Ethanol

Ethanol is a biofuel that when in anhydrous form - when it contains 1% water or less - can be blended with gasoline in varying concentrations. Use of ethanol has two primary benefits; reduced consumption of petroleum fuels and diminished greenhouse gas emissions.

Dependence on foreign oil is a frequently cited security concern. Ethanol use limits this dependence as it can be produced in abundance in the North America. Furthermore, as a renewable resource that is produced from plantlife, it has a replenishable supply, unlike petroleum which is finite and exhaustible.

The burning of petroleum based fuels is also the largest source of greenhouse gas emissions. According to the University of Chicago's Argonne National Laboratory the use of 10% ethanol blends reduces greenhouse gas emissions by 18-29% when compared with conventional gasoline. According to the USDA, the return on every unit of energy invested in producing ethanol is 1.67 units.

For a more detailed discussion of ethanol's benefits and trade offs, please visit the resources section of our website.

Biodiesel

Biodiesel is an alternative fuel produced from domestically available renewable resources. While the term 'biodiesel' is often used loosely in the public domain to refer to things such as waste vegetable oil taken directly from deep fryers, there are strict quality standards that must be met for a fuel to properly be considered biodiesel. The criteria is laid out by the American Society for Testing & Materials under code 'ASTM D-6751'.

Biodiesel contains no fossil fuels itself but is generally blended with conventional diesel for use as a transportation fuel. Blends can range from 1 to 99%. The more common ratios are referred to as B2, B5, B10 and B20 (containing 2, 5, 10 and 20% biodiesel respectively).

The virtues of biodiesel use are similar to those of ethanol; reduced dependence on foreign petroleum and fewer greenhouse gas emissions. However biodiesel can also claim the highest fossil energy balance of any transportation fuel. Both the USDA and the DOE have taken into consideration all the energy used in getting biodiesel to the pump, and determined that for every unit of fossil energy used in production, 3.2 units of energy are produced.

Related Commodities

Beyond the end markets themselves, there are numerous related commodities that have a direct or indirect impact on ethanol and biodiesel prices. Biofuels are dependent on their feedstocks such as corn, wheat and soy whose prices have a direct relationship with production costs. Energy markets are also of great importance to our clients for a variety of reasons. Natural gas is the most apparent, as it is used by most producers in the distillation process. Other energy commodities such as RBOB (reformulated gasoline) or crude oil are important either due to their competing nature as an alternate fuel or because many biofuel contracts are pegged to their floating prices. Biodiesel, for instance, is not currently traded on any public platforms so many of its contracts are tied to the price of heating oil. Similarly, ethanol-RBOB financial swap contracts are also quite common.

PFL is an active participant in all of these markets. Please contact us at team@progressivefuelslimited.com if you would like to receive our daily summary of biofuel market activity.