ethanol

Post image for Ethanol: Coburn, ATR, WSJ

There is an ongoing ethanol spat between Senator Coburn (R-OK) and Grover Norquist, President of Americans for Tax Reform. The dispute is over conservative support for a bill that would repeal the ethanol tax credit, which has the effect of raising an industry specific tax. Americans for Tax Reform comes down hard on any effort to increase taxes. The Wall Street Journal added their two cents in favor of Senator Coburn:

Our readers know Mr. Norquist as the plucky author of the no-new-taxes pledge, which has helped to make tax increases a red line in Republican politics. In a letter to Mr. Coburn, a deputy of Mr. Norquist writes: “Repealing the ethanol credit is the right thing to do, but other taxes must be reduced in the same legislation by at least this much to prevent a net tax increase.”

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Post image for Can Obama End Our “Addiction” to Foreign Oil?

In his speech earlier this week, President Obama took a brave and unprecedented stand against our nations reliance on foreign petroleum imports:

Now, here’s a source of concern, though. We’ve known about the dangers of our oil dependence for decades. Richard Nixon talked about freeing ourselves from dependence on foreign oil. And every President since that time has talked about freeing ourselves from dependence on foreign oil. Politicians of every stripe have promised energy independence, but that promise has so far gone unmet.

I talked about reducing America’s dependence on oil when I was running for President, and I’m proud of the historic progress that we’ve made over the last two years towards that goal, and we’ll talk about that a little bit. But I’ve got to be honest. We’ve run into the same political gridlock, the same inertia that has held us back for decades.

That has to change. That has to change. We cannot keep going from shock when gas prices go up to trance when they go back down — we go back to doing the same things we’ve been doing until the next time there’s a price spike, and then we’re shocked again. We can’t rush to propose action when gas prices are high and then hit the snooze button when they fall again. We can’t keep on doing that.

The United States of America cannot afford to bet our long-term prosperity, our long-term security on a resource that will eventually run out, and even before it runs out will get more and more expensive to extract from the ground. We can’t afford it when the costs to our economy, our country, and our planet are so high. Not when your generation needs us to get this right. It’s time to do what we can to secure our energy future.

Richard Nixon wasn’t the only one. As Jon Stewart pointed out last summer, the last eight administrations have warned against the alleged dangers of importing petroleum and provided a number of solutions to massively restructure the economy, none of which were successful. Stewart comments, “Fool me once, shame on you. Fool me twice, shame on me. Fool me eight times, am I a ****ing idiot?”

And yet we appear to be idiots, and more money will  be spent chasing pipe dreams with taxpayer money. The New York Times, today, congratulated Obama’s willingness to take on such a tough challenge and blamed the lack of progress on, wait for it, Republicans:

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In yesterday’s Greenwire (subscription required), reporter Paul Voosen reviews of the efforts of various firms to develop commercially competitive motor fuel from two types of single-celled photosynthetic bugs — algae and cyanobacteria.

For several years, biofuel entrepreneurs and alt-energy gurus touted oil extracted from algae as the next big thing — abundant, cheap, home grown, hi-tech, carbon neutral. In addition, unlike corn-ethanol production, growing algae in ponds or bioreactors would not inflate grain prices or divert food from hungry mouths into gasoline tanks.

But this narrative increasingly looks like hype. Voosen summarizes: [click to continue…]

Post image for Washington Post Chides Obama Over Energy

In an editorial cleverly titled, “Drill, Brazil, Drill says the U.S.The Washington Post joined in the growing public displeasure over President Obama’s public support for the Brazilian oil industry, which seems to be rising at the expense of administration support for the oil industry in the United States.

As CEI’s Myron Ebell pointed out last week:

This is the same President who has spent the last two years doing everything he can to reduce oil production in the United States.  Cancelled and delayed exploration leases on federal lands in the Rocky Mountains; the re-institution of the executive moratorium on offshore exploration in the Atlantic, the Pacific, most Alaskan waters, and the eastern Gulf of Mexico; the deepwater permitting moratorium and the de facto moratorium in the western Gulf.  The result is that domestic oil production is about to start a steep decline.

