A reader recently sent me a link to the following story:
D.C. Discussions Advance Corn Issues
Extension of the Volumetric Ethanol Excise Tax Credit (VEETC) – This blender’s tax credit provides $.45 for each gallon of ethanol blended with gasoline and expires at the end of this year. The credit provides thousands of jobs, fuels economies and helps the U.S. to meet its mandated biofuels-production standard. The elimination of this credit will result in a 38-percent jobs and production loss. VEETC brings dollars back to the U.S. Treasury in the billions, eliminates more than $22 billion in oil imports and has led to a reduction of farm payments of more than $10 billion. Despite the success of the ethanol industry, some members of the Ohio delegation want its advancement to end – even delegates from areas where corn represents the largest economic portion of their district.
Granted, this is from the corn lobby, but that’s just unadulterated nonsense. It is scare-mongering, and given the advantages they already enjoy (and I am not opposed to some subsidies for the industry) it is sad to see corn farmers groveling for welfare like this. (The irony of this is that I grew up on a farm, in a farm community, and farmers love to gather at the local coffee shop to complain about “people on welfare” taking their tax dollars).
As I have been arguing, eliminating the ethanol credit (VEETC) wouldn’t absolve gasoline blenders from their obligations under the Renewable Fuel Standard (RFS). If the credit was eliminated today, gasoline blenders must still blend 12 billion gallons of ethanol in 2010, and 15 billion gallons by 2015. They just wouldn’t get paid to comply with the law.
Most of the attempted rebuttals to my recent essays on eliminating the VEETC completely missed the mark. People acted as if there was no RFS in place, and therefore they argued that eliminating the VEETC would completely destroy the ethanol industry. That was the gist of Growth Energy’s call to arms for their members; the VEETC was just too important to ethanol’s survival. That might have been a valid argument prior to implementation of the RFS, but it is not a valid argument today. If they really require both a mandate and a subsidy in order to compete, then we might as well stop this charade right now.
There was one response to my argument – made by several different people – that does have some merit. That response was that the VEETC helps incentivize blenders to blend more ethanol than what is required by law.
OK, setting aside for a moment the other arguments for and against the subsidies, it is true that the subsidy may result in the blender going above and beyond the law. But the response to that is simple: Only pay for what was blended above and beyond the law. Arguing for a subsidy that will cost almost $6 billion this year by some incremental blending above what the law requires is silly. In fact, that means you would be paying a very high subsidy for that incremental ethanol blending. How much? Try $4.18 per gallon of incremental ethanol blended.
Several related articles have recently been published along the same theme; that not only is a subsidy on top of a mandate redundant, but it subsidizes driving and wastes taxpayer dollars:
Mandates, Tax Credits, and Tariffs: Does the U.S. Biofuels Industry Need Them All?
It is puzzling why the biofuels industry continues to defend these subsidies when it has its mandates in place. Tax credits cost taxpayers more than $5 billion per year, and import tariffs convey the message that the ethanol industry is so uncompetitive that it needs protection against foreign competition. It would seem that there would be major political benefits from simply giving up all subsidies and import tariffs and for the industry to rely solely on the mandates . . .
Pay close attention to this bit: “Expanded mandates under the Renewable Fuel Standard provide ethanol and biodiesel producers a guaranteed future market at volumes that exceed what they have produced in the past.”
Think about what is going on here. Ethanol producers already enjoy mandates that guarantee a growing market. What other industry has that luxury? And on top of that, they want subsidies to complement the mandates? Outrageous.
I am in the middle of preparing my taxes, so tax dollars are much on my mind right now. And I strongly resent my tax dollars being wasted. The issue of taxpayer money has become a bit of a running joke with all of the multi-billion dollar bailouts and stimulus packages, but that money still comes from taxpayers, present and future. I will not sit idly by while we mortgage our children’s futures to pay a redundant subsidy.
That is a perfect lead-in to the theme of this article, which is what I think the ethanol industry’s strategy should be with the VEETC expiring this year. Now the ethanol/farm lobby might be able to push this redundant subsidy through regardless. I won’t be surprised if they do. But it is going to be a nasty fight, and it is going to shine a spotlight on this issue that they would rather have keep at a low profile. They are going to have to resort to scare tactics and exaggerations (as in the corn lobby’s missive above), and major questions will be asked as to why this industry still requires so much protectionism and taxpayer money to survive.
But imagine that instead of spreading a $6 billion subsidy across 12 billion gallons of ethanol (that oil companies are legally obligated to blend), that it was instead targeted at incremental E85 production. So instead of $6 billion, you could maybe spend $2 billion to get an incremental 2-4 billion gallons of E85 into the market. That would be smart politics by the ethanol industry, would save taxpayer dollars, and would still potentially grow their industry above and beyond their already guaranteed future market.
I haven’t been able to find E85 sales statistics for 2009, but there were lots of stories about how demand had dropped off during the year. The major problem here is in pricing; E85 is currently at about a 15 cent disadvantage (with the subsidy) relative to mid-grade gasoline (but only a nickel disadvantage relative to premium gasoline). If the VEETC was focused entirely on the E85 market, that disadvantage could be made to disappear at a fraction of the cost of the current program.
Further, I think E85 would be a much better outlet for the ethanol industry than trying to get nationwide E15 or E20 in the system. Instead of fighting the EPA, boat owners, the oil industry, the auto industry, etc. to force higher ethanol blends into the system (and I haven’t seen them step up and offer to assume the liability from potential damage caused by these higher ethanol blends), use it in cars that were designed for it.
There are numerous E85-ready cars on the road now. If the price is right, the demand will be there. The industry doesn’t even have to rely on the oil companies. There is nothing stopping farmer’s coops from getting together and opening up their own E-85 stations throughout the Midwest.
I am a fan of efficiency, and to me it doesn’t make much sense to produce ethanol in Iowa and ship it to Texas, while shipping finished gasoline products from Texas to Iowa. The Midwest consumes 40 billion gallons of gasoline per year. The ethanol industry should enjoy the largest cost advantage in the Midwest, close to the source of production. If we are going to incentivize ethanol, let’s first focus on getting E85 sales up in the Midwest, in the local markets where ethanol is produced.
I think some version of this argument – only use the VEETC to incentivize incremental ethanol production – would be a win-win for the ethanol industry. But continuing to argue that they need a subsidy for something oil companies are legally obligated to do anyway is not going to sit well with most people.
Note 1: (My recent Range Fuels’ essay has been republished in the current issue of Subsidy Watch).
Note 2: Major changes are coming to R-Squared. Details on Monday.
Ethanol producers already enjoy mandates that guarantee a growing market. What other industry has that luxury?
I could be profitable making framulated, phase-adaptive swirvel bearings if I could lobby some lawmakers into passing a mandate saying people had to buy them.
Wouldn't it be a whole lot more efficient, RR, simply to eliminate all the subsidies and all the mandates. As you have pointed out before, RR, mandates create problems when gasoline usage drops below expectations — as it may during the coming second leg of the expected double-dip recession.
If Congress & the Administration want to promote ethanol, let them mandate the government itself purchase large volumes of ethanol fuel from the cheapest supplier, to use in government-owned vehicles. That would encourage competition & innovation and help grow a market (if such a thing is possible), while keeping the costs & the beneficiaries out in the open.
Much as I too would like to get rid of all the mandates, tariffs and subsidies, I can;t see that happening, though I would settle for RR's plan of the VEETC only applying to E above E10.
That said, think the best strategy for the ethanol industry, like any other industry, is put their efforts into finding ways that improve the performance of their product so that people WANT to buy their product, instead of being mandated to do so.
After all, beef is one of the most expensive food sources available, but people want to buy it, and certainly are not mandated to do so.
They should be lobbying the carmakers to build all their cars as flex fuels (since it is now only $70 more), though they will probably lobby Congress to mandate that instead.
They should be working with engine makers to use the properties of ethanol to make engines more efficient than gasoline ones (like the Ricardo engine, but there is more that can be done). They should be working on ethanol powered diesel engines (already in use in Europe) and ethanol fumigation add-on kits for diesels – then they can use them on the farm.
There is lots of scope for innovation in ethanol, and I am all for that. The ethanol industry seems to prefer to do its innovation in the area of ways and means to keep/get more subsidies, mandates, etc.
They may even succeed, in the short term, but long term , the best bet for any business is to have people to want to use your product in preference to something else. The corn industry has been very successful in this regard to making corn the preferred animal feed, making corn syrup preferred over sugar, etc, without needing mandates.. Surely they can do the same for ethanol?
They should be lobbying the carmakers to build all their cars as flex fuels (since it is now only $70 more)…
Let's think outside the box for RFA's Bob Dinneen for a second. If it costs only $70 to make a car flex-fuel, shouldn't the RFA and it's members be willing to pay that to GM, Ford, and Chrysler just to help build a market for E85?
Instead of always complaining to Congress and wanting them to mandate flex-fuel cars, Dinneen could serve the interests of his members by saying to the U.S. automakers, "Here you go boys, we'll pay the $70 it takes to make each of your cars flex-fuel."
It would cost RFA and Big Ethanol a bit of money, but it would be an investment that could pay back big.
Instead of always lobbying for legislation Mr. Dinneen, why not be proactive for once?
Actually, Growth Energy is offering grants of between $2,500.00 and $5,000.00 to filling station owners to install Blender Pumps.
I can agree as to making the blender's credit only apply to blends higher than E10 if you added in all "cellulosic" in the process. Cellulosic is very important for our Energy Security future, and will need some help getting started.
I think we should have the same import tariffs as Brazil. Of course, that means putting an end to the Caribbean Basin loophole, whereby every single gallon that has ever been imported from Brazil has been "Tariff-free."
However, for the vast majority of ethanol blended (approx 98%) that goes into E10, or less, count me in.
Excellent post.
Yes, the "people on welfare" gripe.
Does that include rural Americans, who benefit mightily from crop subsidies, rural highway subsidies, rural power subsidies, rural telephone subsidies, rural water system subisides, subsidized airports, subsidized rail service and dubious placements of military bases?
The most mollycoddled, knock-kneed, enfeebled people on Earth are rural Americans, unable to stand on their own two feet without constant and growing subsidies from urban dwellers.
It was then-Tx. Congressman LBJ, in the 1930-40s with FDR, who perfected the art of taking federal money to "develop" rural areas.
The practice has grown ever since, and we have created the Red State Socialist Empire, that stretches from Alaska, down through Montana, thought the heartland and into the Appalachia.
Want to balance the federal budget? How about every state gets back form the feds what they pay in?
Oh, now there's an idea never mentioned in R-Party circles. I wonder why.
The most mollycoddled, knock-kneed, enfeebled people on Earth are rural Americans, unable to stand on their own two feet without constant and growing subsidies from urban dwellers.
But those urban dwellers have to eat, don't they? 😉
I think we can do better than only giving tax credits to above RFS volume biofuels. NRDC has proposed a Greener Biofuel Tax Credit. (See this post of mine.) Basically, the idea is to pay for carbon and other ecosystem services on a technology-neutral basis (i.e. per btu).
Also, FYI, my most recent blog on the $4.18 subsidy for the incremental production, which Rob links to above, now features a back and forth between myself and the RFA's main analyst.
No Benny, but your food would be Much more expensive, and the price would fluctuate a lot more.
RR and Rufus,
I hope you'll help me to understand the gasoline/ethanol price issue. Rufus is posting links showing ethanol at $1.60/gal without the blenders' credit or BTU adjustment. Adjust it for 75% BTU content and the price for ethanol goes to $2.13, which is about the same price as conventional (reformulated?) gasoline. How does that come out to a premium regular gasoline? Where do the taxes and blenders' credit come in?
Benny,
That ignorant screed was beneath you.
1. Ag subsidies have wrecked the social structure of rural areas by increasing land costs and de-coupling ag lands productive use from its subsidy base.
2. They force rural ag producers to compete for land against investment syndicates of the well healed who buy land for the value of subsidies not the lands productive value.
This is an economic battle rural residents can't win. So they move out wrecking the economic engine of rural communities.
3. This destroys rural communities buy displacing the productive economic base of rural areas.
4. The rural residents of wyoming don't need I-80, they don't move that much traffic.
The people who really need major federal interstates like I-80 are residents of urban areas that consume the bulk of the goods that are shipped by freight trucks across the US.
4. Liberal urban residents push for wealth redistribution. Then they cry like babies when the programs they support actually redistribute the income.
Instead of complaining about the results of stupid redistribution policies urban residents need to stop pushing for wealth redistribution policies.
Duracomm.
Peace, people. It must be time to bash the Europeans again.
🙂
Duracomm:
We are in agreements that subsidies, in general, should be eliminated.
Wealth redistribution is a complicated topic, and one may well wonder if wealth is redistributed up or down the economic pyramid, under current tax and regulatory law.
Duracomm wrote: "This destroys rural communities buy displacing the productive economic base of rural areas."
You can say that again! I had the opportunity to spend a couple of days driving across West Texas recently. (There's a lot of West Texas). Hard to believe that we have just gone through a massive real estate bubble, looking at the sad little towns struggling to survive. The last few decades have been hard on rural America.
But then, the last few decades have been hard on the urban poor in America also. And maybe the reason is the same — Subsidies!
The concept of subsidies seems so compelling. And what better way to show that we care than by giving away other people's money. But the results have been demonstrably awful.
Alternate energy needs to kick its dreadful addiction to subsidies, and soon.
But PeteS is right — let's get back to criticizing the Europeans. They were the bums who came up with the idea of subsidies in the first place!
“It must be time to bash the Europeans again.”
PeteS I can understand why many Europeans might be ignorant of the US.
Since you drove the Blue Ridge Parkway maybe you understand why I would prefer not to live in a rural area or a small town. I like a clean environment, good schools, low taxes, and low crime. This in no way takes anything away from Benny.
Cellulosic is very important for our Energy Security future,…
LOL!
Rufus, first show me a SINGLE operating cellulosic ethanol facility. Bigger than bench scale.
…and will need some help getting started.
Sure! Tell you what, Rufus, I have a very important stamp collection business that I want to get started. Can I sign you up for a contribution?
While it's true that subsidies were invented by Europeans, the 1513 "Subsidy" invented by Thomas Cardinal Wolsey and British treasurer John Heron was a tax — a subsidy of the Crown by the taxpayer. In similar double-speak, a "Benevolence" was a donation extracted from the nobility, usually to fund the king's military expeditions.
I guess subsidies didn't start working the other way around until power was transferred from the State to corporate interests. I'm not sure you can blame Europe for that one … or at least Americans were willing copycats and now lead the field. I'm sure Fannie and Freddie and AIG and Chrysler and GM are very grateful for your Benevolences.
Robert,
The are quite a few people considering how E85 could be used to improve the efficiency of the gasoline fleet, which is possible (see Ethanol Boost System, LLc). If E85 were widely available, I think the idea could gain more traction. So, I think your idea is right on about promoting E85.
At the moment some would consider burning any ethanol in a 10:1 compression ratio engine a waste of a fuel that is capable of so much more. We might as well burn it more efficiently if we are going to all the effort to make.
