Ethanol Get's Slammed
Finally, the blinders are coming off and the media is starting to
wake up to the absolute travesty that is the Congress's promotion of
ethanol. From Rolling Stone(!) emphasis added.
This is not just hype -- it's dangerous, delusional bullshit. Ethanol doesn't burn cleaner than gasoline, nor is it
cheaper. Our current ethanol production represents only 3.5 percent of
our gasoline consumption -- yet it consumes twenty percent of the
entire U.S. corn crop, causing the price of corn to double in the last
two years and raising the threat of hunger in the Third World. And the
increasing acreage devoted to corn for ethanol means less land for
other staple crops, giving farmers in South America an incentive to
carve fields out of tropical forests that help to cool the planet and
stave off global warming.So why bother? Because the whole
point of corn ethanol is not to solve America's energy crisis, but to
generate one of the great political boondoggles of our time. Corn is
already the most subsidized crop in America, raking in a total of $51
billion in federal handouts between 1995 and 2005 -- twice as much as
wheat subsidies and four times as much as soybeans. Ethanol itself is
propped up by hefty subsidies, including a fifty-one-cent-per-gallon
tax allowance for refiners. And a study by the International Institute
for Sustainable Development found that ethanol subsidies amount to as
much as $1.38 per gallon -- about half of ethanol's wholesale market
price.
Hurrah! Unfortunately, I fear we may be waking up too late. Already, billions of dollars are being invested by politically connected companies
on the promises of subsidies and promotion of ethanol extending out to
the end of the universe. At this point, ethanol may be as entrenched
as agriculture subsidies, the education department, and depression-era
alcohol regulation. The government has no problem reneging on contracts with oil companies, but God forbid anyone deny Archer Daniels Midland the right to infinite subsidies.
rufus:
You know, before putting your good name on this "Stoner's" article you really ought to check his facts. They are EVERY ONE WRONG!
I fisked most of his ridiculous article over at Kudlow's before I finally wearied at the enormity of the project. I gotta give him credit, though; he hit every myth, misconception, and downright falsehood that's out there.
August 2, 2007, 10:02 pmJody:
Rufus: Can you be specific? Which of the following statements gleaned from the excerpt do you assert are wrong?
1) Ethanol doesn't burn cleaner than gasoline,
2) Ethanol is not cheaper than gasoline.
3) Our current ethanol production represents only 3.5 percent of our gasoline consumption
4) Ethanol consumes twenty percent of the entire U.S. corn crop,
5) Increased production of ethanol has causied the price of corn to double in the last two years and raised the threat of hunger in the Third World.
6) The increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests
7) Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005
8) Corn is subsidized twice as much as wheat subsidies and four times as much as soybeans.
9) Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners
10) The International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price.
All of these seem to check out to me...
August 2, 2007, 11:16 pmBruce Hall:
I have written often about the ills of ethanol and your comments are dead on.
Separately, I hold that existing technology that could reduct oil consumption significantly is being ignored: clean-burning, turbo-diesel engines. It is well known and accepted in Europe and now that the U.S. has finally gotten around to refining clean diesel fuel, they can be used here, too.
Unfortunately, people only remember the soot-spewers of the past and not inclined to give diesels a chance.
http://hallofrecord.blogspot.com/2006/10/diesel-power.html
August 3, 2007, 5:46 amrufus:
1. Corn "Absolutely" burns cleaner than gasoline. Every State (Ca, Ct, NY, etc)where ethanol has been blended with gasoline air quality has improved, markedly. I'll give you some links after while after I've had my morning coffee. In the meantime you could click over to the American Lung Assoc. website - Cleanairchoice.org
2. Once DDGs and other Coproducts are taken into consideration ethanol can be sold profitably from the refinery for (at today's corn prices) about $1.15 without subsidies. The last I saw wholesale unleaded was going for about $2.05 - $2.10/gal. It is true that for the next few months of shortage ethanol will track about ten or fifteen cents below unleaded wholesale; but this will come to an end in a few months when a lot of currently under construction supply comes on market.
3. We are currently producing 6.488 Billion gallons/ethanol yr. This is about 4.5% of our current gasoline consumption.
4. We will produce just a skosche less than 14 Billion bushels of corn this year. We will run about 2.2 billion bushels through the refinery to produce 6.48 billion gallons. We will get back about 700 million bushels of DDGS. Remember Most of our field corn is used for cattle feed, and DDGS are, basically, a 1 x 1 substitute for Corn. As a result we will use somewhere between 10 and 11% of our corn crop for ethanol.
So far we're 4 for 4, and I'm going to stop for coffee, and make sure I can get this through without my flakey internet connection eating it alive. Be right back.