The editorial also mentions the tariff on ethanol. Trade restrictions are bad policy. However, the case for Brazilian ethanol is slightly more complicated than that. If Brazilian ethanol were imported to the U.S., it might displace some ethanol production that is occurring in the U.S. as historically Brazilian ethanol has been cheaper. This would be fine.

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Post image for Ethanol Industry Continues to Deflect Blame on Food Prices

Instead, they blame those darned speculators (are they aware of the important role played by commodity markets?) again. The industry continues to find support in high places:

Speaking to farmers earlier this month, the Obama administration’s agriculture secretary said he found arguments from the like of Nestlé “irritating”. Mr Vilsack said: “The folks advancing this argument either do not understand or do not accept the notion that our farmers are as productive and smart and innovative and creative enough to meet the needs of food and fuel and feed and export.”

Well, the price of corn has almost doubled in the last 6 months. Now, its obviously unfair to blame this entirely on biofuels. Food crops are heavily dependent on a number of other important factors like the price of oil, the weather, crop yields, etc. However, with 35% of U.S. corn being turned into biofuels, it clearly has a major effect on the price, driving it upwards (and driving other commodities higher as well, as farmland becomes more scarce). Globally, U.S. exports provide about 60% of total corn supply.

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Post image for With Rising Gas Prices, is E85 a Better Deal?

No. A few reports have surfaced across the country about motorists with flex fuel vehicles beginning to fuel up with E85 rather than regular unleaded gasoline (E10). From the perspective of an uninformed consumer, E85 costs less than unleaded gasoline. It also gets worse mileage. Look at this article from Minnesota:

“E85 is almost always priced less than gasoline, and many flex fuel vehicle owners in this region have been choosing the lower priced fuel for years,” said Kelly Marczak, Director of the clean fuel and vehicle technologies program for the American Lung Association in Minnesota. “Today, the price difference is so large, even people who had never used E85 before are giving it a try.”

Marczak said that while E85 delivers less miles per gallon than gasoline, the broad price spread between the two fuels makes E85 a bargain for many flex fuel vehicle owners.

This is untrue, and its almost certain that Marczak is aware that its not true. The most recent average price spread I could find for average fuel prices in Minnesota is here. It lists the average price of E85 at $2.87 and the average price of gasoline (presumably with 5-10% ethanol) at $3.45.

For consumers to be better off financially purchasing E85, the price of gasoline would have to be approximately $4.37 with the E85 price holding at $2.87. Pure ethanol gets roughly 66% of the mileage that pure gasoline is capable of reaching, as a result, you must buy a lot more gasoline to drive the same number of miles. This can be confirmed by checking the Department of Energy’s Flex Fuel Cost Calculator. They make it really easy to find out how much money you lose each year using E85.

As you can see here, E85 prices tend to track gasoline prices pretty closely, so without funneling taxpayer dollars into making E85 even cheaper, or a technological breakthrough, this is unlikely to happen anytime soon.

Post image for “Grassley would swallow anti-ethanol measures to cut deficit” – DeMoines Register

The hand writing was already on the wall last December even though Congress extended the Volumetric Ethanol Excise Tax Credit (VEETC) for another year.

As explained here, ethanol’s policy privileges lost their perceived legitimacy. Beef, hog, poultry, and dairy farmers objected that ethanol policy inflates livestock feed costs, making their products less competitive in global markets. Humanitarian organizations objected that ethanol policy aggravates world hunger by driving up grain costs. Environmental groups objected that corn ethanol production damages water quality and, on a life-cycle basis, probably emits more carbon dioxide than the gasoline it replaces. Budget hawks objected to Congress lavishing billions on a favored few in the midst of a budget crisis. Free market groups objected to the fleecing of consumers compelled to buy a product that delivers less bang for buck than gasoline.

The corn lobby could rally its congressional patrons one last time, but the ideological climate had shifted against them, with even Al Gore recanting his earlier support for ethanol subsidies. If the VEETC had come up for renewal in Dec. 2009, Congress would likely have extended it for five years, not just one. But in 2010 a broad-based Left-Right coalition arose to challenge King Corn, and the tide turned. [click to continue…]

Mark Hertsgaard and Christian Parenti, two reporters from The Nation, a far-left periodical, have an oped in syndication about how the federal government’s huge buying power can alter the economics of green energy.