The ag subsidy situation is completely and utterly insane.
Ethanol increase corn prices so corn growers want to see more ethanol used. So government policy is to increase the amount of ethanol used.
The increase in corn price leads to more mono culture corn farming.
Hunters and environmentalists are concerned about the habitat destruction this causes.
They push for the government to pay farmers to stop farming and put their land into the CRP program.
The government agrees to this and increases CRP sign ups.
The end result is that the government is generously funding two programs that have objectives that are absolutely and perfectly contrary to each other.
Duracomm
Bryan, I didn't understand that, either.
RBOB (needs a couple of cents of octane enhancer) is selling on the front contract for $2.26.
Ethanol is selling on the CBOT for $1.58/gal.
Most cars will lose about 20% mileage on E85, but if we use your 25%, which is a Fair number, you would need to be selling ethanol at about $1.70/gal to hit parity.
That means ethanol is, for all practical purposes, about $0.12 below parity with regular unleaded at present (actually, it's probably closer to $0.15 since RBOB is only 84 Octane, and needs some octane enhancer added to be brought up to 87 Octane.
There are, actually, several cellulosic "pilot plants" up and running, and everyone that has one going is planning a Commercial plant. Poet, Vonore, Tn, to name two.
The bringing of the Enzyme cost down from $5.00/gal to $0.50/gal is a monster move. Truly astonishing.
Now, here's what I think they'll "Really" do: I think they'll lop another $0.10 off the corn ethanol credit, and leave the cellulosic in place. Maybe, adjust the Import Tariff to equalize the corn blender credit, but probably pretty much leave that as is.
The thing is, this year Brazil will be allowed to import a little over 700 Million Gallons of ethanol through the Caribbean Basin Agreement Tariff Free.
As far as I know, not a single drop of Brazilian ethanol has ever paid a dime in tariffs; and there are three, or four hundred million gallons imported every year. On the "Other" side of the coin Brazil has a 20% Import Tariff that starts on the First Gallon.
Rufus, that sounds like as good a reason as any for the people in the midwest to switch to flex fuel cars, and use enough E85 that there is none left to export to Brazil. After all, the idea was to reduce foreign oil imports, and every btu exported is a btu of oil to be imported.
I presume the blenders credit does not apply to exports, so any exports are effectively showing they don't need the credit.
Like I said, the ethanol industry needs to find ways to make people want to use ethanol, otherwise they will never amount to anything more than what they are, and once that is recognised, they will gradually lose their subsidy, and rightly so.
I presume the cellulosic folks can see this too – we are spending a lot of R&D money to then export that excess ethanol…
What is not to like about ethanol? We have tapped into the productivity of American farmers and industry in a way that we have not seen since WWII. We have increased domestic production of transportation at a time when foreign sources are becoming more expensive. That is not welfare, that is a good investment.
As a consumer and taxpayer the cost is low.
For those who want to think differently about how we produce the energy and food we need, I recommend:
Industrial Ecology – Graedel & Allenby
http://www.amazon.com/Industrial-Ecology-2nd-Thomas-Graedel/dp/0130467138/ref=sr_1_1?ie=UTF8&s=books&qid=1268486064&sr=1-1
Ethanol is a good Industrial Ecology in practice. It is always great to see theory become practical.
Paul, all ethanol that is blended with gasoline in the U.S. is eligible for the blenders credit.
That is the reason for the Import tariff. It was meant to offset the subsidization of imported ethanol.
A whole lot is going to depend on the price of gasoline this summer.
If gasoline is selling for $3.50 at the pump the blender's credit will be on automatic pilot. If gasoline is $2.50 the horse-trading will be on.
"the 1513 "Subsidy" invented by Thomas Cardinal Wolsey and British treasurer John Heron was a tax"
PeteS — I bow before your impressive knowledge of history.
If the meaning of 'subsidy' has been reversed once already, that may suggest a way to get alternate energy junkies off their self-destructive addiction to subsidies — keep calling it a subsidy, but reverse the direction of the cash flow.
Funny, K, I don't hear you bitching about the $500 Billion in Fossil Fuel Subsidies. Why is that?
What about the $13 Billion we gave the oil companies for deep water drilling?
What about the $Trillion we've spent in the Gulf in the last 8 years?
What about the Oil Depletion Allowance?
Were you complaining when we were subsidizing your Steaks by subsidizing, by approx. $1.00/bu, the corn the cattle ranchers were feeding to those Angus?
I haven't seen you write a single scathing remark about the $7,500.00 Subsidy those people are getting for buying a "hybrid" car.
How many gallons of ethanol, at $0.45/gal do you have to use to get to $7,500.00? Or to get to $13 Billion?
This is interesting. I didn't know they were already doing this.
Using CO2 from two Kansas Ethanol Plants for Enhanced Production of Oil
As a consumer and taxpayer the cost is low.
Kit, you continue to miss the point. The cost this year will be about $6 billion in subsidies for something that is already mandated by law. As a taxpayer, that is not low cost. That is a complete waste of money as it is presently allocated.
RR
Funny, K, I don't hear you bitching about the $500 Billion in Fossil Fuel Subsidies. Why is that?
Funny that you are always glad to accept at face value the worst case fossil fuel numbers and the best case ethanol numbers – without applying a bit of critical thinking or skepticism in either direction. Why is that?
RR
without applying a bit of critical thinking or skepticism in either direction. Why is that?
I don't think that's warranted. And, it didn't answer the question.
You might say that, at present, Gasoline is "Mandated." There certainly is no alternative. Yet, we give the oil refiners all kinds of tax breaks. The $13 Billion I reference, and the "tax credits" they get for foreign production (no other American business gets those – or, at least, none that I'm aware of.
It just seems strange that, of all the subsidies that are being paid out to Solar, Wind, Nuclear, Oil, etc, it's only the comparatively small ethanol tax credit that arouses so much indignation.
I don't think that's warranted. And, it didn't answer the question.
That's because it is simply a made-up number that you chose to embrace. It is like me asking why it is that we continue to subsidize ethanol to the tune of $2/gal. Because I think somewhere someone once told me that. And that is the way you have always operated when we are talking about fossil fuels versus ethanol. For fossil fuels, your cousin John is a good source of information. For ethanol, if the news is bad, Science isn't good enough. But if it was anti-fossil fuel and in Science – I don't think you could beat that from your perspective.
You might say that, at present, Gasoline is "Mandated."
I would ask what exactly keeps farmer's coops from building E85 stations across the Midwest. Nothing is stopping them, except economics and market risk – which they want someone else to take instead.
it's only the comparatively small ethanol tax credit that arouses so much indignation.
Number 1, it isn't comparatively small. On a per gallon basis, it is pretty large. But worse – and you have already said that you agree on this point – we are subsidizing that which is mandated. Besides, since the oil companies get the tax credit – and you are always yelling about oil company subsidies, you should be leading the charge here.
RR
You can tell Rufus, our friendly neighborhood ethanol booster, is nervous.
8 of the last 12 comments were by him. 2 of the last 12 comments were responses to inanities in his comments.
In total 10 of the last 12 comments were driven by Rufus.
This is typical behavior for Rufus when someone questions his gospel of ethanol welfare.
He drowns out posts critical of ethanol by spamming the comment thread with nonsense that is often not even related to the topic at hand.
Entertainingly transparent strategy from our friendly neighborhood ethanol worshiper.
Duracomm
What made up number?
The $500 Billion was from the IEA for crissakes. The $13 Billion non-collected "Royalty" has been a subject of Congressional wrangling for 3 years, at least.
This is the hyperbolic phrase from Kinauchdrach that I was referring to:
alternate energy junkies off their self-destructive addiction to subsidies —
That just struck me as being a bit over the top.
And, I did state, upthread, that I had no problem with doing away with the tax credit for that ethanol that is already mandated. Should I repeat that statement with every comment?
And, no Duracomm, I have absolutely NO reason to be nervous. I have no money invested, here, in any respect, and my wife is sitting right across the room where I can keep an eye on her. 🙂
I thought that was interesting about using the CO2 for enhanced recovery though. Didn't you?
“Kit, you continue to miss the point.”
Gosh darn, there may be different explanation. RR assumes I am rather dense but it could be I see a bigger picture.
Let me know when you have read the book I suggested. It might be useful in your line of work rather than getting junk science from journalists.
Rufus made a point that bears repeating,
“It just seems strange that, of all the subsidies that are being paid out to Solar, Wind, Nuclear, Oil, etc, it's only the comparatively small ethanol tax credit that arouses so much indignation.”
Let me point out that the nuclear industry pays huge amounts of taxes. Currently it is subsidizing government. I am a lot happier with the service from utility for the money than what goes in DC.
Take loan guarantees for energy projects. DOE is making a profit because they do a good job of 'due diligence'. DOE collects a fee up front if if no loan is granted and then charges a fee based on risk. However, the anti-s still complain.
Currently there are 104 nuke gold mines producing really cheap electricity for their customers and paying lots into treasuries of government. Thirty years later it turned out to be a very good investment.
Will ethanol the ethanol industry be bragging about performance thirty years from now? Sure looks like a good investment to me.
I could be wrong, maybe RR will discover massive amounts of $10/barrel domestic oil. I do not see a problem if this turns out to be the cause of ethanol facilities being future gold mines.
The indefatiguable Rufus wrote: "I haven't seen you write a single scathing remark about the $7,500.00 Subsidy those people are getting for buying a "hybrid" car."
That's only because the subject has not come up, Rufus.
History shows us that subsidies don't work as a way of stimulating innovation. I am appalled that good left-wing politicians voted for a subsidy for hybrid cars — a classic case of robbing the poor to pay the rich.
OK – in the case of the US, it is actually a case of paying the rich with money borrowed from poor Chinese with no intention of ever paying it back. But that only makes the subsidy even more morally repugnant.
To pick up on PeteS's earlier learned comment that 'subsidy' was originally a tax — we should be careful what we call a subsidy.
The fossil fuel industries are massive net tax-payers. If corrupt & incompetent politicians make fossil fuels pay additional taxes and then hand part of those taxes back (with major strings attached), is that a 'subsidy'?
The fossil industry 'subsidies' are nothing like the true subsidies paid to alternate energy subsidy junkies. Alternate energies are net recipients, not net tax payers.
Rufus – please understand that my opposition to the subsidy junkies in alternate energy is that the subsidies are actually killing them! The price of subsidies is that politicians pass laws leaving those alternate energies stuck in a technological rut, holding their begging bowls out.
Much better to have government cancel all subsidies — and I mean ALL, including the Prius joke.
Instead, use the money for X-Prizes and for guaranteed supply contracts at fixed prices, competitively awarded. Then roll back excessive regulations & limit lawyers' incomes to the minimum wage. You would be astonished at the tidal wave of innovation that would be released!
Alternate energy's addiction to subsidies has to end.
Kit, I really hesitated putting Nuclear in there. I finally just threw it in as a "aw, what the heck, a loan guarantee is a subsidy of sorts." I probably should have left it out.
I'm, actually, in favor of the rather small (in the larger scheme of things) subsidies for wind, solar, geothermal, hybrids, etc. I'm not even "extremely" incensed over the $13 Billion Royalty "overlook" on the Deep-water Drilling.
I just get a bit tired of the "Holier than Thou" pronouncements from the oil lobby on the smallish (again, from a larger perspective) blenders' credit which has jump-started a heck of a Domestic fuel industry.
And shipping that money to the Middle East really chaps my butt.
Let me know when you have read the book I suggested. It might be useful in your line of work rather than getting junk science from journalists.
Kit will show up and comment at length in a post on a book review even though he never read the book, and then wants to recommend books to me. Tell you what, Kit. First you read the book in question if you plan to comment on it. Then you can worry about my reading list.
Take loan guarantees for energy projects. DOE is making a profit because they do a good job of 'due diligence'.
Yeah, the job they did with Range Fuels made a believer out of me.
RR
I just get a bit tired of the "Holier than Thou" pronouncements from the oil lobby on the smallish (again, from a larger perspective) blenders' credit which has jump-started a heck of a Domestic fuel industry.
Rufus, the true test is whether the motor dies after the jumper cables are disconnected. We could jump start any number of industries if we funneled enough money into them, but if they only remain viable as long as the subsidies continue to flow, then it is a faux industry.
RR
Gosh darn, there may be different explanation. RR assumes I am rather dense but it could be I see a bigger picture.
Incidentally, since you insist on ignoring the point, why don't you explain where subsidies on top of mandates fit in the bigger picture? That would be really helpful to understanding the point you are trying to make about the cost being so low.
RR
& limit lawyers' incomes to the minimum wage.
🙂
Well, Good Luck on That one.
There's been an Awful lot of innovation in the ethanol business in the last couple of years, K.
When the $1.00 blenders' credit for cellulosic was introduced the enzymes were selling for about $5.00 per gallon of ethanol. In a couple of years they've dropped to $0.50 per gallon of ethanol.
That's some pretty good "innovatin," I'd say.
We've gone from 2.7 gal of ethanol per bushel of corn to the point where Poet is getting 3.0 gal + some corn oil.
Water usage has gone from around 6 gallons/gal of ethanol to 2.0 to 2.6. Again, some pretty good "innovating."
And, now, Poet will produce 100 mgpy of corn ethanol, and 25 mgpy of cellulosic utilizing the lignin from the kernels, and cobs for 90% of the plant's process energy.
I'd say, That is some real strong innovatin.
Anyway, last year they pared the credit back from $0.51 to $0.45, and I imagine they'll continue along those lines until the credit is, eventually, gone.
K, I used to be just like you. I thought ALL subsidies were bad. I read the same books you did – except probably a little sooner. 🙂
But, you see, the problem with the "invisible hand" is that by the time the invisible hand gets through fixing everything we're all dead, and the late, great U.S. of A. is but a fond memory. There is a place for subsidies. No Theory can replace "Common Sense."
Robert, let me give you an analogy.
I'm sure you wouldn't consider "Farming," a "Faux" industry. However, after several hundred years, we still subsidize it. Why? The Weather. Farming is just an incredibly unpredictabe business because you can't be certain about rainfall/drought, Early Freezes, late thaws, insect infestations, etc.
Now, let's take a young ethanol industry that's dependent on the Price of a "Farm Commodity" for its profits. Surely, we don't have to get in Too big a hurry to make it "swim on its own."
Especially, when you consider that the only way it can grow is to take market share away from a tremendously Rich competitor On Whom it must rely for its Distribution.
I think it's done pretty good. Production is up to 12.477 Billion gpy, and will be at 14.5 Billion within, probably, a year. It employs a lot of people, pays a lot of taxes, and the money (in the area of $18 Billion, today) stays in the U.S.
Kuwait came out the other day, and said "peak oil" will be in 2014. Whether that's exactly correct we have no way of knowing; but we Do know that oil is $80.00/bbl, and the "smarts" are betting $100.00 before $60.00, and $120.00 before $40.00. Jes Sayin.
Now, let's take a young ethanol industry that's dependent on the Price of a "Farm Commodity" for its profits. Surely, we don't have to get in Too big a hurry to make it "swim on its own."