August 3, 2007, 6:14 amrufus:
5. Corn is an incredibly "Cheap" product. When it doubled it essentially went from 4 cents/lb to 8 cents/lb. It added approx. 1.5 cents to the cost of a 4 oz serving of pork. The dollar amount of corn in your 14 oz box of corn flakes went from 2.2 cents to 4.4 cents. For those "Norte Americanos" who use Yellow corn in their tortillas the corn content went from approx 1/3 cent to 2/3 cent. There is a penny's worth of corn fructose in a can of Coke. BTW, there will be (After ethanol refining) more corn on the market this year than there was last year or the year before that.
The world could raise many times more food than it currently does, but the poor people can't afford what's being raised, now.
Here's the bottom line: A dollar increase in the cost of gasoline (something we're attempting to avoid) affects the cost of food THREE TIMES MORE than a dollar increase in the cost of a bushel of corn. Oh, BTW, Corn is back down to $3.25 bushel.
6. The Best, And Next to Best, farmland in Brazil is 1,000 Miles South of the Rain Forest. They are, at present, only using about 1% of this Best Land. A few poor people chop down trees for "subsistence" living, but the government is working hard to put a stop to it. It really is a totally "Made-up" problem.
7. There's a Reason why he stopped at 2005. Due to the reasonable prices Corn subsidies are, presently, a thing of the past. The Ag budget will come in Down about $12 Billion this year. Most of this is Corn Subsidies going away.
8. See 7
9. He finally got one right. We're paying a $0.51 bribe to the Blenders to blend ethanol. Big oil has a stranglehold, and this subsidy will probably be necessary for a few more years to keep Big Oil from "Murdering" the Baby in the Cradle. By the way, the subsidies for gasoline have been estimated to be as high as $1.32 gallon. The Bribe comes out to about $3.2 Billion this year. That's not too bad when you figure you're supporting 162,000 jobs, and drawing in over $6 Billion in offsetting Tax Revenues from the ethanol business, and that $11 Billion Dollars WILL NOT GO TO THE MULLAHS this year.
10. Ethanol's wholesale price yesterday was $1.97, NOT $2.76.
The $1.38 gallon is absurd. You MIGHT be able to come up with $0.60 Total in some states if you really, really stretched. They must be trying to add the $0.54 tariff on imported ethanol in there. That's just pure silly. The tariff is to OFFSET the Blender's Credit. Otherwise we'd be subsidizing foreign ethanol to the detriment of our own domestic oil producers.
Okay, So I stand corrected. He got One out of Ten. Not bad for a "Stoner," I suppose; but, *I* wouldn't want to co-sign the paper.
Chow: Coffee Time - This post almost took me all the way into beer time :)
August 3, 2007, 6:51 amrufus:
BTW, fellas, the problem with Diesel (long term) is that you get less diesel per gallon than you do gasoline. Ergo, as the price of oil rises (which a lot of pretty smart people think it will) diesel becomes Less competitive. The Europeans still like it because the incredibly high taxes on petroleum products distort the market signal.
Guys, Mexico's big field pumped 500,000 gal/day LESS last year than the year before. Ditto for Kuwait's big field. We're currently pumping about 85 million barrels/day, and it's projected that we will need the equivalent of 125 - 130 million barrels/day in a couple of short decades. We're Going to need ALL THE HELP WE CAN GET! We need to be very careful about Throwing any babies, no matter how ugly, out with the bath water.
August 3, 2007, 7:09 amtk:
The problem is using our food supply for our energy needs. There are other renewable forms for creating ethanol, that don't involve our food supply.
August 3, 2007, 8:12 amdearieme:
"you get less diesel per gallon than you do gasoline": and there was me thinking you'd get a gallon of it.
August 3, 2007, 1:38 pmrufus:
Yikes,
Should have been fewer gallons per barrel of crude:) But, you knew that.
August 3, 2007, 2:08 pmdemocracywhiskeysexy:
Look, the main reason to care about this use of corn is that the price of whiskey just jumped 30%. Where are the leaders in Washington during this crisis?
August 3, 2007, 3:30 pmTJIT:
There are two types of ethanol supporters.
1. Those who are uninformed and don't understand that as a fuel ethanol is a boondoggle that exists only to take money from taxpayers and give it to corn farmers and ethanol producers like ADM.
2. Corn farmers, ethanol producers, and others who are making money from the ethanol boondoggle.
August 3, 2007, 3:31 pmTJIT:
The idea that oil companies are threatened by ethanol is laughable. Ethanol production actually increases the market for oil and gas.
Petroleum based fertilizer, pesticides, and herbicides are used to raise the corn for ethanol. The corn is planted, harvested and transported to the ethanol plant by petroleum burning tractors, harvesters, and trucks.
