As clients well know, PRX does not undertake "paid white papers" in support of one or another government policies. However, when a new policy idea comes onto the drawing board, we often make a "snapshot calculation" of what such a policy might mean to grain supply-demand in the future.
Under current EPA law, the CAFE standard is set to require our automobiles to move toward 50 mpg in the not too distant future. How exactly the auto industry is to achieve this is not set--whether by a greater share of smaller cars in the fleet, by more efficient engines, by some combination of high compression engines with very high octane fuels, or by vastly more electric cars.
One possibility under consideration by auto-makers is the use of E25 blends. Clients have asked PRX for a "snapshot" of how much more ethanol would be needed if the country shifted to 70% E25 by the year 2030, and whether the country could produce enough bio-feedstocks for this approach.
So it's not a make-believe question. Ford Motor and others have published numerous engineering studies indicating that the best and most practical route is indeed "mid-level blends" (like E25), and a high-level "AG-Auto-Ethanol Work Group" has been formed to evaluate this option.
My answer to "Mid-Level Ethanol Blends--Can we produce enough fuel feedstocks?" is "Yes, due to the surplus feedgrain capacity of three main world grain exporters."
I delivered my calculation to the AAE-WG on October 22, and I posted the deck (20 slides) and podcast for all PRX clients. It is basically a novel idea to business people outside agriculture that the US and the main grain exporters have only 11% or world population but 39% of total grains production--creating a geographic SURPLUS, especially in US corn.
As I said, the E25 idea is not "make-believe," but the odds that stakeholders can get the EPA to regulate both engines and fuels at the same time seem small indeed. In other words, we will not be changing our commercial PRX Blue Sky 10-year Model in view of this Think Piece.
Reminder: We'll discuss this issue and many others (including the impending 2016 La Nina event) at the upcoming Nov-18 Strategic Roundtable in KC. If you're interested in attending, please email nancy@prxgeo.com for the agenda.
Bill
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