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Economic Impact of a Methanol Economy

Economic Impact of a Methanol Economy

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Published by Adam Khan
This describes what economic impact methanol could have if we passed the Open Fuel Standard of 2011.
This describes what economic impact methanol could have if we passed the Open Fuel Standard of 2011.

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Categories:Types, Brochures
Published by: Adam Khan on Jun 06, 2011
Copyright:Attribution Non-commercial

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09/19/2013

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Economic Impact of Methanol Economy
A Look at Potential Benefits of the Open Fuel Standard Act
The Open Fuel Standard Act
The Open Fuel Standard Act is an innovative bill that will dramatically reduce the strategic importance ofgasoline and oil to our economy while greatly accelerating the development and deployment ofalternative fuels and technologies for transportation. The legislation would require that most new carsenable fuel competition, specifically by being capable of operating on another fuel in addition to, orinstead of, gasoline – whether natural gas, electricity, bio-diesel, alcohol fuel, hydrogen or somethingelse. An OFS creates a marketplace where these energy technologies can compete and breaks thevirtual transportation fuel monopoly of oil; a fuel we know harms both our national security and ournation’s health, with inflated costs that are a detriment to our economic growth. Widespread deploymentof fuel competitive vehicles will increase the resilience and flexibility of our economy by enablingconsumers to make an on the fly choice to switch fuels based on comparative economics at the pump,instead of policy that attempts to pick any one winner in lieu of letting the marketplace drive innovation.Put simply, the Open Fuel Standard Act is an ‘all of theabove’ energy policy that is a solution to both theunaffordable cost of gasoline and the unsustainable holdthat oil has on our economy. It is a pathway to a cleanenergy future, which starts with employing provendomestic resources and technologies and creating greaterdomestic security. The OFS will enable an economyfueled by innovation in the marketplace by making vehiclesa platform where fuels can compete, which will continuethe advancement of sustainable fuels by creating demandand a market that can support infrastructure deployment.As an example of the economic benefits of the OFS, we have put together this scenario of the economicimpact of widespread adoption of alcohol flexible fuel vehicles from replacing just a portion of our currentdependence on gasoline with clean burning methanol, one facet of this multi-platform legislation.
Alcohol Fuel’s Impact with the OFS
Alcohol fuels, such as methanol - made from natural gas, biomass, agricultural waste, coal and,perhaps in the future, recycled CO2 - and ethanol are cleaner-burning replacements that require onlyslight modifications to current engines to power our vehicles, and they do not require large investment innew infrastructure due to their similarities with gasoline. For around $100 per car – less than half of onepercent the cost of the average car - automakers can manufacturer a vehicle where liquid fuels cancompete on a single platform. A flexible fuel vehicle can operate on gasoline, and blends of ethanol andmethanol up to 85%, which forces each fuel to compete for a consumer’s dollars based on convenience,environmental benefit, and most importantly, cost. The deployment of these vehicles means consumerdemand for alternative fuels will continue to grow as millions more vehicles will be able to operate onthem, and the market will be able to economically invest in infrastructure to meet this demand withoutmassive expenditures by the government.The methanol fueling infrastructure in particular will grow quickly as costs for the clean fuel are very low,the industry has large production capacity to meet demand and the installation cost for a methanolfueling pump is minor compared to other technologies, with the average pump only about $60,000
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. FFVdrivers will immediately be able to make use of methanol, which at wholesale currently sells for $1.04 agallon–without any subsidies. Accounting for state and federal taxes, distribution, and retail mark up, M-85 would retail for $1.83 a gallon. As methanol has less BTUs per gallon than gasoline, a consumerwould use $3.19 of M-85 to travel the same distance – well below the current national average of $3.95for regular unleaded
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1
‘Methanol Refueling Station Costs’ by EA Engineering, Science and Technology February 1, 1999.
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AAA Daily Fuel Gauge (May 1, 2011) - http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp
 
Methanol Savings vs. Gasoline
For every 10% of the gasoline that we currently use that is replaced by methanol, just over 75 milliongallons of methanol would be consumed each day at a cost of $110.6 million to drivers – compared tothe $149.3 million for the same amount of gasoline at current retail prices. This would create an averagesavings of $38.7 million a day for consumers, and over $14.1 billion a year. Each household would bebenefited by over $1,000 average cost savings every year if they filled up with M-85 every day.Methanol’s price advantage over gasoline is apparent in the above graph of historic prices. The mostcommon feedstock for making methanol today is natural gas, requiring only 100 cubic feet of natural gasto produce one gallon of methanol. Methanol is also the most effective and immediate way to takeadvantage of the price difference between natural gas and crude oil prices. In fact, researchers fromMassachusetts Institute of Technology completed a study entitled “The Future of Natural Gas” in whichthey determined that methanol was “the liquid fuel that is most efficiently and inexpensively producedfrom natural gas,” due its mature production technology and the affordability of deploying FFVs capableof running on all alcohol fuels.To replace 10% of our current gasoline demand we would use about 2.6 trillion cubic feet of natural gaseach year. At a current cost of $4.50 per thousand cubic feet for natural gas, that would mean over $11billion worth of natural gas would be consumed. This represents a mere 10% of our current annualproduction of natural gas in the U.S. – which is expanding with new discoveries and technologies - andallows us to conserve consumer money, tap into domestic resources, and reduce harmful engineemissions like particulate matter, cancer causing agents and smog that come from gasoline.Methanol also benefits from polygeneration – in that anything that is, or ever was, a plant can be used toproduce this biodegradable fuel. Natural gas, coal, biomass, agricultural waste, landfill gas, industrialwaste and even CO
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itself can all be used for methanol production based on existing maturetechnologies, as well as cutting edge science. The U.S. has abundant supplies of all of these resourcesavailable to meet our transportation needs, and methanol serves as a gateway technology to advancedbiofuels adoption. Renewable methanol fuel – and derivative fuels such as bio-diesel and bio-dimethylether (DME) – can also help efficiently and economically achieve the U.S. Renewable Fuel Standardtargets.

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