There were several ethanol stories in the news today. It was a mixed bag. From BusinessWeek:
Ethanol’s Growing List of Enemies
Paul Hitch has spent his entire life raising cattle and hogs on a stretch of the Oklahoma panhandle he says is “flat as a billiard table.” But he worries that they’ll face mounting pressures in the industry, particularly because of the soaring price for corn, which the business depends on to feed the livestock. In the past year, corn prices have doubled as demand from ethanol producers has surged.
“This ethanol binge is insane,” says Hitch, who’s president-elect of the National Cattlemen’s Beef Assn. (NCBA). “This talk about energy independence and wrapping yourself in the flag and singing God Bless America — all that’s going to come at a severe cost to another part of the economy.”
“The government thinks it can pick a winner, but they should allow consumers to pick their own,” says Demian Moore, senior analyst for the nonprofit Taxpayers for Common Sense. “Corn ethanol has failed to prove itself as a reliable alternative that can exist without huge subsidies.”
Seems cattlemen in general are not too happy about the ethanol situation. The prosperity of the corn farmer is coming at their expense:
A frightening number was released by the labor department on March 15. February prices for “crude foodstuffs and feedstuffs” were 22.73% higher than a year ago. Wholesale consumer food prices were 6.8% above last year, too. Even more frightening, the February number was 29.25% higher than it was in May, its lowest point of 2006. It has all the potential of being worse and longer lasting than the consistent double digit increases we saw from mid-2003 to mid-2004.
Most of the increase we saw in February is the price we’re paying for trying to buy energy independence with our corn crop. It’s a double whammy, a perfect storm of a too-quick demand on American agricultural resources to pay for decades of unbridled energy consumption and a need by elected officials to prove they’re doing something to end our dependence on tenuous Middle Eastern sources of oil.
This was an interesting read:
You can hardly open up a major newspaper without encountering the latest hype about biofuels: they’re going to save oil, reduce pollution and prevent climate change.
Bill Gates, Sun Microsystems’ Vinod Khosla, and other major venture capitalists are investing millions in new biofuel production, whether in the form of ethanol (mainly derived from corn in the U.S. today), or biodiesel (mainly from soybeans and canola seed).
Several well-respected analysts have raised serious concerns about the rapid diversion of food crops toward the production of fuel for automobiles.
WorldWatch Institute founder Lester Brown, long concerned about the sustainability of world food supplies, warns that “Cars, not people, will claim most of the increase in grain production this year.” The grain required to make enough ethanol to fill an SUV tank is enough to feed a person for a whole year.
One study, originating from the University of Minnesota, is moderately hopeful in the first two areas, but offers a strong caution about land use.
This paper, published in the July 25, 2006 edition of the Proceedings of the National Academy of Sciences, concluded that ethanol production and use offers a modest net energy gain of 25 percent over oil, resulting in 12 percent less greenhouse gases than an equivalent amount of gasoline. The numbers for biodiesel are more promising, with a 93 percent net energy gain and a 41 percent reduction in greenhouse gases.
I don’t even know where to begin on this one:
Science shows ethanol good for America
Suddenly in America, a multitude of so-called experts have become vocal in their attacks on renewable fuels – fuels that just might break the stranglehold that oil-producing countries have on us.
Using a weighted balance of 1, ethanol has an energy balance of 1.3 to 1.8 while gasoline has an energy balance of .8. The same rules were applied to both sources by comparing transportation, refinery costs and handling.
With the wise use and advancement of ethanol production, a 90 percent reduction in the use of gasoline is possible.
Therefore, the cost of extracting a gallon of ethanol is significantly lower than extracting a gallon of gasoline from crude oil.
Somebody needs to dispel the myth that there won’t be enough land to produce this source of alternate fuel.
And finally, Vinod Khosla makes an ethanol investment that I think will actually be viable long-term:
Ethanol Company Starts Brazil Operations
Brazilian Renewable Energy Company Ltd.’s founding shareholders include venture capitalist Vinod Khosla, American supermarket magnate Ron Burkle, America Online founder Steve Case, former World Bank President James Wolfensohn and film producer Steven Bing, the company said in a statement.
The United States is the world’s largest ethanol producer; Brazil is No. 2, but is the biggest exporter and has ample land available to boost production.
Brazilian ethanol is made from sugar, which is significantly cheaper than production of the fuel from corn, the raw material in the United States.
The media is reporting that the price of corn doubled recently and that it is the highest in a decade, but that price doesn’t account for inflation. That is the straight cash price.
Corn was at $3.02US in 1974 and except for a few places has been at $2.00 or below since.
Diesel and an equal size tractor have inflated to around 3 times the 1974 price.
Corn has a long way to go to hit the 1974 $3 price accounting for inflation.
http://www.ers.usda.gov/Data/FeedGrains/FeedGrainsQueriable.aspx
Enjoy your blog.