As I have said before, that 30-year old infant is getting pretty long in the tooth. It's about as young as the computer industry.
RR
But, one more time, it's not nearly as long in the tooth as the farming, and oil industries, and They still get subsidies.
Besides, I think it's kind of a stretch to call ethanol a 30 year old industry. True, there have been a couple of stills around since Carter's gasahol debacle, but there's a lot of difference between the little niche business they were doing, and the big-league, growing modern ethanol business.
“Yeah, the job they did with Range Fuels made a believer out of me.”
This is what anti-s do. They want to argue about my mother wearing combat boots. It is a circular argument. Wearing combat boots is something old ladies do. Mothers are old. Therefore all mothers wear combat boots.
I point out our government has a successful loan guarantee program for energy projects that does not cost the tax payers. RR tries to discredit it with an example of a project that fails to meet his criteria.
RR establishes the criteria, picks the examples, then declares them a failure.
I have a different criteria. I want some of my transportation to be be from biomass produced in the US and available when I need it. I can now go to my local Shell station and buy 10% ethanol but I can also find fuel without ethanol.
Then I check various sources of information to see how it working. Looks great to me.
However, I do skip analysis by journalists because they are not a very good sources of information on energy. You can find whatever supports your combat boots theory of life on the Internet.
For example, anti-nukes like to talk about radiation sickness to support their opposition to commercial nuclear power. First there are very strict regulations about radiation exposure and second exposing people to radiation from the core of a reactor is not all that easy. Explain the perfect record of the commercial nuke industry (US navy too), and the anti-nukes will still prattle on about radiation sickness.
Back to ethanol. Looking back 5 years, ethanol has exceeded my expectation.
Wait for it.
I point out our government has a successful loan guarantee program for energy projects that does not cost the tax payers. RR tries to discredit it with an example of a project that fails to meet his criteria.
No, you point out that it is your opinion that this is true. I point out a glaring example of where it wasn't true. And of course that's not the only example I have.
I have a different criteria. I want some of my transportation to be be from biomass produced in the US and available when I need it.
If that's your criteria, then we can arrange for all sorts of fuels to show up at your local service station. The taxpayer cost would be horrendous, but apparently that isn't part of your criteria. Some of us look beyond simply whether it is U.S. biomass and available when you need it. There are other important considerations.
Face it, Kit. You viewpoint is shallow beyond comprehension here. You have simple criteria, and therefore are happy. But you don't look at the bigger picture. And there is a bigger picture.
RR
Ethanol refineries are buying corn, producing ethanol, and transporting it to Chicago for $1.58, today.
That's before any blender's credit is applied. At $1.58 the farmer is making money, John Deere is making money, the local cafe, and gas station is making money, the employees at the ethanol refinery are making money. The Truck Drivers are making money. The Seed manufacturers, and their empoyees are making money. The Railroad operators, and their employees are making money.
The State is making money. The Federal Government is making money. The County Government is making money.
And, ALL That Money is Staying Home!
Meanwhile, RBOB is $2.26/gal on the NYMEX.
And, THEMS the Facts.
The Federal Government is making money.
Much of what you have stated aren't facts, they are assertions. We don know that the federal government is spending some $6 billion this year on the VEETC. Whether they recoup that is questionable. We also know that consumers pay marginally higher prices as a result of higher corn prices, so "making money" is really just government-mandated wealth transfer.
RR
The Government is definitely making money at the point the ethanol comes out of the refinery.
Remember, I'm on your side as to dropping the Blender's Credit on the 98% that's blended in E10, and under.
As for the consumer: I don't see how he could not be making money. $1.58/$2.26 = 69%. He's getting the product for 31% less money, and even if you used 25% for loss of efficiency he would still be coming out to the tune of 6%.
Also, Ia State came to the conclusion that in 2008 the presence of ethanol in the marketplace had a dampening effect on gasoline prices to the tune of $0.29 – $0.40. And, there was a lot less ethanol in the market then than there is now.
“The government-wide average subsidy fee is low because many loan guarantee programs generate more fee revenue for the federal Treasury than they cost, as the DOE loan guarantee program for nuclear energy is expected to do.”
http://www.nei.org/resourcesandstats/documentlibrary/newplants/whitepaper/clean-energy-loan-guarantee-programs-credit-subsidy-fee-nei-rebuttal-to-center-for-american-progress
The $500 billion fossil fuel subsidy is global, and of course includes coal. It's probably a good number since it was done by the GSI, but if you accept that, you better also accept GSI's views on biofuel subsidies. I trust them, and $500 billion is probably a reasonably accurate number, but has little relevance to the US or to biofuels when you look at it on a BTU or gigajoule basis (i.e., it's trivial). Also, most of it is China, India, Russia, Iran etc where consumers don't pay market prices.
I don't have a problem with subsidies for new sustainable technologies with clear life cycle benefits, but current corn ethanol clearly doesn't meet that criteria, and some version of cellulosic is years away from possible relevance. I'm even OK with providing some subsidies (or mandates) for small volumes of alt fuels that need that kind of boost to get started. But there has to be a cutoff point. Clearly 10 or 15 billion gallons of corn ethanol is on the upper end of what might be reasonable to continue to subsidize, especially when it is as profitable as Rufus says.
Rufus (again): "K, I used to be just like you. I thought ALL subsidies were bad."
Well, you were right. 🙂
You do raise a good question, Rufus, about agricultural subsidies — which have definitely become addictive for both Europeans & Americans. We all have a much greater interest in the food supply than we realize in this temporary age of plenty. How do we avoid wild swings in agricultural commodity prices in a world where the weather (dare we say climate?) is in continual flux?
In biblical times, they dealt with the predicted 7 fat years & 7 lean years with big graneries. But who pays for the grain in storage?
It is easy to see the attraction of government involvement through subsidies to stabilize prices. But that ends up with Harvard lawyers telling farmers what to plant (even though Harvard lawyers generally know sweet nothing about farming), and politicians extracting their pound of flesh. Subsidies are just a very inefficient way of doing things.
In principle, it should be easy for a well-capitalized entity to make money on commodities by buying low, storing, and selling high — thereby moderating the price swings. But politicians intervene, wanting to do things like tax the value of inventory and impose senseless regulations.
Some years ago, it is said, the Saudis approached the US about building massive oil storage facilities in the US to store Saudi oil. The Saudis were looking for a backup against the inevitable day when the Iranians close the Straits of Hormuz. The idea was for the Saudis to use some of their excess production capacity to fill storage in the US, and which they would sit on and then sell in the event of a supply interruption.
Win, win — we all might think. By the time the Harvard lawyers and their political bosses (but I repeat myself) were finished with their plans for taxing & regulating, the Saudis walked away.
Subsidies. Lawyers. Politicians. The roots of the problems facing the human race.
Well, we've been growing corn here for 500 years; and the Indians were growing it 1,000 years before us.
If that ain't sustainable, I guess I don't know what "sustainable" is.
Poet, and Novozymes say they'll be doing $2.00 Cellulosic by 2012. They haven't lied, yet.
He's getting the product for 31% less money, and even if you used 25% for loss of efficiency he would still be coming out to the tune of 6%.
But if the ethanol industry's concerns are correct – that elimination of the VEETC would cause ethanol prices to fall – then the inverse is true. The VEETC is propping up ethanol prices, making fuel more expensive than it might be without the VEETC. Thus, job creation is achieved by transfer of wealth.
(For the record, I don't believe prices will fall if the VEETC is eliminated since the mandate is in place, but that is their argument).
RR
Rufus and Kit,
Subsidies are not harmless.
They cause massive economic dislocation, waste vast amounts of money, and strangle new innovative technologies in the crib.
Furthermore they are flatly immoral.
Government spending is driving future generations into unsustainable debt. And you two demand more, more, more wasteful spending on your pet projects.
Conveniently you won't have to pay the bill, you are going to force future generations of children to pay for your pursuit of ethanol unicorns.
The ongoing government meddling in the economy is going to ruin us all. In fact subsidies were one of the drivers of the current economic meltdown.
Obsessive Housing Disorder Nearly a century of Washington’s efforts to promote homeownership has produced one calamity after another.
As Washington grapples with the current mortgage crisis, advocates from both parties are already warning the feds not to relax their commitment to expanding homeownership—even if that means reviving the very kinds of programs and institutions that got us into trouble.
Not even the worst financial crisis since the Great Depression can cure us of our obsessive housing disorder.
Duracomm
Well, we've been growing corn here for 500 years; and the Indians were growing it 1,000 years before us. If that ain't sustainable, I guess I don't know what "sustainable" is.
Rufus~
You don't. It was sustainable for the Native people because they learned to fertilize it with dead fish as Squanto showed the Pilgrims, or to keep moving to virgin soil that hadn't before been used to grow corn.
It's "sustainable" for us because of the synthetic nitrogen fertilizer we apply every year made from natural gas using the Haber-Bosch process. (It was sustainable for my Grandfather because he rotated his crops, and used the manure from his hogs and dairy cows as fertilizer.)
The truth is without the constant application of energy in the form of fertilizers, corn is not a sustainable crop unless the farmer keeps moving to new virgin soil. Since there is no more virgin soil in the Corn Belt; most farmers long ago abandonend rotating their crops; and only small organic farmers still use animal waste as fertilizer; the alternative is to constantly apply synthetic nitrogen made from natural gas as our industrial corn farms do.
Try planting corn on the same piece of ground year after year with no added fertilizer and you will find corn is not sustainable at all.
And, actually, Robert, I believe prices would fall (probably,) and here's why:
We have about another 2 Billion gpy to bring online in the next 12 months, or so. There will be periods of several months, or longer when the supply will outstrip the mandate, perhaps by a substantial margin. If the difference in price narrows enough I would expect the oil industry to dial back their purchases to only the amount required by the mandate. This could really wreak havoc on prices, and thus the whole industry.
So, you ask, if I believe that why am I supporting your end of it? Simple. I don't believe they'll cut the credit all the way out. It's kind of a freeroll for me. I can be agreeable, somewhat secure in the knowledge that the outcome is unlikely.
Remember, I said that the worst I expect would be a decrease in the credit. I'm figuring probably around ten cents.
If they do cut it out entirely, at least I'll be filling up my flexfuel pretty cheap. And, THAT is the only "investment" I have in the whole deal.
I stated several years ago that this was going to be a bumpy ride, and that there was no way in the world you could ever get me to invest a nickle in an ethanol plant. Too many powerful enemies, and in the end it's just a commodity play.
Personally, I believe oil IS going higher, and ethanol will be alright. But, any commodity that has the ability to go from $147.00/bbl to $34.00 bbl in a couple of months, and then back to $80.00 bbl in just another year ain't no place for this country bumpkin to be messin around.
Rufus wrote "This could really wreak havoc on prices, and thus the whole industry."
So the industry, that we are mandated to use 10bn gpy of it's product, also wants price support? The oil companies didn't ask for that when it went from $147 to $34.
Assuming your scenario plays out, then it shows that the only reason there is a market for ethanol, is the mandate, and the subsidy is, as RR has pointed out from the start, irrelevant (and a waste of money.
If they have excess product for their, that is their problem, not ours. Just ask any airline that has excess product right now, or a resort hotel, or a commercial office park. Excesses, and shortages are part of business – if you don;t like it, then don;t get in the game.
if the domestic price drops that much, then export it to brazil, or somewhere.
But really the problem is there aren;t enough flex fuel drivers around to use up all that cheap ethanol. To steal a phrase from Kinu, the ethanol industry has had a "massive failure to innovate" interms of making sure their is a good market for their product. Their "marketing" strategy to date has been to get everyone else to subsidise them, and have the gov require that the fuel industry use their product. Even the car industry hasn't done that!
Until they do what any successful business does, which is develop a real market for their product, they will be a feeble business reliant on mandates and the like.
To steal a phrase from the health care debate, a mandate and a subsidy is the equivalent of the "public option", and I'm sure the ethanol folks wouldn't support that.
lobby for mandates and subsidies,
You say you support it only because your view is it won't happen. I can support You scenario
Rufus wrote (earlier in this thread) that the ethanol industry "must rely {on the oil industry} for it's distribution.
That is not true – they simply chose to use their distribution because they couldn't be bothered to set up their own.
There is nothing stopping the ethanol industry (or anyone else) from going into the ethanol/gasoline retail business, you can by the gasoline wholesale for $2.26, and blend it, and keep the credit.
To set up their own "All American ethanol stations", and market themselves to customers, not politicians -now that would have been innovative, and profitable
Developing new markets for ethanol, like co-fueling diesel engines, that would have been innovative.
Paying for the carmakers to make all their vehicles flex fuel- that would have been innovative.
Developing other ethanol export markets (Canada, Mexico, Japan, India), that would have been innovative.
Finding a way for the industry to grow and be profitable without subsidies/mandates (like cellphones, computers, flat screen TV's, McDonalds, Google etc), now that would have been really innovative.
Instead they have tweaked their production processes while ignoring the realities of the marketplace – the equivalent of the of a hotel doing energy saving initiatives while ignoring the fact that no one wants to stay there.
That is not innovative, it's just feeble business – if the market collapses they are getting the wake up call they deserve.
Man, there is a lot of misinformation relating to trade in ethanol in these comments.
But, first, I should correct a misconception from Nathanael Greene's page (much as I agree with him otherwise) and also here, by RR.
As I explain on Greene's page, the FAPRI analysis that generated a $4.18 per gallon cost for incremental gallon comes from a simulation comparing, on the one hand, the extension of the VEETC and the $0.54/gallon import tariff with, on the other hand, the elimination (i.e., the non-extension) of both the VEETC and the import tariff.
Yet both Greene and Rapier seem to attribute the $4.18 as the incremental cost of ethanol from keeping the VEETC alone (i.e., the difference, per unit of incremental output between keeping and abolishing the VEETC). That is an understatement, probably a gross understatement, of the unit cost per incremental volume increase in domestic production by keeing the VEETC.
Clearly, eliminating the import tariff on ethanol would make incremental imports (above those that can already enter tariff-free) more interesting, and so in the FAPRI simulation imports increase — though still to only 15.5% of consumption in 2019, compared with 12% in 2006. However, because eliminating the VEETC alone, which applies equally to imported ethanol already, would likely have little effect on the relative prices of domestic versus imported ethanol, the incremental domestic production from keeping the VEETC and not eliminating the tariff would be small, so the cost per unit of incremental production would be high — much higher than $4.18 per gallon.
Paul writes, "I presume the blenders credit does not apply to exports, so any exports are effectively showing they don't need the credit."
I believe that information is incorrect. While there may have been some small volumes of exports that have not availed themselves to the VEETC, as far as I know there is no restriction on it to apply only to volumes consumed domestically.
Indeed, as I have argued on Greene's blog, I think that what this is really all about is maintaining the option to benefit from the VEETC for exported ethanol, much as the biodiesel producers did with their tax credit until the European Commission slapped countervailing and antidumping duties on U.S. biodiesel imports.
To quote from my comments on Greene's blog:
Already, Abengoa Bioenergy is reported to have exported ethanol to Europe this year.
