Economic and Security issues of Methanol Supply

Use of methanol as a neat motor fuel has the potential to reduce U.S. oil imports and enhance U.S. energy security. The extent to which methanol use can achieve this potential depends on several economic and security issues that are discussed in this paper. The analytic framework under which methanol use is evaluated postulates the gradual introduction of fuel flexible vehicles so that, at some future date, a significant amount of gasoline use can be displaced by methanol. The benefits of using methanol are measured by the cost advantage methanol can provide over gasoline and the effect methanol use may have in reducing world oil prices. In addition, energy security will be further enhanced if methanol can be provided by a more diverse set of suppliers than current oil exporters and if these methanol exporters are in more secure regions of the world. This paper summarizes current estimates of methanol cost in the short and long run and describes an ongoing analytic effort to understand the future methanol market in more detail. The potential benefits and cost of methanol use are outlined and other energy policy issues are defined including security of methanol suppliers and OPEC strategy.