Big Oil's Big Entrance

Ethanol Producer Magazine
November 2009
By Craig A. Johnson

Oil companies were noticeably absent during the ethanol industry boom from 2004 to 2007. Now, as some of those first-generation ethanol plants struggle to survive, Big Oil has begun to take an interest.

With the implementation of the renewable fuel standard (RFS) in 2003, a mandate to blend ethanol into gasoline was created, and the ethanol industry boomed. For the next several years, construction of ethanol plants accounted for most of the industry investment. Builders were in short supply, or booked for months in advance. Newspapers were filled with stories of ethanol plants going up across the Midwest. Many of them turned out to be just stories, but the build had begun and ethanol became a household word almost overnight.

Existing fuel producers and refiners, companies such as Royal Dutch Shell plc, BP plc and Exxon Mobil Corp., were initially caught flat-footed by the explosion of growth in the ethanol industry. "I don't know much about farming, I'm not an expert on biofuels, and there's not a lot of technology I can add to moonshine," Exxon Mobil Chairman and CEO Rex Tillerson said at a Houston energy conference in May 2007. "There is really nothing we can bring to that whole issue. We don't see a direct role for ourselves with today's technology."

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