Methanol (chemical formula CH3OH and also known as methyl alcohol or wood alcohol) is a clear, colorless liquid that is water soluble and readily biodegradable. Methanol occurs naturally in the atmosphere as a by-product of biomass and landfill decomposition. As an industrial product, methanol is a liquid petrochem­ical that can be made from renewable and nonrenewable fossil fuels containing carbon and hydrogen. Since natural gas costs account for the major portion of the operating costs of domestic methanol producers and are followed in impor­tance by distribution costs and operating costs, virtually all new methanol pro­duction has been moved offshore near low cost or “stranded” natural gas locations.

Large world-scale or megamethanol plants are being built in these stranded gas areas, such as Chile, Trinidad, Qatar, Equatorial Guinea, and Saudi Arabia.

Each plant can produce 300 million gallons annually of methanol and costs more than $350 million to construct. The construction of these megaplants has rein­forced the characterization of methanol as a “typical” commodity as cycles of oversupply resulting in lower prices and idled capacity are followed by periods of shortage and rapidly rising prices as demand catches up and exceeds supply until increased prices justify new plant investment.

Prior to the 1980s, methanol was produced and consumed locally in North America primarily as an intermediate feedstock for derivatives such as formal­dehyde, acetic acid, and plastics recycling in packaging. Limited international trade was seen mostly through U. S. exports. U. S. natural gas feedstock, at that time, was reasonably competitive. Today methanol is a global commodity and the United States has gone from the position of largest producer in the world, to the largest net importer in less than a decade.

The American Methanol Institute, the trade organization for the methanol industry, has changed its name to the Methanol Institute and predicts that there will be no U. S.-produced methanol within five years due primarily to high and volatile natural gas prices. With the controversy surrounding methyl-tertiary — butyl-ether (MTBE), significant demand for methanol has disappeared from the domestic market. While it was widely predicted that methanol prices over the past several years would be extremely weak, the recovery of the international economy and demand from China and India have virtually made up for the rapid decline for the demand of methanol for MTBE.

MTBE was developed in the early 1990s as an oxygenate to improve more complete combustion of gasoline. This was done at the behest of the EPA. However, leaking underground storage tanks at automobile service stations caused ground water contamination and MTBE was found to be a possible carcinogen. As a result, California, New York, and several other states have banned MTBE. It has largely been replaced by ethanol as an oxygenate for gasoline.