Some in the industry may be hoping that even more exports will be facilitated by the proposed, government-gauranteed, 1,800-mile dedicated ethanol pipeline, which would run from the upper Midwest to the East Coast, and would carry about 240,000 barrels of ethanol per day.
Note where this pipeline would terminate: on the U.S. east coast, within striking distance of Europe, where ethanol commands a higher price in the United States because of its exemption in many countries from high (up to $2.00 per gallon) excise taxes. Getting $0.45 per gallon by splashing in some gasoline before shipping the ethanol abroad could make the difference between exporting and not exporting U.S. ethanol.
In other words, we are perhaps seeing a plans for a repeat [this time with ethanol] of the "splash and dash" trade that provided extra revenues for the U.S. biodiesel industry until the European Commission imposed countervailing and anti-dumping duties on U.S. biodiesel imports.
Of course, that trade was short-lived, and ended in tears. But this debate is not about rational, market-driven outcomes, but about what constellation of support measures an industry that is highly dependent on government support for its very existence can continue to hang onto, no matter how distorting or costly those support measures prove to be.
Ethanol: $1.58
Gasoline: $2.26
Ron, why don't you ever blog about Brazil's 20% Import tariff on Ethanol?
And, what's Europe's tariff? $1.00 per Gallon?
Or is that just certain countries?
Rufus: the fact that Brazil re-instated their 20% import tariff on ethanol (after dropping it to zero in 2006) is inexplicable, and is hard to reconcile with their calls to end import barriers elsewhere.
The EU tariff on undenatured ethanol is just under € 0.20 per litre, which works out to around € 0.75 ($1) per gallon. I would have to look up the tariff on denatured ethanol, but I believe it is a bit less.
I am not defending either of these tariffs.
By the way, Canada applies an import tariff on ethanol of less than 5%, and of course all trade among NAFTA countries is duty-free.
So, we should Drop our import tariff while allowing Brazil, and Europe to keep theirs in place?
Rufus, showing the economic ignorance that is so typical of ethanol welfare supporters, says,
We have about another 2 Billion gpy to bring online in the next 12 months, or so. There will be periods of several months, or longer when the supply will outstrip the mandate, perhaps by a substantial margin.
1. The government gives ethanol welfare recipients lots of money for making their unneeded, unwanted, destructive, product that is a textbook example of corporate welfare.
Which means the welfare sucking ethanol producers make too much ethanol for the non existent market to use.
In other words ethanol mandates and subsidies are the root cause of the ethanol ethanol overproduction Rufus is worried about.
2. To folks who have any common sense the solution to the problem of ethanol overproduction is to end the subsidies and mandates.
3. But not for Rufus who is a desperate member of the cult of ethanol welfare.
The solution for Rufus and the other clueless members of the cult of ethanol welfare is to have more of the subsidies and mandates that caused the problem in the first place.
If this were about energy policy and not taxpayer supported welfare for the corn ethanol producers ethanol mandates and subsidies would be ended.
Some of that money would be put into funding a huge prize to be awarded to whoever develops a biofuel that actually works without welfare.
But that would be too smart.
Ethanol welfare supporters like Rufus just won't stand for it.
Duracomm
I may be "economically illiterate," but I'm smart enough to realize that Exxon will destroy the ethanol industry if it gets a chance (and, I'm just using "Exxon" generically. That applies to all of OPEC, and the "Seven Sisters," etc.)
Btw, Lula's actions Aren't "inexplicable." He's just pulling a "Rufus."
He was all for "no tariffs on ethanol" as long as Brazil was the Only country with the capability to Export Ethanol.
Once Our Capablility started ramping up it was time for a "change of Meme."
Rufus,
You really are clueless.
If ethanol worked your great Boogeyman Exxon would be producing it.
The fact that
1. Exxon won't spend their money on it.
2. Ethanol producers would fail without corporate welfare.
Is all that is needed to show that ethanol is a complete dead end.
Ethanol serves only one purpose, it sends taxpayer money to well connected ethanol welfare recipients.
Duracomm
It serves one other purpose.
It doesn't send my money, and young American lives to Iraq, Iran, Saudi Arabia, or Abu Dhabi.
It, also, saves Americans money every time they "fill up."
Ethanol: $1.58
Gasoline: $2.26
The unstoppable Rufus said of ethanol: "It, also, saves Americans money every time they "fill up."
Well, if ethanol beats gasoline on straight price, then there is no conceivable case for subsidies or mandates. Cancel them all immediately. Case closed.
Yeah, cancel the mandates, and we'll bet on how much Exxon sells.
And put a tax on ethanol. There's a budget to balance, you know.
If ethanol is cheaper tha gasoline, Exxon will sell it. Or someone else will sell it, undercut Exxon, and run off with Exxon's business.
Ethanol is taxed just like gasoline. 18% Federal, plus State.
Don't take my word for the prices of ethanol, and gasoline. Just ring up the CBOT, and the NYMEX.
Ethanol: $1.58
Gasoline: $2.26
Actually, I guess it's,
Gasoline: $2.26 +
The Costs in Treasure, and Lives of Ongoing Wars in the Middle East.
Let's see-
I burn only E85. My E85 blender- whomever that is, is getting .45 cents a gallon to produce the blend.
(It's an oil company, in my case, by the way).
Ethanol on the CBOT is curently $1.61
RBOB gasoline, at the moment, is currently $2.21
That means gasoline is currently .60 cents cheaper per gallon, BEFORE the .45 cent blending credit.
Which means there is a $1.05 difference after you take into account the credit.
Here's what I would favor-
Decrease the credit for production of E10.
Then use all that money- for one year- to build blender pumps across the nation. Any station that currently sells premium, would get, say, a $50,000 cash lump sum to install a blender pump and convert to offer E20/E40/E85. Kind of like the old Sunoco stations used to do with octane rating offerings.
If you did that, in one year you could build out a significant additional amount of capacity to deliver E85, and a lot more people would have access to it.
By the way- regarding tax subsidies- Even though ethanol blnders get .45 cents- where I am from the government gets it all back. We have 18.5 cents per gallon federal road tax, plus 20 cent per gallon state road tax, plus a 6% state sales tax. So one .45 cent gallon subsidized E85 (actually 85% of the .45 cents, or .385 tax CREDIT OUT, is then generating 18.5 cents + 20 cents + 13.2 cents taxes paid IN to the government IN. .45 cent OUT equals .517 cents IN.
The government SILL takes more money away from me.
Oh- My math is off. I just checked yesterday's CBOT prices- Rufus is right, I'm off a tad.
Ethanol closed yesterday at $1.585
Gasoline at $2.225 (+ blood of American soldiers, plus Navyy dollars to keep open the sea lanes, etc. etc. etc. )
Somebody is pocking a lot of profit selling E85- since the spread is so large, and the stations selling it are only pricing it about 14% differently than gasoline. We need LOTS more competition in the market place.
By the way- EXXON doesn't sell it because EXXON is an OIL company- not an energy company. We need some E85 distribution companies out there to give OIL some real competition. The problem with that is- oil companies don't want to sell E85 distribution companies the 15% gasoline they need to meet government specs.
Kum and Go is selling E10 4.5% less than E0
That's 45% less/gallon for the engineers among us.
*You have to look at the little yellow note to get the E10 vs E0 price.
Not to be "picky," but 🙂 Bloomberg – Unleaded $2.255
And, you still have to add an octane enhancer to the RBOB to get 87 octane.
In the end, one needs to be fair and consider the worst case scenario for ethanol and for gasoline (and for lithium and electrical transmission, if that's your persuasion).
No one dies for ethanol (okay, a few farm accidents). Many, many of our most important citizens die for gasoline/diesel. If you disagree with that I daresay you are no patriot.
So worldwide petroleum subsidies are $500 billion. U.S. ethanol subsidies may be $6 billion. Sure, there's many times more gallons of petroleum. BUT HOW MUCH TOTAL SUBSIDIZATION HAS PETROLEUM RECEIVED OVER THE MANY DECADES???
U.S. ethanol can and is already produced more cheaply than the cost of foreign petroleum gasoline. What the protections do is to make sure we don't get trapped into imported foreign ethanol for regions that are unfriendly, leading to a continued need for military force. In the meanwhile, we are ramping up our ability to produce ethanol (which is just alcohol, by the way) from all kinds of readily available feedstocks all around us.
In the end, alcohol harnesses sunlight. Petroleum is a dying fuel, as a very limited amount is formed underground each year. Besides, we need it for many of the industrial and commercial products we depend upon for our economy, and for growing food!
Shell, EXXON, BP, et al have done everything they can to stop the spread of E85.
They wouldn't allow the retailer to put it under the canopy. And, they wouldn't let the retailer put the price on the marquee. And they wouldn't let the retailer put it on their credit card. And, on, and on.
Now, they don't want to supply the E0 for blending. Everything has been a Court Case. In, virtually, Every State.
Then, Underwriters Laboratory (whose biggest customers are oil companies, I guess) stepped in, and refused to "certify" pumps for E85. This despite years, and years of E85 blending in both the U.S., Europe, and Brazil.
This is still ongoing.
In spite of it all, E85 Pumps are being added every day. We're up to about 2,257, I believe. About 100 of these are Blender Pumps.
It must be a bad time to be an "ethanol-hater."
“No one dies for ethanol (okay, a few farm accidents). Many, many of our most important citizens die for gasoline/diesel. If you disagree with that I daresay you are no patriot.”
Sorry Bob but patriots do not use trade on the bodies of Americans. Rufus present this argument also. I think it is a very weak argument for ethanol just as I think the subsidy is a very weak argument against ethanol.
Journalists make a living presenting emotional arguments. The NYT panders to their base and Fox news panders their base. Investigative journalism died a long time ago. Now all you learn is the agenda of the journalist.
Bob Winnson shouted: "BUT HOW MUCH TOTAL SUBSIDIZATION HAS PETROLEUM RECEIVED OVER THE MANY DECADES???"
A great deal less than the total taxes paid by petroleum over the decades — and almost infinitely less than the economic value created by human use of that petroleum.
What is it about the clock changing? It seems to make some people totally irrational. This thread is becoming like a poor knock-off of a Monty Python skit.
So, is the "Consumer/taxpayer" saving money?
Let's look at that Kum and Go link, above.
We're subsidizing the ethanol to the tune of $0.45/gal.
However, we're Saving $1.30/gal at the pump.
A Net Savings of $0.85 per Gallon.
Allowing a 20% loss of mileage (approx $0.55) the Consumer/taxpayer is still Making $0.30/gallon.
And, that is BEFORE you factor in the dampening effect that the presence of 800,000 bpd of Ethanol has on the price of gasoline.
So, Yeah, I'd say the Consumer is saving money.
And, the money is "Staying Home," and No one is dying.
Kit, my son is about the right age to be called to fight in the Middle East. No amount of money is worth his life To Me.
That argument might be a "weak" argument; but it's definitely one I will continue to make.
"Granted, this is from the corn lobby, but that's just unadulterated nonsense."
Reminds me of Mark Twain's line "Suppose you were a Congressman. And suppose you were an idiot. But I repeat myself."
Hey, Kit P, I have an idea. How about starting a movement for succession? You could carve out a large chunk of the Midwest (excluding Chicago) and the High Plains states and declare independence. Hell, you can even throw in the Mississippi River and the Port of New Orleans! (But not the rest of the city, of course.)
Just don't come knocking on the door of the remaining states asking for foreign aid. Or agricultural or biofuel subsidies. Or funds to keep the Mississippi locks working …
Just don't come knocking on the door of the remaining states asking for foreign aid.
"Don't come?"
I thought you were Canadian, also, Ron? Or, was it Swiss?
I know the outfit you work for is based in Switzerland, right?
Not that it should matter to this debate, but I'm American, Rufus.
people like Rufus and I (not people like RR)
You won't make insinuations like that on here, Kit. You have been warned far too many times, so your post has been deleted. I can make all sorts of snide comments about "people like you" and the dangers of your line of thinking. But then that very quickly degrades the level of conversation; something you frequently seem intent on doing.
RR
Okay, Ron, my mistake. But your organization is Swiss-based, right. I just want to make sure I'm not confusing you with someone else.
BTW, You never did answer my question. To wit: Should we revoke our tariff while Brazil, and the EU keep their Tariffs in place?
Now, they don't want to supply the E0 for blending.
Please elaborate, Rufus. I can assure that nothing can stop me from going out and acquiring all of the E0 I want on the market. I may not be able to sell it as Shell E85, but I can certainly make my own E85.
As I keep saying, nobody is stopping the farmers or ethanol producers from retailing E85. They want to force the oil companies into selling their product.
And as I have said, the oil companies – despite your protests – would be happy to sell ethanol if they could make a penny a gallon more than they could refining and selling gasoline. To suggest that they would actively avoid ethanol if it could make them more money belies an incredible ignorance of the petroleum industry. At the end of the day, they are out to make money. If them deem it a good business case – as with Valero – they will sell ethanol or even get into the business of making it.
This shtick of "the oil companies won't sell it" is just scare-mongering designed to protect the subsidies.
RR
Yet both Greene and Rapier seem to attribute the $4.18 as the incremental cost of ethanol from keeping the VEETC alone (i.e., the difference, per unit of incremental output between keeping and abolishing the VEETC).
Well, it would be just a guess, but it seems to me like it is in the ballpark. Pay $6 billion or so and get an incremental 1-2 billion (maybe) gallons of ethanol blended above the mandate. So maybe it's $3/gal and maybe it's $6. In any case, it's a lot to pay for incremental production.
RR
Please elaborate, Rufus. I can assure that nothing can stop me from going out and acquiring all of the E0 I want on the market. I may not be able to sell it as Shell E85, but I can certainly make my own E85.
Oh, NO, Bubba; That ain't true. This fight has been fought all over the place. North Carolina, South Carolina, just recently with Valero in Tenn.
They reached some sort of compromise (whatever it was wasn't publicized) in Tenn. As a result, I suppose, we have no E85 in Memphis.
BTW, you deleted Kit's post for an ad hom of sorts, but you keep doing this –
an incredible ignorance of the petroleum industry. –
to me.
And, in this case, you're wrong, to boot.
Sorry, Rufus, but I answered one personal question. Since you are blogging anonymously, that is your limit.
As for your question, "should we revoke our tariff while Brazil, and the EU keep their Tariffs in place?"
I am in favor of free trade, so I would like to see all import tariffs on ethanol eliminated.
But you have demonstrated the inexplicableness of the Brazil decision to re-instate its import tariff. It has an absolute and a comparative advantage in ethanol production. It does not "need" to protect itself from other countries' exports. Without the tariff, it could more easily persuade other countries to drop theirs. Now that they have one again, U.S. ethanol supports naturally ask why the U.S. should drop its tariff.
By the way, European ethanol producers are high-cost producers, and most of their support is to consumption (via excise-tax reductions): the United States is not about to get an influx of European ethanol.
So, yes, if I were allowed to vote on the issue, I would vote to let the import tariff expire, even if other countries did not.
