A simple solution to pain at the pump?

Barry Engle is the president of Ford Brazil.  

Engle:  This isn’t science fiction, this is real world technology that we’re using in Brazil everyday on a broad scale basis.

At a time when ford and other U.S. automakers are posting huge losses, sales in Brazil are up. 

Phillips:  Are you telling your fellow executives up in Detroit, "Get more flex-fuel, this is the future?" Has that been the message that you feel like you’ve been bringing?

Engle: Yes. There is already, in Detroit, a lot of interest in this particular technology.

In fact, both Ford and GM already sell flex cars in the U.S. And how much more does this new technology add to the sticker price?  Not a dime. 

Phillips: This is not an expensive proposition for automobile makers.

Engle: No. It doesn’t have to be.

Phillips: And there’s no reason it can’t be translated elsewhere?

Engle:  As long as the fuel is available.

In Brazil, that fuel is plentiful thanks to a crop as sweet as candy— sugar cane.

Dateline Stone Phillips travels to Brazil, and visits one of the sugar cane fields that help the country produce ethanol.

Brazil is turning sugar cane into the equivalent of 300,000 barrels of oil a day.  To people in this country, what you’re looking at is a field of dreams: Homegrown security that has helped this country to completely free itself from foreign oil.

Last month, Brazil announced it no longer has to import oil from the Middle East or anywhere else. And much of the credit goes to ethanol.

The world's largest sugar cane mill is located in Barra Bonita, Brazil, producing more than 100 million gallons of ethanol a year.

After the cane is harvested, by hand or machine, the stalks are fed into the mill.  They’re crushed. The juice separated and sent to tanks to ferment.  Ethanol operations are really just industrial-sized moonshine stills. Khosla sampled the product straight from tank.

But what really intoxicates him isn’t what he tasted, but the opportunity he sees in what’s being thrown away. With new technology, Khosla says you can process these mountains of leftovers and triple the amount of ethanol you get, dramatically reducing costs.   

Khosla: My bet is it’d be a lot cheaper than $1 a gallon.  It might even be less than 70 cents a gallon right there. Right today.

And that’s exactly Khosla’s vision for America— putting new generation ethanol plants next to paper mills, turning their leftovers into fuel.  Or even next to orange juice factories, where he says ethanol from peels could replace petroleum. 

But that’s only part of it. To really make America an ethanol nation, Khosla says billions of gallons will come from something as common as prairie grass. He says it’ll be much cheaper and deliver 10 times the energy it takes to make it.

Khosla: We could return the country back to the prairie grass that it used to have hundreds of years ago and make, and meet all our petroleum needs.

Phillips: Back to the future?

Khosla: Back to the future. There is nothing standing in the way.

He’s so sure about it he’s become an ethanol evangelist— preaching to governors, senators and even key advisors to the president who despite his roots in Texas oil is sounding like one of the converted.

In his April 25^th speech, President Bush said, “Ethanol will replace gasoline consumption. Ethanol is good for the whole country.”

Khosla: The environmentalists love it because it’s greener. The neo-conservatives like it because it ensures energy independence and security for America. The farmers love it because it takes oil dollars and moves it to rural America.

Phillips:  It sounds almost too good to be true.

Khosla: I’m not this “imagine some kind of hypothetical future” kind of person. But it is a very pragmatic vision.

He may be man of vision but Khosla’s under no illusions about the resistance ethanol faces back home from big oil.

Some oil companies have complained that putting ethanol at their stations would require costly and complicated changes to their trucks, tanks and pumps.

Phillips:  How much of a burden will that put on oil companies to start distributing ethanol?  To dedicate a pump to ethanol?  I mean what about trucks? What about their holding tanks?

Khosla: In most cases, the same holding tanks can be used.  The same trucks can be used to transport the ethanol.  There are logistics problems to be solved, to be sure, but it’s not a difficult transition. I’ve looked at all the issues they raise. In fact, most of them are bogus.

As for the expense, Khosla estimates it would cost about $15 to 20 million to offer ethanol pumps at a thousand gas stations in California. 

Khosla: $15 to 20 million dollars.  Exxon alone made 36 billion dollars last year.

But Khosla, who’s invested millions of his own money in companies working on ethanol technology, says government must play a role as well, by requiring that gas stations everywhere offer ethanol, that all new cars be flex-fuel, and that oil companies play fair.

Khosla:  We need to make sure that the major oil companies don’t manipulate the price of oil enough to drive ethanol out of business.

Phillips:  Do you believe oil companies would deliberately drop the price of oil?

Khosla:  Absolutely. A senior executive of a major oil company came up to me and said, “Be careful.”  In a very warning tone he said, “Be careful, we can drop the price of gasoline.”

The battle to bring ethanol to your neighborhood pump is just beginning, but Vinod Khosla is confident that time and technology are on his side.

Phillips: What do you say to skeptics, who say, you’re a money maker, you’re an investor and what you’re trying to do here is to drum up support and governmental help to make sure your investment pays off?

Khosla:  Well, I am in the business of investing. But in fact, this has become a mission for me: to get the message out of how simple it is to get independent of petroleum.  In fact, my mission now is to put the fossil in fossil fuels.

President Bush is expected to meet later this month with the heads of the Big Three American automakers and ethanol will top the agenda. Wal-Mart has also confirmed to Dateline that it's working out details to sell a fuel that's 85 percent ethanol at its retail locations that sell gas.  

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