in our region … continuous granting of FiT is opposed to that objective,” he stressed.

But Cusi, who has otherwise done a good job of boning up on energy issues since his appointment, has failed to see a similar anomaly happening in biofuels. Our fuels are also pretty expensive and will be more so once the new taxes under the tax reform proposal are added.

The one that concerns me as a car owner has to do with the negative effect of the increased ethanol blend on my car engine. There are car experts like PhilStar columnist Cito Beltran who tell me there could be some problems.

One thing is sure… the use of ethanol is not benign. The Economist in an article pointed out that “unlike the hydrocarbons of pure petrol, ethanol has a special affinity for water from the atmosphere. The entrapped moisture can corrode petrol tanks, pumps, fuel lines and injectors.”

Cito Beltran, in a column he wrote in 2013, had a similar warning: when you leave an ethanol/gasoline mix in your gas tank for more than a week the ethanol will separate from the gasoline as it bonds or attracts any humidity. In other words your petroleum has now deteriorated… panis na gasolina.

Cito continues: The minute you run your engine the foul fuel will foul up your computerized fuel delivery system, contaminate your fuel lines and essentially have the same results as mixing water with your gasoline or worse.

“With today’s highly sophisticated fuel management systems, the tolerance for bad fuel is so small that foul fuel often destroys them and dents your wallet. Cito personally saw this happen in a brand new Jaguar and he witnessed the owner cry in fury.

The Economist also pointed out that “ethanol burned in an engine produces more than twice as much ozone as the equivalent amount of petrol. Ground-level ozone is a big cause of smog.” So there goes the environment-friendly claim for ethanol.

Another expert warned even 10 percent alcohol is causing much damage to automobile engines and fuel systems. The fuel pumps fail from corrosion and can stop a car on a busy freeway.

“This is very dangerous. Fuel pumps are inside the fuel tank on most cars now, and it is very expensive to have the tank removed and opened to take out the fuel pump. Alcohol makes the engines run hotter and it wears them out sooner. Alcohol also damages the valves requiring more expensive repairs.”

The Biofuels Law mandates the oil companies to secure their supply from local sources before importing. But the local suppliers have not been able to produce the required volume. The oil companies are forced to import the ethanol needed to comply with the 10 percent government mandate.

That negates the objectives of the law to increase our level of energy independence and save on foreign exchange. It seems Filipino drivers and vehicle owners are being made to spend more and take undue risk for really not much benefit to anyone at all.

Let me correct that… of course some people are benefited… the vested interests who earn bundles because of the law. That’s called rent seeking by economists and we should get rid of such parasitic legal mandates.

In the meantime… we consumers should be given a choice. After all, choice is the essence of a free market system and a democracy. It’s time to update that Biofuels Law.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco