Flex-Fuel Chevrolet AvalancheClick to enlarge picture

The Chevrolet Avalanche is one of more than 20 vehicles available in the U.S. that can run on gasoline or E85.

"Gasoline prices soar."
"Citing high earnings, Congress considers passing a tax on the 'windfall' profits of oil companies."
"President calls for a 'massive increase' in domestic production of ethanol."

Answer: None.

In the words of baseball great, Yogi Berra, they are "deja vu, all over again"—these headlines appeared in major publications in late summer and fall of 1979.

With memories of long gasoline lines still fresh, President Jimmy Carter like President Nixon in 1974 and President George W. Bush in his annual State of the Union Address this year and last, touted putting corn in the tank as a way to beat the oil-import bind.

Apparently when there's an "oil crisis" that results in sharp spikes in gasoline prices and oil companies profit, American presidents have turned to ethanol derived from corn as a solution.

What Is Ethanol?
And just what is this magic elixir that is supposed to rescue America from its dependence on oil?

Ethanol (C2H5OH), also known as grain alcohol, is much like the stuff that provides the kick in gin and whiskey. The majority of the ethanol in the U.S. is made from corn, but it can also be produced from sources such as grain sorghum, wheat, barley, potatoes or sugar cane.

In addition to being a renewable American-grown fuel source that can displace at least some gasoline in the supply chain, ethanol reduces all emissions at the tailpipe. And while carbon dioxide is released to the atmosphere, it is reabsorbed by the plants that grow the fuel.

From a driver's standpoint, adding ethanol to gasoline increases the fuels' octane rating, boosting performance. On the downside, fuel economy is lower since ethanol contains less energy units, or BTUs (British thermal unit), than gasoline. This means filling up the tank more frequently. Depending on the vehicle, the reduction in fuel economy can be 20 percent or more, according to the government Web site, www.fueleconomy.gov.

Model Ts Used This Stuff
Fueling up with ethanol is not new. It was used decades ago to power early automobiles (Model Ts had a carburetor adjustment to switch between gasoline and ethanol), only to fade when plentiful supplies of cheaper gasoline became readily available.

In the 1970s, when two U.S. presidents trumpeted the use of ethanol to help toward greater independence from petroleum, the recipe was called "gasohol"—a mixture of 90 % gasoline and 10 % ethanol. While some import and older domestic cars had difficulty operating on the blend, all vehicles sold in U.S. from approximately 1980 forward can run on gasohol.

Ethanol has grown up since then and today's featured flavor is called E85, a combination of 85% ethanol and 15% gasoline. But, unlike gasohol that requires no vehicle modifications, E85 fuel can only be pumped into what's called flexible-fuel vehicles (FFVs). Costing carmakers around $150, special fuel systems and engine-computer programming are required for flex-fuel vehicles to run on E85. Additionally, an FFV can operate on gasoline only or any combination of the two.

I Didn't Know This Is A Flex-Fuel Vehicle
There are over 6 million FFVs on the road today, mainly from domestic car companies. The vast majority were sold to people who, in many cases, didn't even know that the vehicle could run on E85, like Regina Fulton of Manhattan, Kansas.

"I had no idea my Ford Explorer was a flex-fuel vehicle until after I bought it and sat down and read the owner's manual," said Fulton. When she returned to the dealership to ask why they hadn't told her, the answer was that since the closest E85 station is 50 miles away, they don't mention it to customers.

Automakers eat the extra cost to produce FFVs, so why have they made a few million of them and why have they only recently begun to advertise them?

The 1988 Alternative Motor Fuels Act, designed to decrease oil use, allows carmakers to receive credits toward the federal Corporate Average Fuel Economy (CAFE) standards for every FFV produced, even if it never burns a drop of E85 fuel. The credits help offset big vehicles with less miles-per-gallon since CAFE is average fuel for all vehicle models produced, not each car model, thus avoiding penalties and fines.

FFVs Come Out of the Closet
When gas prices increased dramatically after Hurricane Katrina in August 2005, Detroit's automakers began coming out of the closet with their E85 capable FFVs. A month following the devastating hurricane, Ford Motor Co.'s then President Bill Ford made a speech to employees announcing it was stepping up its production of ethanol vehicles. "Ethanol is typically cheaper than regular gasoline, and we're going to do all that we can to support it," Ford said.

Grasping an opportunity to present themselves as having an environmental and social conscience, both Ford and General Motors are buying air time and print space to spread the word. GM has splashy ads with the theme, "Live Green Go Yellow." Ford has enlisted Kermit the Frog. Between them, the companies say they will produce around 650,000 FFVs in 2007.

The Chrysler Group hasn't produced a marketing campaign as yet, but given the right forum, the automaker is not bashful. At the Renewable Fuels Summit in April 2006, Tom LaSorda, the automaker's president and CEO, let it be known that the company has put 1.5 million FFVs on the road since 1998 and plans to sell 250,000 in 2007, doubling that number in 2008. In closing, LaSorda said, "Every single drop of petroleum that is replaced by a drop of ethanol is a good thing for Americans."

Import car companies have been shy about joining the ethanol parade. Mercedes-Benz offered an E85 C-Class sedan for model years 2003 through 2005, while Nissan began selling an E85 Titan pickup late in 2005. Honda stated that they are developing a new clean diesel engine and sticking with their hybrids and Toyota, who began offering a vehicle in Brazil last year, has said they are considering ethanol vehicles in the United States.

Not Many Places to Fuel Up
Looking at the big picture, with only around 1,000 out of the approximately 170,000 gas stations nationwide offering E85 fuel, there are only a few drops of ethanol being pumped into the 6 million FFVs now on the road. More stations are being added, and both Ford and GM have partnered with fuel suppliers to increase the numbers (mostly in the Midwest), but the number of outlets probably won't total more than 2,000 or so by the end of 2007.

To be competitive with gasoline, E85 has to be priced 40 to 50 cents per gallon less because of lower fuel mileage. That's a problem for a couple of reasons.

First, ethanol cannot be added to gasoline at the refinery and pumped through pipelines because it tends to corrode the pipes. Instead, it must be transported on trucks, trains and barges in relatively small batches to storage terminals where it's blended with gas. That's part of the reason the only E85 public station in Virginia (Arlington) was selling E85 for $2.75 per gallon and regular unleaded for $2.25 per gallon in late January. By comparison, a station in a Minneapolis suburb—close to corn fields and ethanol production plants—priced E85 at $1.47 a gallon, 45 cents less than regular unleaded.

The second reason has to do with a basic tenet of economics, supply and demand. Oil refiners have been rushing to buy huge quantities of ethanol as a replacement for MTBE (methyl tert-butyl ether), a petroleum-based additive which raises the amount of oxygen in gasoline so it burns clean enough to satisfy U.S. pollution standards—as does the more expensive ethanol. Used since 1979, it turns out that MTBE is nasty stuff when leaked into ground water and has been banned in 25 states, with others following. That switch has put a squeeze on supplies that has doubled ethanol's wholesale price, to $2.75 a gallon last summer, about equal to the wholesale cost of gasoline.

The Energy Security Act of 2005 added to the supply pressure. It established the Renewable Fuels Standard that requires 4 billion gallons of ethanol and/or biodiesel be used in 2006 and increasing to at least 7.5 billion gallons in 2012, a level the U.S. is likely to hit within about a year. Last year, the ethanol industry produced an estimated 4.9 billion gallons.

Bob Dinneen, president of the Renewable Fuels Association, a trade group representing ethanol, says the industry has the ability to meet growing ethanol demand and that 35 billion gallons of alternative fuel use by 2017 is "an eminently achievable goal." Current ethanol plants have a capacity to produce nearly 5.5 billion gallons and new plants under construction have a capacity of more than 2.2 billion additional gallons.

An E85 Success Story
In 1998, the U.S. Department of Energy chose Chicago, Denver, and the Twin Cities of Minneapolis-St. Paul for a pilot program to expand the awareness and usage of E85 fuel. The goal—take this mixture of ethanol and gasoline and make it a viable alternative in local markets and then, spread across the nation.

With working-behind-the-scenes leadership from the American Lung Association's regional office, the most successful of the three efforts has been in Minnesota. Since the program was introduced, the number of FFVs registered in the state has swelled to nearly 150,000, and its 11 E85 stations that pumped about 6,000 gallons of E85 have multiplied to more than 300 outlets that pumped more than 18.3 million gallons in 2006.

An early adopter of E85 is the Holiday chain of service stations, headquartered in Bloomington, Minnesota. With 34 of its 432 locations offering E85, all but one in the Twin Cities area, the company sold 3.4 million gallons of E85 in 2006, making it the largest retailer of the fuel in the U.S.

Pricing has played a significant role in the sales volume according to Ed Hoffman, the firm's vice president of petroleum marketing. "With E85's lower fuel mileage of 10 to 20% less than regular gasoline, it's important that a lower price per gallon of 30 to 40 cents offsets that difference."

Hoffman said that being close to ethanol production facilities and ethanol suppliers who are willing to work with station operators has kept E85 pump prices in the area competitive. The story of Minnesota's E85 growth is one of cooperation among a diverse group said Tim Gerlach, the American Lung Association's director of outdoor air programs. "Partners like Ford Motor Co. joined with the state, fuel suppliers, car dealers and gas station owners to bring the message of E85 to consumers."

Ethanol by itself is not the silver bullet to end our oil dependency, but it can play a role. Detractors say the push for flex-fuel vehicles and corn-derived E85 appears to be nothing more than a Band-Aid on a gushing wound that needs a tourniquet. But the Clean Cities program in Minnesota shows that a growing number of drivers would prefer their cars fueled by corn fields in the Midwest than by oil fields in the Middle East.

Larry E. Hall is editor of Northwest Auto News Service and a freelance automotive journalist based in Olympia, Wash. He has an intense interest in future automotive technology.

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