In almost all cases, the consumer surplus (the financial benefit to consumers) of reducing tariffs is less than the loss in producer surplus. That is why members of the WTO (of which the USA was a charter member) have been working to progressively reduce, and bind (i.e., lock-in), reductions in tariffs on goods.
But the political economy of tariffs sometimes makes that difficult: the benefits to consumers are spread widely, whereas the losses to producers are more concentrated.
Well, it would be just a guess, but it seems to me like it is in the ballpark. Pay $6 billion or so and get an incremental 1-2 billion (maybe) gallons of ethanol blended above the mandate. So maybe it's $3/gal and maybe it's $6. In any case, it's a lot to pay for incremental production.
Robert, you miss my point! The incremental loss in sales from eliminating the VEETC alone (while maintaining the tariff) would be less than eliminating both the VEETC AND the tariff (which is the scenario that FAPRI analyzed). So divide $5.85 billion over an even smaller volume and the cost of the incremental production protected is even higher than $4.18 per gallon.
That is to say, $4.18 is a lower-bound estimae!
Correction: "In almost all cases, the increase in consumer surplus (the financial benefit to consumers) of reducing tariffs is greater than the reduction in producer surplus.
Well, Ron, just a couple of weeks ago I noticed that Brazilian Ethanol was selling for $3.26/gal at the Port in Brazil.
At the time our Ethanol was selling for $1.90 on the Gulf Coast.
But, you know what, even with the $0.38/gal tariff our guys weren't able to arrange importation into Brazil.
Lula is a phony-balony Socialist that has led Brazil to have just about the Highest Tariffs, and most problematic import market into the world.
But you want us to drop our tariff, and let him keep his in place. Sure.
BTW, you deleted Kit's post for an ad hom of sorts, but you keep doing this –
It is not an ad hom "of sorts" to say "People like Rufus and me – not Robert – fight to protect their country." It is a disgusting slander that will not stand on this blog. If Kit wants to spew that kind of garbage, it won't be here.
On the other hand you do – and continue to – demonstrate a serious ignorance of the oil industry. It is a comic book version.
Why don't you link to a story on your insinuations above? As I said, nothing can stop me from starting up my own E85 station, and I can assure you nobody can stop me from getting gasoline to blend. Suggesting the oil companies can block you is wrong, and just fear-mongering.
RR
The problem with your theory, Ron, is that if we had followed your advice 3 years ago we wouldn't have $1.58 gal ethanol, now.
And, if we follow your advice, now, it's a highly unlikely that we'll ever have $1.58 Cellulosic ethanol in the future.
Robert, the case went all the way to the S Car Supreme Ct., and, again, I believe, in N. Car.
They had to sue Valero in Tenn.
I'll find the references, but you're wrong.
Unless you're saying that a little filling station operator could have E0 shipped in from out of state, or somesuch. If that's what you're saying, then, technically you'd be correct; but for all practical purposes it would be bizarro-land.
“You won't make insinuations like that on here,”
What did I insinuate? You will have to excuse me but I grew up before before political correctness. RR is always talking about rules. I suspect he has a rule about me guessing what RR might guess what my intentions are.
Rufus and I served in the military. As did others. We now have children of military age. This gives us a different perspective than someone younger who has not served in the military. So maybe in the future RR you might consider two way communication before chastising your elders to breaking your rules.
Back to my response to Paul,
Do you know who PowerX is?
So I'll assume, Ron, that you're the same guy, and you still work for the outfit out of Switzerland.
Kit wrote "The only 'we' in the relationship with Canada is that people like Rufus and I (not people like RR) protect your country so you can gouge us on energy prices. Do you know who PowerX is?"
Kit, for the US to accuse Canada of gouging, is a bit rich. Mind you normally, the complaint is selling too cheaply (softwood lumber, beef potatoes, wheat etc etc). Energy is traded back and forth between companies at prices they agree to pay. Powerex sold (sells) electricity to Cal at prices that Calif energy companies agreed to pay, and then later those companies send the lawyers instead of the cheque. If they don't want to pay, then don't take the power. You know all the electric companies engage is trading gamesmanship, (as happens in any market from energy to real estate) the Calif companies are just sore losers when they don't win.
I do say "we" in this regard as Canada's energy policy pretty much follows US, and we have a 5% ethanol mandate about to be enacted, with the ethanol lobby pushing for much more, of course.
Kit, Since you asked specifically, I'll answer specifically, Powerex is the trading arm of BC Hydro. Their job is to do all the out of province sales (and purchases) of electricity. They are a player, amongst many, in the US wholesale market. They do have an advantage that many don't, and that is 10,000MW of hydro at their command, so they are able to do turn on and off much faster than companies like Trans Alta.
I used to be a $1m a year customer of BC Hydro, when I managed the utilities at a ski resort. There were more than a few times when would shut down our snowmaking (5MW of pumps and air compressors) to sell the power back to BC Hydro, so Powerex could sell it to US/Cal.
Several mines and factories do the same of course – so BC is giving up industrial production so that people in Cal can keep their air con/heaters /X boxes running, and then complain that we charge (and they agreed) to a premium to do so?
But since this thread is about ethanol, lets return to the subject at hand. WE can get into this when RR writes a post about electrical trading.
If the VEETC does apply to exports, then there is something really, really wrong here.
The supposed idea of ethanol is to reduce America's dependence on imported oil. Now, producing ethanol uses some oil – we can debate about just how much, but unquestionably some.
So if the ethanol is being exported, then it is INCREASING oil consumption, not reducing it.
If the credit is actually about supporting the corn/ethanol industry, then exporting it is consistent with that. But the government should be clear to the people, what the purpose is. PAying a credit to a company that produces ethanol for export, thus restricting the domestic market to keep prices up, is of zero benefit to the consumer.
No one can control what tariffs Brazil or EU put on ethanol, and we shouldn't care, it should be getting used domestically. If the companies want to export it, that's their choice, but they should not be asking the taxpayers to support them in doing so.
I suspect he has a rule about me guessing what RR might guess what my intentions are.
I don't have to guess what your intentions were; what you said is plenty. First, you don't know the first thing about me, my family, or who has or has not served in the military. So for you, an anonymous poster, to suggest that people "like you" and not people "like me" are the ones who fight for their country is simple slander. It won't be allowed here. You don't know the first thing about "people like me", and since you are anonymous we can't verify any of your claims. It is simply a way of saying you have the interests of the country at heart because you understand more about what is at stake. That's bunk.
So don't do it again.
RR
“(excluding Chicago)”
You can keep Chicago Ron. While Chicago happens to be one of my favorite cities, I prefer not to live and work in the city. I grew up near there, was stationed near there, went to college near there, and worked at two power plants near there. Last time I was in Chicago (June 2009), I noticed the air was much cleaner than in the 60s. In fact the air quality was very good.
I also noticed something else because I was stuck in traffic for an hour. A lot of people who work in Chicago do not want to live there. Like every US big city, enormous resources are expended daily to get out of Dodge.
So Ron when you come knocking on my door to provide you the resources you demand, I am going to tell you I want a fair wage. I want affordable housing. I want my kids to have good schools.
I can tell the cost of making electricity with coal and nukes. But Ron you are gong to link me to an NRDC web site telling me how evils of those energy sources. I can tell your the cost of alternative energy sources and the limitations. Ron you said go ahead, it really is not that expensive.
So five years later, lots of money was invested. The energy industry is doing exactly what the city folks wanted. Yes, it is more expensive for now because that investment must be paid back.
There is an alternative Ron but I do not think you will like it. You can stop using the enormous resources you gobble up.
The ethanol is doing what they said they would do. Produce transportation if the right incentives were provided to produce what Ron demanded. Next time be careful what you ask for.
I'll tell you what else corn ethanol is doing; after subtracting the $0.45 Blender's credit, and allowing for a 20% reduction in mileage it's still yielding a $0.30 gal better Value than gasoline.
And, it's not even Summer, yet.
Oh, and Corn is still a smidge over $0.06/lb.
So, corn ethanol is paying for its subsidy, and yielding the taxpayer/consumer $3.6 Billion, Annually.
Not bad.
No wonder they want to kill it.
“If they don't want to pay, then don't take the power.”
I could not agree more Paul, said the spider to the fly. Welcome to my trap. I just loved the statements made by the head of PowerX. The CEO of my company had to be more discreet. Public power in general gouged rate payers California investor owned utilities (IOU) who were playing by the rules.
My problem is not with Canada, it is with short sighted energy policy. My job went away because of cheap Canadian NG and I received NAFTA benefits for retraining. Meanwhile Canada built a pipeline to Chicago and could sell to the highest bidder.
“so BC is giving up industrial production so that people in Cal can keep their air con/heaters /X boxes running”
Washington State lost a lot of jobs too.
I visited one of my sisters (every family should have 3 BMWs) in southern California. It was a warm spring day and I complemented them on conserving only to find out the house was too hot to sleep because the heat was set at 78 degrees.
My point here is that energy is too vital to allow the free market to rule completely.
Paul wrote: "I used to be a $1m a year customer of BC Hydro .. our snowmaking (5MW of pumps and air compressors) …"
Isn't it wonderful to live in a world where people can make snow for their enjoyment!
This is the kind of world we have with very large scale cheap energy. Why would anyone ever want to go backwards to the Middle Ages?
That means we need very large scale alternate power sources to replace finite fossil fuels. One thing that is clear — subsidized mandated ethanol is not that very large scale alternate.
Rufus again, on his favorite topic: "No wonder they want to kill it."
Oh Rufus! Take off your tin-foil hat.
If ethanol really is cheaper than gasoline, then the only way "they" could kill it would be with oppressive taxation & regulation. Which no-one is talking about. Yet.
K, just because you're paranoid, doesn't mean you're wrong. 🙂
I may be "economically illiterate," but I'm smart enough to realize that Exxon will destroy the ethanol industry if it gets a chance…
Wow! What a wrong-headed statement. How many conspiracy books do you have in your library?
Exxon (and the others) are energy and fuel companies. If and when there is money to be made selling ethanol, they will do it. Their Boards of Directors would quickly fire any CEO that doesn't have plans to move aggressively into ethanol — when it looks to be more profitable than making liquid fuels from oil. I suspect all the big "oil" companies have their analysts and operations research people working 24/7 trying to figure out the best plays and contingcies to take advantage of alternate liquid fuels — not how to terminate them.
Sure.
There is nothing stopping the ethanol industry (or anyone else) from going into the ethanol/gasoline retail business, you can by the gasoline wholesale for $2.26, and blend it, and keep the credit.
That's absolutely correct Paul. And a local corn ethanol distillery about 35 miles from me does that. You can drive up to their parking lot and fill up with E85 from pumps they own, less than 100 yards from their stills.
That they've never branched out and established a chain of filling stations is a business decision they''ve made, it's not some Big Oil conspiracy.
There is no reason Big Ethanol and the RFA couldn't start up a chain of E85 stations. But it's easier for Bob Dinneen to complain and lobby Congress to make it mandatory that existing filling stations put in E85 pumps, than it is to write a business plan of their own and become E85 entrepeneurs.
In fact, there is nothing to stop our own Rufus from starting a chain of E85 refueling stations in his state. All he would need do is come up with a business plan, go to an investment banker and convince them his plan is sound and that he would be a competent manager. They would give him the capital, and he'd be off to the races. He could then spend his time running his E85 empire.
Rufus, if corn ethanol is such a sound and profitable business, why haven't you or Big Ethanol started a chain of E85 stations independent of that enemy "Big Oil?"
Sure.
Wendell has it exactly correct, Rufus, and this is why I say you are ignorant of the oil industry. It really is comical conspiracy stuff that you are spouting. Every oil company I know of has active research programs in one form or another related to ethanol. If they believe they can make a penny a gallon more than they can by buying foreign crude and refining it, they will. You can believe it or not, but those are facts.
Put yourself in the shoes of an oil company CEO. Isn't that what you would do? Why do you believe they would leave money on the table?
RR
@ Rufus
Just what is it that you think an oil company CEO's job is?
I assume you want the truth.
I would (indirectly) hire guys like Searchinger, Patzek, etc to muddy the waters, fight ethanol in places like Ca (through people like Mary Nichols, and her husband the lead lawyer in Exxon's Exxon Valdez suit,) fund efforts to do away with ethanol's tax credit, and in general try to Kill the developing competition.
That's what I Would Do.
Of course, people like John D. Rockefeller would never do something like that. 🙂
Kit, I will repeat what RR said: you know next to nothing about me, especially what kind of resources I consume or don't consume, so I'd appreciate if you would not presume. But on the subject of country vs. city, numerous study have shown that people living in cities — smaller living quarters, with less loss of heat to the exterior, walking more, etc. — often consume fewer resources per capita than people living outside of cities.
From Rufus: "I would (indirectly) hire guys like Searchinger, Patzek, etc to muddy the waters, fight ethanol … "
That's rich, Rufus.
One could equally come up with a strategy for the ethanol industry: hire people to write under anonymous pseudonyms and fill up serious blogs (that are trying to provide cogent discussions on public policies relating to biofuels) with irrelevant drivel, chaff, and half-truths.
“In fact, there is nothing to stop our own Rufus from starting a chain of E85 refueling stations in his state.”
Rufus I have a better idea. You buy a really big sail boat and hire me to be your skipper. We will use colorful language when the wives are not around.
That would be grand. So would Big Wendell pulling into a only open gas station for a hundred miles on the coldest day of the year just to find out the cost of a to get him to the next station was $300.
So Big Wendell 'there is nothing to stop' that from happening other than the law and regulation. Pumped gas as fast I could on Christmas night at Knox Shell many years ago. Our price did not change because we were the only station open.
So Big Wendell have you ever considered find little energy to buy from?
Uh, Kit, you seem to have an inflated idea of the earning power of ex-insurance salemen.
Maybe, you better buy the Boat, and I'll be the deckhand, or cook, or sumpin. 🙂
We can still use that salty langwidge, though.
irrelevant drivel, chaff, and half-truths.
Care to give an example?
I brought it to the board's attention that E10 is selling for $0.13 less than E0 (which works out to $1.30 gal less than E0.
Was that irrelevant drivel, chaff, and half-truths?
Care to give an example?
Don't need to. Most readers are smart enough to recognize irrelevant drivel, chaff, and half-truths when they read them.
I brought up the fact that Brazil has a 20% Import Tariff on Ethanol, and questioned if the EU's wasn't close to $1.00 gallon (which led you to inform the board that the EU's import tariff was $0.80/gal.
Was that irrelevant drivel, chaff, and half-truths.
In other words: You are prone to make insults that you can't back up.
Is that about right?
I brought up the fact that the Big Oil Companies wouldn't allow the retailers to sell E85 "under the canopy," put their E85 prices up on the price marquee, or put the E85 sales on their Big Oil Co. Credit cards until forced to by the law.
Was that irrelevant drivel, chaff, and half-truths.
I pointed out that a few weeks ago your highly-vaunted, super-dooper effishunt Brazilian Ethanol was selling for $3.26/gal at their port.
Was that irrelevant drivel, chaff, and half-truths?
How many FACTS have You blessed us with, this thread, Ron?