Here’s how it works, in the authors’ own words:

Federal spending is responsible for roughly 25% of the gross national product, giving Washington enormous power to influence marketplace behavior even if annual spending levels are trimmed…If the Pentagon, the Postal Service and other agencies shifted their buying wherever possible from dirty technologies to clean ones, it would give manufacturers…a huge influx of orders. These orders would yield economies of scale that would enable green manufacturers to substantially reduce prices.

As the prices of green technologies fall to near that of dirty technologies, consumers and private companies will begin buying green of their own accord. Their purchases will yield additional economies of scale, enabling green manufacturers to lower prices further and entice more buyers, thus hastening the displacement of dirty technologies.

Hertsgaard and Parenti call their plan the “Big Green Buy.” I call it a “Very Dumb Idea.”

Recent history supports my description over theirs. Evidently unbeknownst to these authors, the federal government already has attempted The Big Green Buy, and it was a disaster.

From 1999 to 2006, the Post Office became the world’s #1 buyer of “flex-fuel” cars capable of running on E-85, a fuel blend containing 85% ethanol, a then-voguish green fuel distilled from the starch in corn. The Post-Office’s 30,000 car buying spree was meant to achieve markets of scale for ethanol production and use.

Unfortunately for the feds, the flex fuel plan backfired. The problem was that E-85 fueling stations were only available in a handful of states; everywhere else, the new Post Office vehicles had to use regular unleaded. And because “flex-fuel” vehicles tended to be SUVs, and were therefore larger and less fuel-efficient than the vehicles they replaced, gasoline consumption increased by almost 1.5 million gallons.

Such are the unintended consequences of Best Laid Plans.

A global food crisis is “forecast as prices reach record highs [1].”  “Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years.”  “Global wheat and maize prices recently jumped nearly 30% in a few weeks while meat prices are at 20-year highs.” “Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels.”

Drought is one factor in the price spikes.  Biofuels and ethanol subsidies and mandates are another major factor.  According to the UN, “large-scale land acquisitions by foreign investors for biofuels is squeezing land suitable for agriculture [1].”

Ethanol subsidies have resulted in forests being destroyed [2] in the Third World, and caused famines [3] that have killed [4] countless people in the world’s poorest countries [4].

These subsidies are expanded in the global warming legislation backed by the Obama administration.  Its ethanol subsidies will result [5] in “damage to water supplies, soil health and air quality.”  The Washington Examiner earlier explained how the global warming bill backed by President Obama would cause deforestation by expanding ethanol subsidies, and thus increase greenhouse gas emissions [6] in the long run.   It was larded up with corporate welfare: 85 percent [7] of its carbon allowances were given away to special interests free of charge, thanks to lobbying that turned the bill into an orgy of corporate welfare.

Earlier, Ron Bailey wrote in Reason magazine about the “global food crisis” that has resulted in food riots across the world [8], in countries like Mexico, Pakistan, Indonesia, Yemen, Haiti, and Egypt.   The crisis, he notes, is caused by “stupid energy policies” in the form of ethanol “mandates” and subsidies, which result in the world’s breadbaskets producing less food and more ethanol.

In 2008, two prominent environmentalists, Lester Pearson and Jonathan Lewis, published a Washington Post editorial, “Ethanol’s Failed Promise [9],” which explained how ethanol subsidies and mandates are destroying the environment and fueling hunger and violence worldwide [9].

Turning one-fourth of our corn into fuel is affecting global food prices. U.S. food prices are rising at twice the rate of inflation, hitting the pocketbooks of lower-income Americans and people living on fixed incomes. … Deadly food riots have broken out in dozens of nations in the past few months, most recently in Haiti and Egypt. World Bank President Robert Zoellick warns of a global food emergency.

Moreover, they noted,

food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy – most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources.  Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm. Here in the United States, farmers are pulling land out of the federal conservation program, threatening fragile habitats. … Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. As Time Magazine reported [10] this month, huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest ‘carbon sink.’ And when the forests are cleared and the land plowed for farming, the carbon that had been sequestered in the plants and soil is released. Princeton scholar Tim Searchinger has modeled this impact and reports [11] in Science magazine that the net impact of the food-to-fuel push will be an increase in global carbon emissions – and thus a catalyst for climate change.