I used a quote from your rapier-response-to-miglietta post on the business week debate room for their ethanol article. I included your blogname and a link to your post.
Unfortunately, before they posted the comment they stripped out both the credit I gave to your blog and the link back to the post.
Sorry you did not get credit for the quote, because it was a dandy.
Cheers,
TJIT
Robert,
If I were you, I wouldn’t waste your time refuting the opinion piece in the Aberdeen [South Dakota, not Scotland] News (“Science shows ethanol good for America”). It says nothing new, and simply rehashes old arguments.
What is more interesting is its tone: “So-called experts are attacking renewable fuels with half-truths!!” (Of course the writer says nothing about the subsidies involved.) Could it be that the pro-ethanol lobby is starting to become worried about the growing number of critics?
Unfortunately, the serious questioning of U.S. policy has not occurring soon enough to forestall copy-cat policies in other countries. Canada, for example, just announced a new, seven-year, C$1.5 billion program to support biofuel production with operating incentive to producers of “renewable” alternatives to gasoline (such as ethanol), and “renewable” alternatives to diesel (such as biodiesel).
The Federal government will be offering incentives of up to C$0.10/litre for ethanol and up to C$0.20/litre for biodiesel during the next three years (the rates are scheduled to decline thereafter).
Meanwhile, proponents of corn- and sugar-based are fighting over new subsidies being proposed in South Africa.
Fortunately, wiser heads seem to be prevailing in Chile.
Ron Steenblik (Global Subsidies Initiative)
Give or take a few hundred million, today the earth is inhabited by about six and a half billion people. That is estimated to be as many people as have ever inhabited this planet over the millennia since its existence. Although with the technology, and medicine people are living healthier and longer lives. There are probably more millionaires, per capita than ever, we have bigger houses, more cars, more airplanes, etc, etc. We also have more poor, more starvation and more people who are sicker than ever.
Whether you are a fan of global warming or not, that is a totally different issue, there are other consequences of this population boom that do not bode well for our future, that is the future of the mankind as a whole.
And this brings me to the recent editorial in “The Dothan Eagle” of Friday February 16, 2007, “ Biofuel research must be a top priority”. I admit that most of it is well thought out and well intentioned, it still leaves out a few problems and concerns that I have with promoting the Biofuel idea as an alternative to the “black gold”.
As we, at the behest of our beloved decider, jump head long into the research and conversions in to Biofuel arena we must consider a few other points. Your editorial already mentions the increase in the cost of corn due to the ethanol production and the cost of tortillas in Mexico, here are a few other items that needs to be considered.
Whether we use the corn or the switch grasses to produce the ethanol, the price of corn will stay up as the land being used to produce corn for the fuel will be used to grow switch grasses, thus the increase in food prices will be the same or similar no matter what we use to produce that fuel. We already see the price of eggs and poultry going up, and surely the cereals, the price of beef and the soft drinks will also go up as the price of corn syrup used in the soft drinks climbs, ethanol also is more expensive to produce than the gasoline and is less efficient, as you correctly noted in your editorial.
We must also keep in mind that even as ethanol is cleaner burning, the fuel is not less polluting to the environment, as to grow more and more organic materials to produce ethanol we will need more and more fertilizers and insecticides and thus directly pollute the under ground water reservoirs and rivers and the oceans, endangering the aquatic life and our own lives also.
As the competition grows for the land use, as to what we need more, the fuel or the food, the price of food articles will keep growing and become almost prohibitive for the poor, or just like in South America we will be forced to cut down the forests to grow these new crops, or let people go hungry. We have always sent our surplus crops to the starving around the world, with a switch to the biofuels we will endanger our own people. Will our elders and the poor on limited incomes still be able to eat?
Will we increase the minimum wage and social security benefits yet again to cover the cost of new more expensive fuel and the cost of food? How will we explain to the starving that they can not eat so as we can still drive our SUVs? What will we do when the fish populations start to die in our rivers because they have become more polluted with the fertilizers and insecticides?
The true and the only solution to our predicament of dependence on foreign oil is to reduce our “addiction” to oil, foreign and domestic. And we can start that by improving public transportation, making smaller cars, using less drive through’, and yes imposing higher and higher taxes on gas to be used for improved public transport. Would you believe a four dollar a gallon gasoline/ diesel tax will give us better and less congested roads, clean the air, give us better transportation systems, actually reduce poverty, and help bring many of our jobs back from over seas, will force Wal- mart into smaller stores, cut our dependence on the Arab oil, reduce terrorism, keep the Arabs from buying out the United States, and tell Hugo Chavez where to get off at.
If we do follow the road to the biofuel heaven, the over all cost increase in foods and fuel and the environmental damage will be the same as a four dollar a gallon fuel tax.