So far, Ron, about all I can remember from your comments is that you think we should drop our tariffs, and leave OUR farmers, and Producers naked,) Even while Brazil, and Europe Leaves Theirs in Place.
Maybe I missed something.
Kit, I think we can both agree that California gets what it deserves, but it does irk me when they expect others to give up so they can take.
Kinu,
I a do agree that snowmaking is a waste of resources, one of the reasons why I left. Unfortunately it is a good business decision for the resorts, as without snow, you have nothing. How much resources society should be investing in "resorts" of all kinds is a different question, and the answer, today, is that no (capital) is being invested, as there are fewer customers that can afford it. I am good with that, we can invest our scarce capital in productive beneficial things.
Which begs the question whether investing in the ethanol industry is worth it, either.
Despite what Rufus says about "oil companies" wanting to kill the ethanol industry, the evidence does not support him. Valero has invested over %1bn, to now own 10% of US ethanol capacity.
The ethanol industry has, with the exceptions as noted by Wendell, not bothered to invest in itself in terms of selling to customers and developing new markets. They have consistently chosen to invest in lobbying instead.
Good companies like 3M never lobbied for mandates and they like – they made products people could actually use, and when they had things with no apparent use (a failed paper adhesive that would peel off) they innovated and found uses for them (that adhesive led to the invention of the ubiquitous Post-It notes). That is how you create real success.
To argue that the ethanol industry's tax credit is justified because they pay more than that in other taxes is just wrong. If every industry took that approach, there would be no tax revenue left.
The supposed reason for going to ethanol in the first place was to reduce reliance on imported petroleum. It was not as an octane enhancer, there are plenty of (cheaper) petroluem alternatives for that. So given this is (supposedly) about dispalcing imported petroleum, every decision should be weighed against that goal.
The history shows the tax credit did not do much to increase ethanol usage, it was the mandate. This is still apparent today, as evidenced by Rufus' numbers – even when ethanol is significantly cheaper, people aren't buying it. So will continuing the tax credit lead to more ethanol usage – no.
Will exporting the product to Europe reduce gasoline imports? Absolutely not.
The fact that the ethanol industry wants the tax credit kept, and want to be able to claim it on exports shows that they are not interested in reducing petroleum imports, they are just interested in making money. I have no problem with that, that should be the primary aim of any business, but they should be subsidised to make money.
But the ethanol industry proudly proclaims they "eliminate $22bn in oil imports". If they have a ready to use fuel (ethanol) and export it, instead of using it here, then they are very clearly not displacing imports. They are making money, and they benefit, but it doesn't reduce dependence on mideast oil one drop.
You (Robert R and Nathaniel G) had best work on getting Brazil to drop their own tariff while you work on getting the U.S. to drop theirs. Your argument is moot without the other side dropping it.
Just recently the U.S. possibly would have been exporting to Brazil, had they not the tariff in place.
Before you side track into another topic to avoid this issue, please reply about what you are doing to get rid of Brazil's tariff.
Good job, Rufus! You've added another 8 posts in a way that allows you to repeat yourself!
Did you miss something? Yeah, the point of my first and second posts on this string.
Rufus wrote;
"So far, Ron, about all I can remember from your comments is that you think we should drop our tariffs, and leave OUR farmers, and Producers naked,) Even while Brazil, and Europe Leaves Theirs in Place."
That, Rufus is EXACTLY what should happen. Lets look at the oil industry. There are no tariff barriers to oil imports, we will happily take whatever we can buy. If Europe or Brazil want to have tariff barriers on imported oil, making it harder for others to sell to them, then that makes it cheaper for the US to buy it.
So now lets substitute "liquid fuel" for oil, so it includes ethanol (or methanol, or biodiesel).
If anyone wants to sell the US cheap liquid fuel, cheaper than oil (as you constantly remind us), why on earth would we turn that away? Surely it is in the interests of the country to buy cheaper energy than expensive energy? Surely it is better to have less import dollars going to Brazil/Eu than more to Mideast/Africa/Venzueala?
If the government truly has the interest of the country in mind, that is what they would do. Now, f the truly have the interest of the ethanol industry in mind, then they will restrict imports, give tax credits, mandate consumption – in short, all the things they are doing today, which the people at large pay for.
Then the ethanol industry has the nerve to want to export the product that people have paid them to produce, forcing more mideast oil imports. How, exactly, is that helping any other than the ethanol industry?
Paul, we would never have been able to get those ethanol plants financed (and we wouldn't have Ethanol wholesaling for $1.58/gal, today) if we had heeded your advice 3 years ago.
We cut the the blender's credit a nickle last year, and we'll probably cut it some more this year. We'll, slowly, wind down the tariffs. But, we've got to get our own baby out of the crib, first.
Meanwhile, after accusing me of posting irrelevant drivel, chaff, and half-truths,
You can give no examples.
My work is done. Nap time.
I have a feeling that if this had been a fight, they would charge me with manslaughter.
We'll, slowly, wind down the tariffs. But, we've got to get our own baby out of the crib, first.
Some baby. The ethanol tariff has been in place for 30 years. Sounds more like a spoiled post-adolescent.
"Paul", you're incorrect about Valero. They are a refiner, blender, and retailer–different part of the fuel chain. They don't pump oil and they could care less about gasoline vs. ethanol. Whichever makes them the most $, and right now that's ethanol. The market is moving towards ethanol–the refiner/blender market, that is. That concerns the oil companies (the ones running the oil fields and selling oil).
"Some baby. The ethanol tariff has been in place for 30 years. Sounds more like a spoiled post-adolescent." Now Ron, you're confusing the argument here. A tariff doesn't matter when oil prices are artificially low. Only in recent history have oil prices increased to a point that the tariff even matters. The ethanol tariff could be 70 years old now, and just now would it matter. Perhaps before then it would have mattered, since ICE engines were engineered for vegetable oil and ethanol/alcohol. But Rockefeller took care of that by lobbying the government and through Temperance/Prohibition.
That concerns the oil companies (the ones running the oil fields and selling oil).
No, Robert, it doesn't. Valero is on one end of the spectrum. They have no oil. But none of the oil companies own all of their oil. They all have to go out and buy oil. It makes them no difference if they go out and buy ethanol – and in fact I can assure you that if they think it will make them a penny more a gallon that's what they will do.
That's why the whole conspiracy angle is silly. And Rufus, for the record, that whole argument is drivel. However, you can throw out more unreferenced drivel than anyone can possibly rebut. By the time it has been rebutted, you just throw out more. So it is a never-ending cycle.
RR
"Sorry Bob but patriots do not use trade on the bodies of Americans. Rufus present this argument also. I think it is a very weak argument for ethanol just as I think the subsidy is a very weak argument against ethanol."
Kit-I don't know what you mean by "use trade on the bodies". However, if you mean to say that petroleum is not fought and won militarily, then I am not interested in debating you. Someone who disregards blatant facts is not someone to debate. Much as some other comments on this board against ethanol.
"No, Robert, it doesn't. Valero is on one end of the spectrum. They have no oil. But none of the oil companies own all of their oil. They all have to go out and buy oil. It makes them no difference if they go out and buy ethanol – and in fact I can assure you that if they think it will make them a penny more a gallon that's what they will do."
Robert R, you're wrong with this. Exxon, BP etc. are on all ends of the fuel supply spectrum, vertically integrated. The price of oil being high is fantastic for their oil business, and not so much for refining/distribution. But as a company they may a LOT more with high oil prices–RE: 2007 & 2008 record profits.
Valero being only on the refiner/blender/distributor end of the spectrum, they could care less about high oil prices–actually they're better off with lower oil prices. Valero is operating at a loss, but their ethanol operations are creating profit from that division.
Now Ron, you're confusing the argument here. A tariff doesn't matter when oil prices are artificially low. Only in recent history have oil prices increased to a point that the tariff even matters.
It clearly mattered in 1980 when it was imposed, and for several years after that. Don't forget that the VEETC's antecedent, the exemption from the federal gasoline excise tax for E10, is older even than the tariff. Indeed, the reason we always hear from the ethanol industry as to why the tariff is in place is to offset the VEETC — i.e., to keep foreign ethanol producers from being net subsidized by taxpayers. Of course, what that does instead is shift the burden of higher domestic prices to consumers.
Ron wrote,
“Hey, Kit P, I have an idea. How about starting a movement for succession?”
I do not know what kind of response Ron was expecting. I thought my response was very thoughtful and civil. I am not sure why Ron thought I was talking about him specifically. So anyhow Ron, I will try again.
Using Chicago as an example, would you agree that large amounts of resources are used daily by people who work in Chicago and commute to someplace else. These are not city dwellers but city workers and someplace else dwellers.
Robert R, you're wrong with this. Exxon, BP etc. are on all ends of the fuel supply spectrum, vertically integrated.
Oh, I can assure you I am not. I used to work in an economics group at ConocoPhillips. We would happily buy ethanol instead of crude if we could make a penny more a gallon. Our crude reserves are falling and our access is diminishing. Any CEO that left money on the table like that would be fired. For instance, in Rufus' example above of what he would do as CEO, he would be fired.
Valero is simply looking at their economics. They are forced to blend ethanol, so they may as well own it so they can ensure their supply. For ExxonMobil, it is the same calculation, they just have some oil as well so they aren't as exposed as Valero.
I always get a chuckle from the view outside the oil industry, though. The idea that they are afraid of ethanol, or that they are against ethanol is absurd. But they don't like being forced to blend and sell someone else's product. They will happily do it if the economics are there, but they are against mandates that say "Do it regardless of your own economic considerations." People outside the industry incorrectly translate that as hostility to ethanol.
RR
In response to Kit:
I thought my response was very thoughtful and civil. I am not sure why Ron thought I was talking about him specifically.
Here's what you said in an earlier post: "There is an alternative Ron but I do not think you will like it. You can stop using the enormous resources you gobble up."
[W]ould you agree that large amounts of resources are used daily by people who work in Chicago and commute to someplace else.
Yes.
“but it does irk me when they expect others to give up so they can take.”
In the months before leaving office, Clinton's secretary of Energy was ordering the last of the hydro reserves be sent to California. The reservoirs were mud flats. Fortunately, the drought broke and February was mild. The following years was brutal cold and the grid was near collapse a couple of times. If these events had lined their would have been serious consequences.
I have not studied BC generation but 2 in 10 years are drought years someplace on the west coast. While the reduced production is predictable in a the year of the drought, it is hard to get people to understand the benefit of excess capacity.
Paul wrote: "I a do agree that snowmaking is a waste of resources"
Sorry, Paul. What I wrote must have sounded like sarcasm — but I was totally serious!
I think it is wonderful that we live in a society where an ordinary guy can afford to have a car; where he can afford to drive that car 50 miles or more up to the mountains; where there are machines to take him up to the top of the mountain as often as he has the stamina to ski back down; where there are other machines to make snow if the Good Lord has failed to provide enough.
And an ordinary guy can afford to do all of that in exchange for less than a day of his labor — less than an hour, if he happens to be a lawyer, regulator, or politician.
Thanks to the efforts of our forebearers, ordinary people can enjoy experiences that were denied to kings & lords only a couple of generations ago. All made possible by plentiful cheap power, which today means fossil fuels.
A ski resort is not a waste of resources (assuming it is not subsidized by politicians spending other people's money). It is improving the quality of life for all who choose to spend the fruits of their own labor in enjoying it.
The purpose of the energy industry is to make it possible for us to continue to live this wonderful life, even after finite fossil fuels start to reach their limits. And to make it possible for even more of our fellow human beings to enjoy life to the full, in the ways that they choose.
We can do so much better than to give up & join the doomers, cold & hungry, huddled around their pathetic window-box vegetable gardens.
Kinu, I don't disagree that we should have our luxuries, but the ski industry is a particularly large user of energy, for the enjoyment of the people. We are not as bad as Dubai, where they have built an indoor one in the desert, but it does command a lot of resources. Not subsidised by government, generally, but not profitable either. They are made possible by selling resort real estate, which ultimately becomes it's own Ponzi scheme. It's fine as long as people keep buying, but when they stop, as happened two years ago, the party is over.
My old employer, Intrawest, who owns Whistler, is now in bankruptcy – there was going to be an auction of the Whistler ski hill while the Olympics were on! I left because the more I learned about the underlying business model, the less I liked it, and I predicted, 10 yrs ago, that they would be in trouble, but happened 2yrs earlier than I called it.
So, I could see that their business was unsustainable. Would still unsustainable even if they were energy efficient.
I am not a doomer either, and want to mainatin quality of life, but where I think we have gone wrong is that many people "want it all", are not prepared to work hard to get it, and often want someone else to pay part/all of it.
Come to think of t, that sounds a bit like the ethanol industry…
I see Rufus the ethanol welfare supporter is spraying comments the way a squid sprays ink in the water.
Mostly to obscure things.
You have to admire the mental contortions ethanol welfare supporters go through to justify the ongoing welfare.
1. Ethanol is easy to produce and profitable right now.
2. Oil companies are ruthless profit driven companies who will do anything to
3. Not make money off of an easy to produce profitable product.
Now that sequence does not make sense to anyone who rationally looks issues.
But for the proud members of the ethanol cult it makes perfect sense.
Duracomm
Well, today it's cheaper driving that car to the top of the mountain using ethanol than gasoline. With Subsidies, without subsidies, however you want to figure it.
And, we don't have to send two fleets of ships, and 150,000 Servicemen in harms way to do it.
Since Rufus does not no much about farming he apparently does not realize that modern agriculture is completely and utterly dependent on petroleum products to survive.
From diesel to run the equipment, the petrochemical based herbicides, the petrochemical based pesticides, the petroleum based nitrogen required to obtain today's corn yields and the petroleum required to run the stills at the ethanol plants.
In other words the ethanol industry is utterly dependent on petroleum.
Contrary to what rufus says the ethanol industry is just as responsible for the two fleets of ships, and 150,000 Servicemen in harms way as the oil business is.
No oil, no modern agriculture, and sure as hell no ethanol either.
Because without petroleum ag would be hard pressed to feed us all let alone divert resources into the ethanol welfare program.
Duracomm
I can get anything out of an ear of corn that you can get out of a hole in the ground, Duracomm.
That said, we don't have to replace ALL oil. Just the imported stuff.
Strategy for the Ethanol Industry
Here are some strategic tips for Bob Dinneen of the Renewable Fuels Association (RFA). Instead of complaining and lobbying Congress for subsidies and mandates, here are three positive steps you could take to build further the market for ethanol.
Fund the Low Cost of Flex-fuel Cars
1. Apparently it costs ~$70 for one of the U.S. automakers to build a car that can burn E85 and gasoline. Suggestion: Go to the U.S. automakers and offer to pay the cost of $70 it would take to make every car they build flex-fuel. (Build your own market for ethanol instead of expecting Congress to do it through mandates or tax credits.)
Cover Any Engine Damage E15 or Higher Blends Might Do
2. You want E15 or higher blends. Here's how to expedite E15: If your confidence in E15 is that high, offer to pay the repair bill for any car owner who's engine is damaged burning E15. (If you're right about E15, there would be no risk.)