Once the corn gets to the ethanol refiner a large amount of natural gas and petroleum products are used in the process of converting the corn to ethanol.
The ethanol is then trucked to market in trucks that burn petroleum.
And as a final gift from the ethanol lobby, the consumer then gets lower gas mileage from the ethanol based gasoline and has to burn more petroleum to make up for it.
I guess this makes sense to ethanol boosters but probably not to anyone who is not making money from ethanol.
August 3, 2007, 3:42 pmrufus:
TJIT, I am a retired insurance man. I am in no way involved in the ethanol industry, farming, or any other enterprise except sometimes drinking it. And, I put it in my car when I can.
It takes less than 10 gallons of diesel to farm an acre of corn land. It will yield, on average, about 450 gallons of ethanol, and about 50 gallons of biodiesel. That leaves a net of 450 gallons of ethanol, and 40 gallons of biodiesel. 1 biodiesel = 1 diesel, more or less.
You might have another nickel/gallon in truck transportation, and, maybe a dime in rail.
The energy required for process is getting to be less, and less. In many of the newer plants fossil fuels/nat gas are not used at all. The process is accomplished using biomass, or burning their own syrup, or using waste heat from other power plants, or methane from cattle lots/dairies, etc.
Bottom line is these refineries are just getting more, and more efficient all the time. If you are in the oil and gas business I'll quit correcting you, here. A man has a right to defend his own livelihood; but, if you're a civilian it could, in the long run, be expensive to be so ill-informed on a topic of such importance.
a good source is ethanolproducer.com They have a good article this month on the changes that are being made to ethanol refineries to make them more energy, and water efficient.
August 3, 2007, 11:17 pmRon Steenblik (Global Subsidies Initiative):
Rufus, as you say, "you really ought to check the facts" before criticizing how you THINK we arrived at the $1.38 per gallon estimate. A quick Google search would have easily led you to our study.
First, Rolling Stone quoted the high end of our estimated range: $1.05 to $1.38 per gallon.
Second, while there is an element of market price support included in those numbers (reflecting the combined effects of the tariff and the renewable fuels standard), we did not simply take the $0.54 per gallon tariff and add it to the $0.51 per gallon volumetric ethanol excise tax credit (VEETC).
Third, the estimate is a total support estimate -- i.e., a best estimate of the total cost to government and consumers of policies -- not just what biofuel producers received. For example, it includes the value of direct payments to producers of ethanol feedstocks (corn and sorghum), pro-rated of course. But it also counts the value of reductions in state motor fuel taxes for ethanol-blended fuel; state incentives to producers, blenders and retailers; and of course the federal small producer tax credit (on the first 15 million gallons sold each year by eligible producers). Another big element is the value of excess of accelerated over normal cost depletion for biofuel facilities.
Part of the reason for the range is that the reports' principal author, Doug Koplow, discovered that recipients of the VEETC appear to be treating it as not subject to income tax. (See discussion of this in the report.) The subsidy-equivalent value of such tax credits is greater than a grant of an equivalent value, because a grant would be treated as revenue and therefore taxed.
There were many subsidies -- particularly those provided by local and state governments for individual plants -- that we could not count because of lack of data. But what comes through from the examples provided in the report is that every stage in the production of corn ethanol is subsidized somewhere by somebody.
Which brings me to Rufus's claim that "once DDGs and other co-products are taken into consideration ethanol can be sold profitably from the refinery for (at today's corn prices) about $1.15 without subsidies." And if pigs had wings they could fly. The point is, nobody is selling ethanol without subsidies, and the industry (and its great defenders in Congress) is fighting tooth and nail to continue the subsidies. Also, the industry is always comparing its marginal cost of production with the retail price of oil. Comparing marginal costs of production, oil is still cheaper, and comparing retail prices (and adjusting for the lower energy content of ethanol), ethanol has almost always been more expensive than gasoline. Yes, we may see a glut once the new capacity comes on line -- a glut fueled by over-subsidization -- but any significantly lower prices for ethanol will not last for long.
Now, as for the other points:
1. Corn does not "absolutely" burn cleaner than gasoline. Rufus cites a link to The American Lung Association, but note that the web page is actually for the American Lung Association of the Upper Midwest. I have spoken with ALA officials in other regional offices and in central headquarters, and their views on ethanol are much more agnostic. I've just gone to the ALA's main web site and did a search for "ethanol". I get a grand total of 6 hits, none of which could be construed as endorsing the fuel. A search for "E85" yields no pages. Curious that, no? Meanwhile, let me quote from a recent study by Stanford University's Mark Z. Jacobson, Effects of Ethanol (E85) Versus Gasoline Vehicles on Cancer and Mortality in the United States
Conclusion: Rolling Stone's statement appears to be reasonable.
