How does fuel hedging work

how does fuel hedging work

Overview

What is Flex Fuel?

Vehicles that use flex fuel can run on regular gasoline, or a combination of regular gasoline and ethanol. Flex fuel vehicles can run on a combination of up to 85 percent ethanol and 15 percent gasoline. The National Ethanol Vehicle Coalition estimates that there are approximately 6 million vehicles in the United States that can run off of flex fuel.

Ethanol

Ethanol is made out of plant sugars. Corn and sugar are two plants that are commonly used to make ethanol. Ethanol is considered to be environmentally friendly because it is made out of renewable resources and is a cleaner-burning fuel than gasoline. In a time when the United States is concerned about oil reliance on other countries, ethanol use is seen as a partial solution to reduce oil dependence.

Flex Fuel

The most common type of flex fuel sold in the United States is called E85. E85 is a combination of 85 percent ethanol and 15 percent gasoline. The use of flex fuel does not harm an engine that is designed to use it. Engine performance is the same when using flex fuel or regular gasoline. A car running on flex fuel does get fewer miles per gallon because ethanol does not contain as much energy as gasoline. A car running on E85 can get 20 to 30 percent lower miles per gallon than the same car would get running on regular gasoline.

Flex Fuel Vehicles

The

engine of a flex fuel vehicle is pretty much the same as a regular gasoline engine. Flex fuel vehicles have minor alterations to the fuel system to allow then to run on flex fuel. Ethanol is a more abrasive fuel and produces more oxygen. Flex fuel vehicles have system alterations that allow them to properly run on an ethanol-mixed fuel. Changes to the system include alterations to the the fuel system and oxygen sensors. Gasoline cars can be converted to run on flex fuel. Unknown to their owners, many cars on the road today are able to run on flex fuel. To determine if your car can run on flex fuel, view your owner's manual or contact your local car dealer.

Concerns About Flex Fuel

Some environmentalists are concerned about the potential that ethanol used in flex fuel may cause more pollution than regular gas alone. The concern arises from the production process of ethanol. In the United States, ethanol is predominately made from corn that is grown for the sole purpose of ethanol production. In order to keep up with ethanol demands, corn is grown in areas where it does not normally grow well. The harvesting of the corn and the process used to make ethanol creates a lot of greenhouse gases. Environmentalists say that better ethanol production techniques are needed before the use of ethanol can be considered an environmentally friendly alternative. Brazil makes an environmentally friendly ethanol out of the waste product of sugar cane stalks.

Source: ehow.com

Category: Forex

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