A Model for Optimizing the Allocation of Ethanol Production in the U.S.

Authors

Anali Huggins, University of Nebraska-LincolnFollow

Date of this Version

8-2012

Citation

A.G. Huggins, A Model for Optimizing the Allocation of Ethanol Production in the U.S.Masters thesis, Department of Industrial and Management Systems Engineering, University of Nebraska–Lincoln, 2012.

Comments

A THESIS Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Master of Science, Major: Industrial and Management Systems Engineering, Under the Supervision of Professor Demet Batur. Lincoln, Nebraska: August, 2012

Copyright (c) 2012 ANALI HUGGINS

Abstract

In the last five years, fuel prices have fluctuated from 2.86$/gallon to 3.87$/gallon which represents an increase of 35%. This situation has collocated the ethanol manufacturing in an advantageous situation. However, a major problem that is faced by the ethanol producers is the high cost of transportation. The objective of this thesis study is to determine the optimal allocation of ethanol production in the U.S. in 2009 that minimizes the transportation cost. This thesis is based on the application of a linear programing model. The thesis is focused on two questions. The first is the optimal allocation of ethanol between the producer states and the supplier states. The second is the optimal allocation of ethanol production of Nebraska. The optimal solution represents a total transportation cost of 10.186 million dollars in 2009. A sensitivity analysis is developed with the purpose of determining two themes. The first identifies the possible alternative routes in the optimal allocation program and the impact of their use over the total cost. The second identifies how long the actual allocation program could remain the optimal solution. According to the analysis, if the conditions remain constant, the allocation generated in this project will be still optimal until the year 2014. The present study represents an opportunity to establish more coherent policies about the market and the development of the existing and future ethanol plants. The ethanol industry needs to incorporate mechanisms that facilitate a decrease in the operative and transportation costs to achieve a sustainable industry and to minimize subsidies of the federal government.