3. "We are currently producing 6.488 Billion gallons/ethanol yr. This is about 4.5% of our current gasoline consumption." Only if you don't account for its lower energy density. If you do, the percentage drops to around 3%.
Conclusion: Rolling Stone's statement appears to be reasonable.
4. Rufus is correct that just under 2.2 billion bushels are expected to be used for ethanol production, out of 13.85 billion bushels of corn expected to be produced this year. That translates into 15.7% of the crop. Rufus asserts, however that DDGS are, basically, a 1 x 1 substitute for corn. Perhaps for ruminants, but not for pigs and poultry, which have a hard time digesting the product. By the way, here is a photo of an abscessed cow's liver, a complication of rumen inflammation (rumenitis) in adult cattle. As the FAO writes, "This condition is common in feedlots where cattle are fed a high grain diet which produces acidity in the rumen and ulcerative rumenitis. The rumen lesion is invaded by F. necrophorum which pass further via the veins to the liver and stimulate abscess formation."
Conclusion: The Rolling Stone article over-states the share of corn going into ethanol. But the 20% share will be reached within a couple of years.
5. "Corn is an incredibly 'cheap' product", Rufus writes. Yes it is. But the comparison that is relevant for poor people is not what an 80% increase in its price does to a highly processed product like cornflakes, but what it does to the prices of meats and low-processed products made of corn. People in places like Mozambique do not eat corn flakes, they eat corn meal. This is what a recent joint analysis by the OECD and FAO concluded, as summarized on FoodNavigator.com:
The Foreign Agricultural Service (FAS) recently wrote a report on the situation. Although high international commodity prices are not the only factor, they are aggravating an already bad situation:
Conclusion: Rolling Stone's statement is reasonable.
6. Rolling Stone claims that the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests. Rufus, writes that this is a totally "made-up" problem. Thanks to the strong incentive to grow corn in the United States, acreage planted to soybeans this year is down 15%. And more and more of those soybeans are being used to produce biodiesel. Who is making up the difference? Latin American countries. And some of the new acreage is in the Amazon. Tropical rainforest land may not be good for growing cane, but it's fine (and cheap) for growing soybeans.
Conclusion: Rolling Stone's statement is reasonable.
7. Rolling Stone notes that corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005. Rufus says that, thanks to high prices, large subsidies are a thing of the past. They are both right: corn continues to receive the bulk of subsidies, but for the moment farmers are benefiting from only one of the three main programs, crop payments.
Conclusion: Rolling Stone's statement is not incorrect, but the future may look different than the past.
8. The Rolling Stone article notes that corn is subsidized twice as much as wheat subsidies and four times as much as soybeans. That is true in absolute terms, but not relative terms.
Conclusion: See comment on No. 7.
9. Rufus agrees that U.S. taxpayers are paying a $0.51 per gallon to blenders to blend ethanol. But he claims this is a "bribe" to get big oil to do that blending. First of all, most of the value of that "bribe" passes on to ethanol producers. Second, why is a "bribe" needed if MTBE has been eliminated as an option, and biofuels are now mandated? I'd like to know, also, how he arrives at subsidies for gasoline of $1.32 gallon. The only estimates that I have seen that get that high count government expenditure on roads and suchlike -- expenditures that also benefit drivers powering their vehicles on biofuels.
August 4, 2007, 3:36 amRon Steenblik (Global Subsidies Initiative):
I need to correct what I wrote above about the American Lung Association: The link was to the other ALA (the American Library Association). Nevertheless, the basic conclusion still applies. Here is the correct link. Again, I invite anybody to do a search on "ethanol" or "E85"; the results of either search will bring up only one page, and that one is a general page on alternative fuels, from April 2000.
It is understandable that the American Lung Association of the Upper Midwest -- located in the heart of corn-ethanol land -- might have some positive things to say about ethanol. But it is curious, no, that if ethanol or E85 was so great for air quality that the national chapter of the American Lung Association would be so silent on the issue. Why isn't it out there banging the drum for ethanol?
August 4, 2007, 5:55 amrufus:
Second, while there is an element of market price support included in those numbers (reflecting the combined effects of the tariff and the renewable fuels standard),
Uh Huh.
August 4, 2007, 6:58 amrufus:
I guess he didn't take into consideration that virtually all (if NOT all) of the ethanol we imported last year came through the Caribbean Basin Initiative, and thus, was tariff-free.
Also, I take it he didn't use the "Amortized" amount of the loan guarantees, etc. Nah.
He, also, tries to say that a $1.00 tax credit is worth more than a dollar. His rationale is that if it was given in a different way it would be "taxable income," and thus, worth less. That's just silly. I know this is a Switzerland based outfit, but it's hard to convince Americans that a dollar is worth more than a dollar just because the beneficient government allows them to keep it.
