Can ethanol replace oil?

November 15th, 2006

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Recently, due to worries over the prospect of sustained high prices of oil, there had been renewed interest in alternative energies (see our article: Is oil going to be more expensive?) One of the considerations for an alternative to petrol for powering motor vehicles is ethanol.

Indeed, Brazil is a working example on the successful use of ethanol as an alternative fuel. For years, cars in Brazil had been running on ethanol, which are derived from their vast sugarcane crop. In view of this, will there be a day when ethanol supplants petrol as choice of fuel for cars in a mass scale, thus reducing a big source of demand for oil? Before we can answer this question, let us examine what it takes for this to happen.

Ethanol is produced from the conversion of carbon based agricultural feedstock (e.g. sugar cane, corn, sugar beet). Currently, the world does not have a sufficient surplus of agricultural feedstock to produce enough ethanol to supplant petrol. Diverting vast amount of agricultural produce from food consumption to ethanol production is unacceptable?the result will be mass starvation.

In that case, how feasible is it to significantly increase the supply of agricultural feedstock for use in ethanol production? We believe it is not likely to be so. There are too many issues involved. We would not be able to examine every issue, but we will look at two of the most important ones. A commercially viable mass production of agricultural feedstock will require vast amount of land and water. Clearing vast tracts of fertile land (assuming that such land are available in the first place) to grow the same type of plants for extended period of time for this purpose will bring about its own environmental and agricultural issues. The next significant challenge will be the procurement of vast amount of potable and agriculturally-suitable water, which is a major issue in many parts of the world. In Australia, the naturally dry continent made worse by the drought is a case in point.

With these factors in mind, although ethanol will have its limited role to play in the world?s energy problems, we are not confident of it supplanting petrol in a mass-scale in the foreseeable future.

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