In Human Events, Deroy Murdock explained how rising food prices resulting from ethanol forced Haitians to literally eat dirt [12] (dirt cookies made of vegetable oil, salt, and dirt), caused tortilla riots in Mexico, and fueled violent protests in unstable “powder kegs” like Pakistan and Egypt.

In 2008, finance ministers and central bankers called for end to ethanol subsidies and biofuel mandates [13]. South African finance minister Trevor Manuel called such subsidies “criminal [14].” Earlier, the Indian Finance Minister Chidambaram noted that [14] “in a world where there is hunger and poverty, there is no policy justification for diverting food crops towards bio-fuels. Converting food into fuel is neither good policy for the poor nor for the environment.”

The EPA is now ratcheting up [15] ethanol use, heedless of the fact that ethanol makes gasoline costlier and dirtier [16], increases ozone pollution [17], and increases the death toll from smog [18] and air pollution.  Ethanol production also results in deforestation, soil erosion, and water pollution [19].


At today’s press conference announcing new Obama administration biofuel initiatives (see here, here, and here), Ag Secretary Tom Vilsack mentioned that USDA has a memorandum of understanding with the Federal Aviation Administration to develop bio-based alternatives to jet fuel. Vilsack’s press release describes the MOU as follows:

The Secretary also announced jointly with the Federal Aviation Administration (FAA) a five year agreement to develop aviation fuel from forest and crop residues and other “green” feedstocks in order to decrease dependence on foreign oil and stabilize aviation fuel costs. Under the partnership, the agencies will bring together their experience in research, policy analysis and air transportation sector dynamics to assess the availability of different kinds of feedstocks that could be processed by bio-refineries to produce jet fuels.

About when will these “non-food” renewable jet fuels become competitive with conventional petroleum-based fuels? Secy. Vilsack did not venture to say. My guess is — quite a long time. Maybe even longer than it takes to make competitive auto fuel out of switch grass, corn stover, and wood waste.

One of my posts from a few months ago, on CEI’s OpenMarket.Org, goes straight to the point, so I recycle it below for your edification and amusement.

Bio-Jet Fuel — The Real $600 Toilet Seat?

The custom-designed $600 toilet seat for P-3C Orion antisubmarine aircraft — often depicted as the epitome of government waste — is an urban legend.

The “seat” was actually a plastic molding that fitted over the entire seat, tank, and toilet assembly, for which the contractor charged the Navy $100 apiece.

However, in the subsidy-driven world of biofuels, government can flush lots of your tax dollars down the gurgler.

DOD’s Quadrenniel Defense Review Report (QDR) crows that in 2009, the Navy “tested an F/A-18  engine on camelina-based biofuel” (pp. 87-88). Camelina is a non-edible plant in the mustard family.

On Earth Day 2010, an F/A-18 taking off from the Warfare Center in Patuxent River, Maryland, became the first aircraft to ”demonstrate the performance of a 50-50 blend of camelina-based biojet fuel and traditional petroleum-based jet fuel at supersonic speeds,” enthuses Renewable Energy World.Com.

At the event, Secretary of the Navy Ray Mabus said: “It’s important to emphasize, especially on Earth Day, the Navy’s commitment to reducing dependence on foreign oil as well as safeguarding our environment. Our Navy, alongside industry, the other services and federal agency partners, will continue to be an early adopter of alternative energy sources.”

Renewable Energy World also reports that the Navy ordered 200,000 gallons of camelina-based jet fuel for 2009-2010 and has an option to purchase another 200,000 gallons during 2010-2012. Sounds impressive, but let’s put those numbers in perspective. In just three months in peacetime, the flight crew of a single vessel — the USS NASSAU, a multi-purpose amphibious assault ship – flew more than 2,800 hours and burned over 1 million gallons of jet fuel.

Neither Renewable Energy World nor the QDR mentions how much camelina-based jet fuel costs. Hold on to your (toilet) seat! According to today’s ClimateWire [June 28, 2010; subscription required] the price is $65.00 per gallon. That’s about 30 times more expensive than commercial jet fuel.

Those who wonder why government can’t just mandate a transition to a “beyond petroleum” future should contemplate those numbers.