In other words, it was a pretty well made-up number.
Which brings me to Rufus's claim that "once DDGs and other co-products are taken into consideration ethanol can be sold profitably from the refinery for (at today's corn prices) about $1.15 without subsidies." And if pigs had wings they could fly.
Okay, we get about 18 lbs of DDGS per bushel of corn. We'll price them at their low end of about $80.00/ton. All of the newer refineries (and, most of the older ones through retrofitting) are getting 3 or more gallons of ethanol/bushel. Corn is selling for about $3.25/bu on the current contract. Using natural gas it's costing about $0.15 gal for process energy, but those using coal, or waste heat, or animal originated methane are spending considerably less.
You do the math.
August 4, 2007, 7:21 amrufus:
The study done by Jacobson (who has been highly funded by EXXON) is very suspect. I won't go into all of the questions on the studies methodology, but I WILL POINT OUT that it flies in the face of observed reality. Los Angeles OBSERVED the opposite result that Jacobson predicted when they went to ethanol in their fuel. The number of "Bad Air Days" fell by about 90% if memory serves. Can you say, "Mann's Hockey Stick?"
Only if you don't account for its lower energy density. If you do, the percentage drops to around 3%.
Good try, but "Wrong Again." If you're going to count BTUs you have to count "OCTANE." Once you add in octane you're probably back within 10% (and, maybe, with proper tuning 5%.)
August 4, 2007, 7:37 amrufus:
Africa has a lot of problems; but, the price of corn in America going from $0.04 per pound to $0.06/lb is NOT one of them. Turning the country of Zimbabwe from the breadbasket of Africa into a fallow wasteland would seem to be right up there at the top.
Brazil is making some attempt to get in front of it's Rain Forest problem, but it is a "Socialist" country with all of the economic problems attendant to that economic system.
OH, I completely left out the $1.00 worth of corn oil (biodiesel) coproduct from a bushel of corn. That would add in another $0.33/gal.
August 4, 2007, 8:06 amrufus:
As for the $1.32? I have no idea; and, don't care. I know there was more money for big oil in the last bill than there was for ethanol. Maybe they added in $120 Billion/yr. or so that we're spending in the middle east keeping the oil shipping lanes open.
I just know that 2.5 Billion people in China and India are getting richer, and will be using a heck of a lot more oil in the coming years. I'm just assuming that those experts that say we're going to need another 50 million barrel/day of oil equivalent have some knowledge of which they speak.
I know that as far as I'm concerned the Europeans can spend all they want on CO2 "Offsets," but we Americans will be better served finding and developing other energy resources. I'm, also, of no mind to switch our energy "dependency" from Riyadh, to Rio. I would rather trust Dupont, and Monsanto to get my energy from Iowa, and Alabama.
Thanks to our kind host for allowing this discussion. I, for one, am deeply Appreciative.
August 4, 2007, 8:18 amTJIT:
The use of ethanol fuel in the US is entirely due to government subsidies and mandates.
If ethanol was not subsidized and mandated the only US ethanol production would be from companies like jack daniels and their product would not be used for transportation fuel.
The fact that ethanol usage has to be forced via mandates is clear, unequivocal proof that ethanol as fuel:
1. Is an economic boondoggle that will never replace petroleum
2. It exists only to take money from taxpayers and give it to corn farmers and ethanol producers.
August 4, 2007, 9:20 amrufus:
Yeah, TJIT; Petroleum is going to go live in a house with Snuggles and last forever, and ever, and ever.
All you have to do is click the heels of your little ruby red slippers three times and wish . . . . .
August 4, 2007, 9:48 amrufus:
BTW, no one is "mandating" that those people who fill up with e85 at one of the 1,257 filling stations in the U.S. that sell it do so. A lot of them are probably somewhat like me in that they enjoy saving a few dollars, and positively love sticking it to the Mullahs when they get a chance.
August 4, 2007, 9:56 amTJIT:
I have a lot of friends who are involved in agriculture. Because of this I have seen the tremendous economic, social, and ecological damage various flavors of ag subsidies have created over the years.
Ethanol is just the latest flavor of ag subsidy boondoggle and it is causing tremendous damage already.
Ethanol's Growing List of Enemies
August 4, 2007, 10:11 amTJIT:
Rufus, most of your arguments ignore energy balance and that is a fatal flaw. For example you say
You might have another nickel/gallon in truck transportation, and, maybe a dime in rail. This statement completely ignores the massive amount of petroleum based fertilizers, herbicides, and pesticides that are required to get a decent yield of corn.
Ethanol's energy balance ranges from a small positive to a potential negative energy balance.