Build Your Own Chain of E85 Stations
3. Start RFA's own chain of E85 stations. Your first target might be to build a chain of E85 stations along the Interstate highways through corn country: I-70, I-80, and I-90 going east-west; and I-35 and I-55 going north-south. (Instead of always asking for Federal or state mandates for E85, or asking for subsidies to install E85 pumps, construct and run your own E85 stations and build your own market.) It seems so obvious, I don't know why you didn't do it years ago.
Instead of always expecting Federal and state governments to do your heavy lifting through subsidies and tax credits, be proactive, take the bull by horns, and build your own ethanol market.
Rufus,
Your statement,
I can get anything out of an ear of corn that you can get out of a hole in the ground, Duracomm.
Intrigues me.
Can you show me the flowcharts for converting corn to
Roundup, 2-4-D, trimethacarb, diesel, urea, and anhydrous ammonia?
That would be really useful and it should be easy to find given your statement in italics.
Because if you can't provide that your comment is another in a long series of rufus ethanol related wishful thinking.
Now featuring 75 % more of those tasty magic ethanol unicorns.
Duracomm.
Duracomm,
Great points. Here's one path from corn to anhydrous ammonia: Bury the corn in a land fill and let it decompose until it starts to release methane gas. Capture the methane — which is the major component of natural gas — then use the Haber-Bosch process to turn the methane into ammonia.
I'd have to say Rufus is right. It can be done. Corn to anhydrous ammonia in just two easy steps. 😉
Then spray the anhydrous onto a corn field this Spring to grow more corn with which to make more anhydrous. I'm sure it's an energy efficient cycle. (not)
Robert R., as an insider (hailing from Hawaii–I don't recall Hawaii being a big energy economy state) you can assert you are correct, but other readers can easily see that you are incorrect. It's very obvious that Valero, as a refiner/blender, is far different from a vertically integrated company like Exxon or BP. Exxon makes far more money when oil prices are high; while refiners don't capture the high oil prices which are basically high input expenses. Now that Valero owns ethanol, it isn't as affected by high oil prices.
"Ethanol, the commodity that cost Bill Gates more than $44 million the last time prices collapsed, is poised to rally as much as 20 percent as the fastest drop since 2008 spurs demand."
“Valero gets a big positive from what’s going on in ethanol,” said Paul Resnik, an analyst at Olympia Capital Markets Group in New York. “If you want to bet on ethanol prices rising, Archer Daniels Midland, Valero and Green Plains are it, and if I just wanted to have a rifle shot on ethanol I choose Green Plains.”
"Falling corn prices and record ethanol supplies have driven the price down 17 percent in three months to $1.634 a gallon, its worst run since 2008’s fourth quarter. It will average $1.96 a gallon at the peak of the U.S. summer driving season as refiners from Valero Energy Corp. to Sunoco Inc. mix more into gasoline made from increasingly pricey oil, according to the median of 10 analyst estimates compiled by Bloomberg."
http://www.businessweek.com/news/2010-03-08/ethanol-making-comeback-as-valero-sees-profit-where-gates-lost.html
"Although Valero Energy Corp.'s refining business has been pummeled this year, there's a bright spot on the company's balance sheet that comes from a surprising source: ethanol.
Valero is making money with the corn-based fuel just six months after buying seven corn ethanol plants from bankrupt VeraSun Energy for $477 million.
Although Valero's ethanol business is small when compared with its vast refining operations, “the business has worked out for us very well,” Valero CEO Bill Klesse told analysts during the company's earnings conference call late last month. “We feel very strongly that ethanol is going to be part of the fuel mix going forward.”
In its most recent regulatory filing, Valero said its ethanol business posted operating income, or earnings before interest and taxes, of $49 million for the three months ending Sept. 30 and $71 million for the nine months ending Sept. 30.
By contrast, Valero posted an operating loss for both periods when all its businesses are included."
http://www.mysanantonio.com/business/local/Ethanol_is_producinga_profit_for_Valero.html
Do you want to keep insisting that ripe pineapples are indeed red (that Valero is just like Exxon)? I may not be in Hawaii, but I'm pretty sure that I wouldn't trust a Hawaiian on that one.
Robert R., as an insider (hailing from Hawaii–I don't recall Hawaii being a big energy economy state) you can assert you are correct, but other readers can easily see that you are incorrect.
Well, Bob, if that is an example of how rigorous you are with your research, it is obvious why you come to such silly conclusions. GIGO. I have lived in Hawaii all of 6 months. Meanwhile, I have worked in the energy industry around the world. Take a minute to browse my CV linked in the sidebar before you continue.
Funny how outsiders always think they know what the view is on the inside. You don’t, but are certain you do. Then again, you think I am from Hawaii.
It's very obvious that Valero, as a refiner/blender, is far different from a vertically integrated company like Exxon or BP.
They aren’t far different. The big oil companies all have refining arms, which would be like an internal Valero. (One of my best friends is a manager at Valero, by the way). And you miss/ignore/wish away the very important fact: The oil companies don’t own all of their oil. They go out and buy it on the open market. They will readily ethanol if it will make them more money. The view from comic book land being what it is, I don’t expect you to see things any differently. But I know, because I have been there and made those decisions. You clearly have not, and are simply speculating on how you think things are on the inside.
I may not be in Hawaii, but I'm pretty sure that I wouldn't trust a Hawaiian on that one.
Again, perhaps you should reconsider whether you really know what you are talking about, or whether it is you who is doing the asserting from a position of ignorance.
RR
It appears that this blog is not the only place that Bob Winnson and Kum Dollison aka Rufus are posting the same sort of fluff:
Big Oil Behind Yet Another Biofuels Research Paper
Check out the back to back comments posted within an hour of each other on the 12th. In fact, Bob is posting some of the exact same stuff that Rufus has posted here (e.g., Mary Nichols).
So, anything you two want to tell us about?
RR
Wendell,
That is indeed a good strategy for the ethanol industry. To which I would a few more, and som campaign like statements;
4. Develop systems for using ethanol to fuel and co-fuel diesel engines. This will enable American farmers and truckers to run on American grown fuel, and make the ethanol industry oil indepedent.
5. Remove all tariff barriers to imported ethanol. "We believe in affordable ethanol for all Americans. If imported ethanol is cheaper than imported oil, then we say bring it on – it will help transition America away from oil dependence faster. "
6."We have no interest in exporting our ethanol. It is made by Americans, for Americans, and we will not trade the fruits of our soil and labour to another country while America is importing oil. When Henry Ford made his first cars, his vision was for them to run on ethanol, made from American farms. We are working to make that vision a reality."
Who knows, if they did all these things, they might actually succeed in turning a taxpayer funded charity into a profitable sustainable business.
Hey, good catch RR. Unless Kum Dollison is Rufus's evil comma-and-apostrophe-abusing twin brother, they are one and the same person. And a Google for "Kum Dollison" certainly throws up plenty of ethanol cheerleading, including the comment at the bottom of this article about how to get the propaganda machine going.
And there I was … just about to blame the Europeans again.
Most of us post on more than one blog.
So?
I stated on my very first post, here, that Kum Dollison, Kdolliso, and Rufus were the same person.
I've had a blogspot account since Larry Kudlow opened his blog.
When I attempted to post at other blogs I found that the nom de guerre, "Rufus," was taken.
At the oil drum I used kdolliso, and most other blogs since then I've used Kum Dollison. Except for a couple where I use Galop47 – my poker-playing moniker.
Bob Winnson is someone else (unless I've been doing too much Ambien.) 🙂
I dropped a bombshell, yesterday – namely, that ethanol, after tax credits, and allowing for mileage is NOW producing Greater Value than Gasoline.
I thought that would raise a hailstorm of comment, and analysis; but, nope, all we seem to have gotten was some comments about my proclivity to post comments at energy/ethanol type blogs.
Maybe you all skipped over that comment. Let me repeat it:
Ethanol is now retailing for 45% less than gasoline at your very competitive retailers. Ex. Kum and Go (a very, very competitive retailer in every market they're in) is selling E0 for $2.77, and E10 for $2.64.
That's a Savings of $1.30/gal.
If you subtract .20 X $2.77 (approx $0.55) from $1.30, and then subtract the $0.45 Blenders Credit you still end up with $0.30 gal Savings.
And, you're interested in whether I might have posted this somewhere else? I think you all are missing the forest for the trees.
I thought that would raise a hailstorm of comment, and analysis; but, nope, …
Maybe because you are not particularly clear when you try to run through the numbers. What you mean, I believe, is that on a pure gallon basis, a 10% admixture of ethanol reduces the at-pump price by $0.13 per gallon, so a gallon of E100 reduces expenditure on gasoline by 10 times that amount, or $1.30.
Of course, that ignores the difference in energy content, so let's round that down to $0.90 per gallon ($0.09 per gallon real savings to the customer between E10 and E0). Subtract out the VEETC and one gets to $0.45 net savings per gallon ($0.045 per gallon real savings to the customer-taxpayer between E10 and E0).
One could subtract out other subsidies (state-level subsidies, exemptions from sales tax, and lower excise taxes), along with the federal small producers' tax credit ($0.10 per gallon on a limited volume), and add in the extra cost to consumers of higher grain prices, but let's for the sake of argument say that there is some savings currently from too much ethanol chasing too few outlets.
Such a scenario was predicted several years ago by Cornell University economists Harry de Gorter and David Just. See, "The Forgotten Flaw in Biofuels Policy: How Tax Credits in the Presence of Mandates Subsidize Oil Consumption."
In a recent article the authors explain:
"Fuel prices decline as a result of more fuel on the market due to the supply of ethanol. Total fuel consumption increases, representing displacement of gasoline.
"Some gas that would have been used in the U.S. is now shipped to China and used in more inefficient cars and produces more pollution," Just said. "For every mile of ethanol that we put into the market in the U.S., about half of that pollution shows up elsewhere in the economy where the gas is substituted somewhere else."
So, in other words, you can't have it both ways: argue that ethanol is reducing prices at the pump and not admit at the same that the effect of that is to increase overall blended-fuel demand, which means gasoline as well as ethanol. Whether the net increase in demand for the gasoline portion of blended fuel resulting from the lower price is greater or less than the gasoline displaced by ethanol is a matter of empirical analysis. De Gorter and Just have argued that the effect of the current set of policies could very well actually increase gasoline demand.
So much for the arguement that ethanol is reducing gasoline imports.
So, lower cost transportation is "Bad" for us? Is That what you're saying?
Right on, Bubba.
So, lower cost transportation is "Bad" for us? Is That what you're saying? Right on, Bubba.
Decide for yourself, Rufus. In the absence of a cap on carbon emissions, lower-cost blended fuel increases demand, which increases emissions. But I gather you are not particulary bothered by GHG emissions.
In the absence of any other constraints, lower-cost blended fuel increases demand for blended gasoline, which could offset the displacement effect of increased ethanol use.
Please enlighten us on how you would square that circle: reduce gasoline prices without increasing demand.
No, I think "GHG emissions" is the silliest concept we've ever dreamed up. (Of course, ethanol does put out 59% less CO2 than Gasoline – according to the EPA.)
They manage to get it down to 20% by dreaming up a scenario where Brazil cuts down rainforests to plant soybeans to make up for soybeans displaced in the U.S. by Corn. Problem is, the world isn't working the way they're dreaming.
Bottom line: Brazil is planting Less Acres in soybeans, not more.
They've gone from 58 million acres in 2003 to 53 million acres in 2008.
Anyways, it is now cheaper/more efficient to produce ethanol than to import Saudi Crude, and refine it. And, you want to make this into a Bad thing.
Lotsa luck.
Rufus,
Still waiting for an answer to my question I asked yesterday
""""""""""""""""""""""""""""""""""
Your statement,
I can get anything out of an ear of corn that you can get out of a hole in the ground, Duracomm.
Intrigues me.
Can you show me the flowcharts for converting corn to
Roundup, 2-4-D, trimethacarb, diesel, urea, and anhydrous ammonia?
That would be really useful and it should be easy to find given your statement in italics.
Because if you can't provide that your comment is another in a long series of rufus ethanol related wishful thinking.
Now featuring 75 % more of those tasty magic ethanol unicorns.
March 14, 2010 5:27 PM
"""""""""""""""""""""""""""""""""""
Hurry up those magic ethanol unicorns are getting closer
Duracomm.
Duracomm, that stuff is all over the technical literature. Hydrocarbons are hydrocarbons. They can be changed at will. Wendell have an example, although I would recommend anaerobic digestion over "burying."
Besides, no one is saying "let's replace ALL oil." We're trying to replace what we're getting ready to lose by depletion.
Anyways, it is now cheaper/more efficient to produce ethanol than to import Saudi Crude.
Here, again, you show a misunderstanding of how markets operate, Rufus. Whether ethanol producers would be able to cover all of their costs (including capital recovery and a market return on investment), without subsidies, at current gasoline prices is an open question. I leave that to those who know the industry better than I do to answer.
But one thing is for certain: U.S. ethanol producers' costs are far higher than Saudi oil producers' costs. Saudi Arabia is a low-cost producer, and probably produces at a cost of around $10 per barrel. That means that, no matter how low ethanol might be priced, Saudi oil will remain on the market.
As oil prices drop, it is the marginal, high-cost producers — some of whom operate in North America — who reduce production.
So be careful what you wish for.
U.S. ethanol producers' costs are far higher than Saudi oil producers' costs.
To the Saudis, maybe. Not to ME.
I could care less what oil costs the Saudis. I care what gasoline costs ME.
And, now, thanks to E10 I can go farther for less money. Bottom line.
Also, according to This Study from Ia State the presence of ethanol as a competitor in the marketplace is depressing the price of gasoline, itself.
The Iowa State study did its regression on data between 1995 and 2007. Here is what they say in the conclusion:
"The availability of ethanol essentially increased the "capacity" of the U.S. refinery industry and in so doing prevented some of the dramatic price increases often associated with an industry operating at close to capacity. Because these results are based on capacity, it would be wrong to extrapolate the results to today’s markets."
Watch in amazement as rufus takes two paragraphs to say no there is no facts to back up his statements.
And the crowd cheers as rufus and his herd of magical ethanol unicorns enter the arena.
Duracomm, that stuff is all over the technical literature. Hydrocarbons are hydrocarbons. They can be changed at will. Wendell have an example, although I would recommend anaerobic digestion over "burying."
Besides, no one is saying "let's replace ALL oil." We're trying to replace what we're getting ready to lose by depletion.
Rufus can you provide some documentation on the percentage of hydrocarbons by weight and volume corn contains.
Because I think that percentage is so small you are going to take hundreds of acres of corn to produce the fertilizer needed for one acre of corn.
Duracomm
Rufus,
One other question about your statement below,
I can get anything out of an ear of corn that you can get out of a hole in the ground, Duracomm.
Can you show me the flowcharts for converting corn to Water
Irrigation Water comes out of a hole in the ground.
The aquifers that are being depleted to grow corn and produce ethanol could sure use some help.
Your process for efficiently and effectively converting corn to water will be very useful.
Duracomm.
