The Congressional mandate to add ethanol to gasoline to reduce the country’s dependence on foreign oil has fueled much of the strong growth in farm machinery sales for the past few years. But if big oil’s plans for an ethanol substitute comes to fruition, the ag equipment run could be slowed down significantly.
 
According to a November 1 report on desmoinseregister.com, an official with British Petroleum says the company is moving forward with the development of butanol as an alternative fuel to ethanol. Butanol costs more to produce but has some key advantages to ethanol, including a higher energy content. Cars can get more miles per gallon on butanol.
 
DuPont and BP have formed a joint venture called Butamax to develop the fuel. Susan Ellerbusch, president of BP Biofuels North America, told the House Agriculture Committee last week the companies plan to have the production technology commercially available in the United States by 2012 or 2013. A demonstration plant is being built in Britain.
 
She said that butanol could be used in all existing vehicles at a 16% blend.
 
At the same time, it’s ethanol production that’s the one bright note coming from oil refiner Valero Energy of San Antonio.
 
When the company bought 7 ethanol plants from bankrupt VeraSun Energy last spring, many believed the Texas oil refiner had sniffed a little too much sulfur.
 
Valero became Iowa's largest ethanol producer when it resumed the operations at the ex-VeraSun plants at Albert City, Charles City, Fort Dodge and Hartley, as well as plants in other states.
 
Valero now is calling ethanol the highlight of its otherwise troubled operations. The company reported a third-quarter loss of $219 million vs. a third-quarter profit of $1 billion a year earlier.
 
The company reported that, "Similar to last quarter, our retail and ethanol segments had outstanding results. Our ethanol business earned $49 million of operating income in the third quarter, more than double the second- quarter results, as we increased run rates at all 7 ethanol plants and captured very good margins.
 
"In October, ethanol margins have continued at strong levels."