Given the massive petroleum inputs required to produce ethanol there is a very real chance that increasing ethanol usage will increase or dependence on foreign oil.
August 4, 2007, 10:32 amTJIT:
Rufus,
You keep mentioning dried distillers grains as a panacea for the problems with ethanol production.
Unfortunately you are not aware of the problems with dried distillers grains.
1. Distillers grains can't be substituted in the ration of pigs and chickens like it can with cattle.
2. Apparently the increased usage of distillers grains in cattle rations has decreased the quality grade of the beef produced.
3. Technology is in development that will allow ethanol plants to burn distillers grain as fuel. At that point distillers grains will no longer be available for livestock feed.
What do you think that will do to food costs?
August 4, 2007, 10:51 amrufus:
I have a lot of friends who are involved in agriculture. Because of this I have seen the tremendous economic, social, and ecological damage various flavors of ag subsidies have created over the years.
Have you, by chance, noticed that we have the cheapest, most abundant food in the history of the human race?
Their common contentions are that the focus on corn-based ethanol has been too hasty
If I'm not mistaken, that Tax Credit is for the blending of ALL Ethanol, regardless of origin, or original type of feed-stock. Am I Wrong?
is likely to lead to chaos in other sectors of the economy.
My contention is that it will lead to lower transportation costs, and as a result lower costs for virtually everything we buy. We'll see.
This statement completely ignores the massive amount of petroleum based fertilizers, herbicides, and pesticides that are required to get a decent yield of corn
Funny, isn't it? No one was worried about $12 Billion/yr Corn subsidies, or the "Massive" amount of petroleum based fertilizers, herbicides, pesticides, etc. when the farmer was raising corn to feed cattle. Only after the farmer started threatening the $40 Billion annual profit of Exxon did anyone get excited.
Anyhoo, Monsanto is improving the drought, and pest tolerance of their seeds everyday, and the other chemical companies are improving the herbicides, etc. No one is sitting still, and nothing is happening in a vacuum.
At the same time companies like Dynamotive are working on making Char a byproduct of biofuel/ethanol production. In case you are wondering Char-rich land, called Terra Preta, is the most productive land in the world. The Amazonian Indians were doing it 3,000 years, ago. BTW, there's a lot more to that Rain Forest Story than you get in sound bytes on the six oclock news.
Basically, you've gotta remember this: Anything Petroleum can do (including fertilizers, and pesticides) Biofuels can do. Better.
Now comes "ENERGY BALANCE." The most misunderstood term in, ...er, energy. You lose 60% of your energy when you convert coal to electricity. So, do you quit using electricity?
You lose 20% of your energy when you pump oil to the surface and convert it to gasoline. Do you quit using gasoline?
Anyway, after allowing for all of the energy inputs we've been discussing, and taking the coproducts into account, a modern ethanol refinery can have an energy balance anywhere from plus six to plus twenty, with some refineries running off of cow methane claiming plus forty.
As for DDGS: It's just about a coin flip as to whether you convert them to energy or sell them as cattle feed. It looks to me like the various distilleries are going to come down about fifty fifty on this one. But, Science is ploughing ahead; we'll see.
As for what that will do to the price of food. It will lower the price of food. The price of food is closely tied to the price of transportation fuels. A $1.00 increase in the cost of gasoline has between twice and three times the effect as a $1.00 increase in the price of a bushel of corn.
And, Lord have mercy, don't worry about our capacity to produce more food. As Science brings more, and more, marginal land into the game there is absolutely no way to imagine how much food we will be able to raise in the future.
August 4, 2007, 2:07 pmrufus:
Oops, I missed these:
Distillers grains can't be substituted in the ration of pigs and chickens like it can with cattle.
In as much as the main use of corn, way and far, is feeding cattle this wouldn't be a problem, anyway; but, the fact is with the new fractionation technologies they are producing DDGS that are much better suited for hogs and chickens.
Apparently the increased usage of distillers grains in cattle rations has decreased the quality grade of the beef produced
This is a new one on me. If this is true I'm sure the appropriate corrections in price, volumes, etc will be made.
Technology is in development that will allow ethanol plants to burn distillers grain as fuel. At that point distillers grains will no longer be available for livestock feed
No, but that much natural gas won't be required either, will it. Actually, Corn Plus in Winnebago, Mn has been burning the syrup for a year, or so. As I said, when the cost of natural gas is high, they'll burn the DDGS; when the cost of nat gas is low, and corn is high they'll sell the DDGS. The Market's a Blast, isn't it?
August 4, 2007, 2:22 pmrufus:
DDGS
Tilstra identified 11 different plant feed coproducts that come from various methods within the dry-grind process. He said some facilities produce several of the products, but those with automated systems can reduce that variation within individual plants.