Criminitly, Duracomm, a bushel of corn (56 lbs) yields 3 gallons (19.8 lbs) of ethanol.
I have no clue what you're talking about "fertilizing with petroleum." The DDGS do make for a very fine fertilizer, but they're more valuable as livestock feed.
Okay, you got me on the corn to water. 🙂
On the other hand: very, very, very little "aquifer" water goes into ethanol.
They went on to say in their conclusion that in the absence of greater refining capacity are removal of ethanol from the marketplace would cause "extreme" increases in price of gasoline (paraphrased.)
The fact is: it was there, it reduced the price of gasoline, and is Now a Better Value than gasoline – even accounting for the tax credit, and efficiency loss.
I long ago concluded that Kit and Rufus are sock puppets planted here by big oil. They are paid to come up with simplistic, easy to flatten arguments in support of corn ethanol specifically to make corn ethanol look bad ; )
I participated in the debate at Greene's NRDC blog but Steenblik came along and made my arguments obsolete.
Assuming that the RFA analyst knew what he was talking about, I let him have all of his points (which I realized were all wrong after reading Steenblik's responses) and argued against them from other perspectives.
They [the Iowa State analysts] went on to say in their conclusion that in the absence of greater refining capacity are removal of ethanol from the marketplace would cause "extreme" increases in price of gasoline (paraphrased.)
Yes, paraphrased. What they actually said was "Had we not had ethanol, it seems likely that the crude oil refining industry would be slightly larger today than it actually is, and in the absence of this additional crude oil refining capacity the impact of eliminating ethanol would be extreme."
Hardly profound. Equally one could say that if we all of a sudden diverted a whole lot of grain from the world market, a lot of people would go hungry. (Hey, wait a minute, we tried that, didn't we!)
As the FAPRI analysis shows, even if one were to eliminate the VEETC and the import tariff, production from existing ethanol plants would continue for many years. So to postulate a sudden disappearance of all ethanol from the market is not very realistic (unless you postulate a severe drought, late frost or pestilence that devastates the corn crop).
They then go on to say, "In addition, the impact of the first billion gallons of ethanol on this capacity constraint would intuitively be greater than the billions of gallons that came later."
In other words, if one is in a tight supply situation, easing that supply even slightly can affect prices. However, the incremental value of additional supplies is much, much less.
Rufus lets go through the steps.
You said
I can get anything out of an ear of corn that you can get out of a hole in the ground, Duracomm.
I said great show me how.
You said (completely failing to back up your original point)
Duracomm, that stuff is all over the technical literature. Hydrocarbons are hydrocarbons. They can be changed at will.
I said
Rufus can you provide some documentation on the percentage of hydrocarbons by weight and volume corn contains.
You said
I have no clue what you're talking about "fertilizing with petroleum."
Let me explain this very slowly to you.
You flatly stated corn could replace oil. You never produced support for your statement because you statement is not true.
If you are going to replace hydrocarbon from oil with hydrocarbon from corn it would be important to know how much hydrocarbon corn contains.
You don't know how much if any hydrocarbon corn contains.
You just produced another blatant falsehood in your ongoing effort to defend the ethanol welfare program.
Part and parcel of your behavior on this thread.
Duracomm
Another thread approaches 200 comments much of it due to the spamming of this thread by rufus and his various sock puppets.
The spamming by rufus serves one purpose. It is a hecklers veto.
Many of his comments are "facts" made up from thin air that when looked at are found to be completely untrue.
The inanities rufus posts combined with the great volume of his posts drowns out most of the good discussion pro and con on ethanol.
This comment thread would be half as long and much more substantive if it were not for rufus throwing everything but the kitchen sink at the comment wall hoping something sticks.
Duracomm
Findley found me out. A blogger for Big Oil. Cashing them crazy Exxon checks, partyin' hard.
Whoo whoo
🙂
Duracomm, you keep addressing questions to me; and then, when I respond you gripe because I'm posting comments.
Don't hardly seem fair.
"If they really require both a mandate and a subsidy [and an import tariff] in order to compete, then we might as well stop this charade right now."
These things can be effective in the short term to try to get an industry started but failure to end the bleeding eventually leads to collapse from a thousand cuts.
I suspect that many past civilizations have met their demise in similar circumstances when government make-work projects stalled their economy and emptied the public larders.
Russ — we are out here in never-never land, beyond the dreaded 200 comment mark. But I do feel compelled to add something to your insightful remark.
If we are going to tax ourselves (or borrow from the Chinese) to pay for subsidies, we clearly need something like the "Powell Doctrine" — Don't start subsidizing anything until there is an agreed Exit Strategy for getting out of the mess.
The Exit Strategy could be a Date Certain for terminating the subsidy; or a provision making those politicians who voted for it jointly & severally personally liable for the economic consequences of their vote.
Personal view — it would be much better for government to stick to funding basic research, to providing giant X-Prizes, and to using the purchasing power of the Federal Government. And to rolling back excessive regulation which inhibits innovation. Subsidies just don't work.
“NOW producing Greater Value than Gasoline”
I did note this Rufus but I was afraid if being a sock puppet for ethanol to comment. Something I was expecting. The ethanol industry is always talking about improving productivity.
On the other hand: very, very, very little "aquifer" water goes into ethanol.
Rufus~
Except for the corn grown in western Nebraska and Kansas, eastern Colorado and Wyoming, the Oklahoma and Texas Panhandles, and parts of South Dakota.
Haven't you ever flown across the Corn Belt west of the 100th meridian, looked out the window, and seen the almost countless circles of crops from center-pivot irrigation systems? That's almost all Ogallala water. 100th Meridian
Your statement of very little aquifer water in corn is only true for the three I states — Iowa, Illinois, and Indiana — Ohio, Missouri, Wisconsin, and Minnesota.
You do say the dangdest things at times.
Excellent comment Russ,
Two examples that come to mind are the Great Pyramid, and the statues on Easter Island. Both bankrupted their countries – Egypt recovered, though ti took a few hundreds of years. The E. Islanders used up every last tree building and moving their statues and their island (and the people) never recovered.
When Rome ran out of money they just went and conquered somewhere else and took their food, gold and slaves, but eventually it became too big to govern and was attacked and rotted from the middle, like an overgrown tree.
The inability of most politicians, who have all the expertise of a country, and history, at their disposal, to make proper long term decisions is amazing and disappointing.
I sometimes think the historical kings and emperors did a better job, they had a great motivation to keep their country strong and independent, or it wouldn't be theirs for very long.
Modern governments seem to have outsourced looking after the general wellbeing to companies – (what's good for GM is good for America), but it aint always so. The companies can (and do) pack up and move their operations elsewhere, but the government and population can't.
“the statues on Easter Island”
That is a myth Paul.
Corn ethanol has increased proclivity while reducing environmental impact. A shinning example of industrial ecology. This is the opposite of civilization collapse.
There is a systematic approach to meet the needs of society while reducing the environmental impact.
The anti-s have a systematic approach TOO. Telling the same lie over and over. If the NRDC has a good idea, I would adopt it. Russ Findley talks about his environmental credentials but these credentials do not including learning the root cause of a problem and solving it.
Russ Findley lives in the Seattle area. The City of Seattle has a $2M public relations budget not a $50 million a year budget for replacing coal generation. There are people that are making things better but Russ is against them.
So I think Paul you would agree that when Transalta to bought and installed pollution control equipment at Centralia, the company significantly reduced environmental impact of making electricity in the region. Not very politically correct but better than being against everything.
…while reducing environmental impact.
Reducing environmental impact?
"Ignorance, outsider, insider, rethink" blah blah–RR.
You do live in Hawaii. And you've lived in other places. You not living in Hawaii all your life doesn't make you correct on petroleum and ethanol.
I can't believe you don't accept being corrected about Exxon vs. Valero. So what if Exxon also buys petroleum because it can't pump enough of its own. It STILL profits hugely from the petroleum that it does pump (Billions!), while Valero does not. It's as simple as that. Please don't debate a settled fact any more.
And I can't believe that point about "Oil companies WOULD sell ethanol if they could make money…" They DO sell ethanol–in much of the gasoline supply it composes up to 10%. And they DO make money on it. This is the way they want it, and they want it to stop at that. They're not afraid of E10. They are VERY afraid of E85 (USA) and E100 (alcool in Brazil). E10 is just a minor supply blip to them. E85 and E100 becoming a major fuel around the world WILL be a major problem for them.
That's why BP and others are buying up ethanol interests (sugar cane). BP also spent $500 million on the EBI at Brekeley and the venture at the University of Illinois. They will go hard for the biofuels that they can CONTROL, and against the ones they can't (corn). Then they will have government entities regulate against corn ethanol, and work against the tariff in the U.S. (all while Brazil has its own ethanol tariff). So it's not that they're against all biofuels–mostly just corn ethanol and soy biodiesel. And they're not against corn ethanol per se, just so long as it stays as an oxygenate/additive. Anything more than E10, and it becomes competition. It's shrewd business.
You do live in Hawaii.
And you tried to dismiss my points because they were coming from "some guy from Hawaii." Weak. So now that you know I am not from Hawaii – and tried to imply I was less credible as a result – my credibility should clearly be higher for you. But alas…
And you've lived in other places. You not living in Hawaii all your life doesn't make you correct on petroleum and ethanol.
No, the fact that I understand the energy business as an insider is what makes me correct – and you incorrect. Do you think I don't know the difference between Valero and Exxon? You are just whipping a strawman. But I can promise you that Exxon will buy ethanol to blend over petroleum to refine if it will make them one more penny a gallon. Take it to the bank. Your conspiracy theories are mere comic book fare from someone looking at it from a distance and convincing himself that this is the way it must be.
And Exxon afraid of E85? You guys have really convinced yourselves of some fantasies. There is absolutely zero stopping Exxon from owning the ethanol industry if it deems that it is a long-term good business model. The entire ethanol industry would be one of Exxon's smaller divisions.
But your whole Hawaii shtick was very telling, and you should have learned something about your conclusion jumping from it. Clearly, I can see you didn't.
RR
RR, you are being ridiculous. I am able to admit that I didn't know all of your background (which has NO implication for what I know about oil companies and ethanol). And I stated that you not living in Hawaii doesn't mean that you know everything. "Know everything" guys are the type that many dislike, and are often wrong about some of the most important things. Having an ego that doesn't allow one to be corrected allows one to continue forward in errant ways.
BTW I am not against the oil companies moving towards biofuels. They just should not be so hypocritical to work so hard against them right now, when they fully intend to use them as much as they can control and profit from in the future.
BP at EBI: http://www.energybiosciencesinstitute.org/
BP on (their) biofuels:
http://www.bp.com/productlanding.do?categoryId=9030593&contentId=7055794
http://www.bp.com/sectiongenericarticle.do?categoryId=9030042&contentId=7055187
RR, you are being ridiculous. I am able to admit that I didn't know all of your background (which has NO implication for what I know about oil companies and ethanol).
It has implications on how you come to conclusions. You jump quickly. That does have implications for what you THINK you know about oil companies and ethanol. I can tell you – from the inside – that what you think you know is just speculation, and wrong.
Imagine for a moment that you want to get a medical opinion. Are you going to get that from an actual doctor, or someone who watches a lot of General Hospital? If you want to know how the oil industry thinks, I can tell you. You are an observer, and you should understand that what you think you know just may be wrong.
Having an ego that doesn't allow one to be corrected allows one to continue forward in errant ways.
Yet it is you trying to tell me how oil companies think – even though I used to be one of the people doing the thinking. What was your background again? How much time have you spent in the oil industry? Believe it or not, I know a lot more about all of this than you do. I am not speculating. You are. But your ego won't allow you to admit that you are wrong about your speculation.
But again, you were ready to completely dismiss my points when you thought I was from Hawaii. Now that you know that I am not – and have a background in the oil industry – you still wish to dismiss what I am telling you.
Some people have ideas ingrained in their heads that they just can't let go of.
RR
It STILL profits hugely from the petroleum that it does pump (Billions!)…
Bob Winnson,
I don't know if it worth pointing out to you, but both state and Federal government make more money off each gallon of fuel sold than does any of the oil companies.
And those governments don't even have to take any risks or work for it, they get to just skim money off the top in the form of taxes.
KIt,
"Not very politically correct but better than being against everything."
I do agree with you regards Trans Alta, though I can't see how installing pollution control is not PC. Always amazes me when people talk about coal as a dirty fuel – they have obviously never had crude oil on their fingers. I'll take a boat/train/truck spilling a load of coal over oil anyday.
While I like certain renewables (hydro), people are off their rocker if they think we can really get rid of coal fired electricity anytime soon. Doesn't mean we can't pursue other things, but you can close down coal until you have something else to replace – something the Ontario government doesn't quite understand.
As for ethanol making much of a difference to society's environmental impact, I don't think that has been proven. It may have shifted it from somewhere to somewhere else, and made a minor reduction in CO2 – but we both agree there is nothing really wrong with CO2 – it seems to be a cover to drive a different agenda (de-industrialisation)
“As for ethanol making much of a difference to society's environmental impact, I don't think that has been proven.”
Sure it has Paul. Right now about 10% of my gasoline comes from ethanol with lower environmental impact than previously.
I am not saying there are not environmental issues. However, there is a general positive trend. Step by step we are solving problems and making thing better like the TransAlta example.
One reason change is less apparent is that the long hanging fruit has been picked. If ethanol was replacing leaded gasoline, the change would be more significanct.
If you want to do something like add pollution control to a coal plant, uprate a nuke, make a NG plant more efficient, biomass, build an ethanol plant; you must go through a public review process and document the public interest. The groups like NRDC or the Sierra Clup oppose these project with false attacks. The so called defenders of the planet are against everything because improvements could always be better.
KIt,
While we can debate about the impact or not of ethanol, what I do like is that the impact (environmental) and benefit (economic) is here, not somewhere else, and can be judged accordingly. Who know what is happening in oilfields in Angola or wherever.
And if it ends up where the US is faced with not being able to import oil (other than Canada), then there are some hard decisions about how much land/biomass to devote to ethanol. That decision would be much easier if there was a viable method for true cellulosic (wood waste) ethanol.
Having run up against the likes of Sierra Club myself, it is thinly veiled that they are against pretty much everything except organic farming.
I had an inetersting conversation some years ago with an oil prospector in Whitehorse (Yukon Territory). They had very promising prospects for oil in some areas, but the California based groups, like Sierra Club, had succeeded in swaying so much public opinion (out of the territory) that the govt caved and imposed a moratorium on oil exploration.
So they have their economic opportunities curtailed so people in Berkeley can feel good about it while they sit in traffic in their hybrids.
Bob Winnson said to RR:
"Please don't debate a settled fact any more."
Careful, Bob! That line has been copyrighted by Alleged Anthropogenic Global Warming alarmists. You may be getting a call from their lawyers.
Find your own unscientific argument, please!
Right now about 10% of my gasoline comes from ethanol…
Kit P.
At the risk of being pedantic, 10% of your gasoline does not come from ethanol. Your gasoline is still 100% gasoline. 10% of your motor fuel comes from ethanol.