Of course, there is also significant variation between plants; every facility has different profiles and different gene characteristics. “We have about 7,000 samples in our lab that we’re working with,†Tilstra said. He added that over the years, he has seen products labeled as DDGS with fat content as low as nearly zero percent to as high as 30 percent. In the past three months, there is still variation within protein (24 percent to 29 percent), moisture (9 percent to 14 percent), fat (9 percent to 15 percent), and starch (less than 1 percent to 8 percent). “[The starch] doesn’t affect us very much nutritionally, but I think 8 percent starch would be pretty interesting to you in today’s ethanol prices as an opportunity loss,†he said
Interesting article: Also talks about swine, etc.
August 4, 2007, 2:48 pmTJIT:
Rufus said
Which leads me to believe he suffers from exxon on the brain.
If he had actually bothered to read the linked article he would have found that.
1. Exxon and the oil companies are not mentioned
2. The article is about the damage the current boondoggle ethanol policy is doing to other sectors of agriculture and the potential for even greater damage in the future.
August 4, 2007, 3:02 pmrufus:
TJIT, some call it Exxon-paranoia; some call it "situational awareness. :)
T, the screaming from the cattle feeders' sector has died down a bit, of late. I guess corn coming back in to "three and a quarterish" has something to do with it.
Also, the cattle feeders, and dairies, have discovered a new profit stream (if you'll pardon the pun.) It turns out that cow manure is a valuable commodity (a couple of hundred dollars/yr per cow, valuable.) Some are converting the methane to electricity; some are selling the manure directly to ethanol distillers. Some are taking advantage of the surge of DDGS, and resultant low price - about $80.00 ton - which brings them back to just about what they were paying before.
BTW, those cattle farmers have been buying corn for well below the cost of production for quite some time now. Guess who's been making up the difference? Three guesses and the first two don't count. The main difference is the cattlemen are paying for their own corn now, and I'm off the hook.
August 4, 2007, 3:40 pmRon Steenblik (Global Subsidies Initiative):
Ad hominem attacks are pretty easy if one is writing under a pseudonym. "rufus" claims that he is a retired insurance man, and is in no way involved in the ethanol industry, farming, or any other enterprise. Well, I guess we're going to have to take his word for it, since there is no way to verify that he is not actually somebody working for an ethanol company, or a major investor in it. Care to divulge your real name, rufus? My guess is it's an acronym for Renewable FUels U.S.
According to rufus, the fact that Mark Jacobson's work at Stanford University has been partly funded by Exxon makes it highly suspect. So, does that mean that because British Petroleum is providing $500 million to a consortium including the University of California Berkeley, the University of Illinois, Urbana-Champaign and the Lawrence Berkeley National Laboratory, to undertake research on biofuels, that we should suspect the research of these institutions also?
And, gosh, our group is headquartered in Switzerland, which means as foreigners we cannot possibly understand the USA. For your information, rufus, both Doug Koplow and I are U.S. citizens.
Rufus writes in respect of Doug Koplow's work for our study:
The effects of tariffs depend on how they affect marginal supply. Japan has a small tariff-free quota for rice, for example, but that has had no effect on the high price of rice in its highly protected market. Similarly, the USA offers a modest tariff-free quota for ethanol imported from Caribbean countries (most of it Brazilian ethanol that is dehydrated in those countries -- an expensive trade). But that volume is limited, and not enough to reduce domestic prices at the margin, since the marginal supplier is a U.S. supplier.
Researchers at Iowa State University last year simulated what the U.S. market for ethanol would look like over the 2006–2015 period, with and without the 54¢ per gallon tariff. (At the time, the tariff was due to end on 30 September 2007; it has since been extended.) The authors measured a price gap before and after the removal of the tariff of 27¢ per gallon. Steven Stoft, over at zfacts, using a different approach, arrives at an even higher value: 75¢ per gallon.
Why do you guess instead of looking at the report, rufus? Doug only included the intermediation value of loan guarantees, not the full value of the loans.
A $1 of a tax credit IS worth more than a $1 given as a grant ... if you would have to pay tax on the latter. For the very same reason, it is also more costly to the government. That is why the range given in the report includes only the nominal value in the lower number and the grant-equivalent value in the higher.
By the way, Doug Koplow also used these methods in his definitive study of subsidies to the oil industry, done for Greenpeace in 1998. Check out item No. 3, here. But I guess it is OK to count those kinds of subsidies as benefits to the oil industry, but not to the ethanol industy.
Certainly not for ethanol consumed as E85. Yes, one can optimize for octane. But U.S. cars don't. EPA ratings consistently find that fuel economy is 25% worse for FFVs running on E85 than on gasoline, which is consistent with a 30% loss on a pure ethanol basis. Yes, at low levels (E5 and under), the higher octane value of ethanol can largely compensate for its lower energy density. But that benefit disappears quickly as one gets into higher E levels. To quote Keith Collins, the USDA's chief economist:
rufus adds later, "No one is "mandating" that those people who fill up with E85 at one of the 1,257 filling stations in the U.S. that sell it do so."
No, rufus, no one is mandating that private citizens consume E85, but the federal government and several states have mandated a volume or percentage of "renewable fuels" that must be used nationwide or in a state. And the federal government has mandated that a certain percentage of its (and state-government-owned) fleets be able to run on alternative fuels. The result is that many states have loaded up on flex-fuel vehicles (FFVs) in order to meet the letter of the law. (And these FFVs typically have larger engines than needed, because most of the FFVs produced by Detroit are SUVs or pick-up trucks.) Many federal and state agencies are required to buy E85 if it is available. Of course, it often is not. In Utah's case, the state's FFVs, which run mainly on gasoline, have cost it at least $200,000 more a year in fuel.
Rufus: you seem to want it both ways. You insist that ethanol can be produced in the USA without subsidies, and then defend the maintenance of those subsidies and the import tariff. Does the industry need the subsidies or not? If not, shouldn't you be calling for them to end?
We wouldn't even be having this debate if it were not for the subsidies. If ethanol were a commercially viable product, and you wanted to buy it, we'd all be saying, "go ahead!".
August 5, 2007, 11:35 amrufus:
You never heard me when I get down to my ad hominem attackin. Trust me, I'm not there, yet.
BUT, one thing IS for sure. Europeans, and Americans Do look at money and taxation differently. For instance: He increased the the value of the tax credit to an amount GREATER THAN A $1.00, not to an amount greater than a $1.00 grant, which, admittedly, in some cases would be less than a $1.00.
Well, trust me on this one. Any CAPITALIST will tell you that a $1.00 tax credit can be equal to Zero, or it can be equal to any amount up to and including a Dollar, but it CANNOT EVER, IN ANY CIRCUMSTANCES be Worth MORE than a Dollar.
No, Ron, I'm just a private citizen. I would be proud to be affiliated with the people at RFA, or one of the other fine Ethanol organizations, but, unfortunately, I'm not. I am, however, and always have been, interested in what happens to my kids, and grand kids when the oil runs out, as we know, it being a finite resource, it must some day. Thus, my interest in biofuels.
Also, I just feel great when I pump some moonshine in my 01' Expedition. I can just hear the Mad Mullahs gnashing their teeth in frustration.
The trick with ethanol is Compression. With proper compression ethanol will get 25%, or more, power per cu in of displacement. This means you can run a much smaller engine, with it's attendent fuel savings, and get the same hp as with a bigger engine running unleaded.
The Saab Biopower is a good example of what's currently available (in Sweden, and Brazil, anyway) in this realm. It uses a variable boost turbocharger to up the compression when the engine smells ethanol. It's quite an asskicking little ride; you need to check it out.
Look, in an economy our size, run by politicians, we are going to end up "subsidizing" damned near everything imaginable at one time or another. We have always subsidized the whey out of oil and gas. Right now, we've got to subsidize ethanol just a little bit longer to keep big oil from deciding to kill it off. When the subsidy goes away, the tariff will probably go away. I mean, after all, the U.S. has, overall, the lowest tariffs of virtually any country in the world. Oh, and that small amount was OVER 400,000,000 Gallons that we let in sans tariff.
We're spending $120 Billion/yr in Iraq because we're dependent on the ME for our prosperity. Brazil is one bullet, or one ballot away from being Venezuela. It would be nuts to trade a dependency on Riyadh for a dependency on Rio.
got errands, be back later, I'm not through with you. :)
August 5, 2007, 2:19 pmRon Steenblik (Global Subsidies Initiative):
Just a little bit longer? How long? Ethanol's been subsidized since 1978, and each time Congress has an opportunity it extends or adds to the subsidies. Now that everybody agrees that there are physical limits to producing corn ethanol, the great white-lightnin' hope is cellulosic ethanol. But that is even more costly to produce, and hence -- to quote the Des Moines Register) -- "the biofuel industry wants an additional subsidy of 75 cents a gallon to cover the higher cost of producing cellulosic ethanol. Energy tax bills proposed by congressional Democrats would provide an extra 50 cents per gallon."
So please excuse me for saying, "I'll believe it when I see it."
P.S., I gather you've decided to remain anonymous.
August 5, 2007, 2:53 pmRon Steenblik (Global Subsidies Initiative):
On ethanol in California
Looking at the "American Lung Association of California web site, it too has only a few web pages that talk about ethanol. I would not call this, from a recent (20 July 2007) document titled "Fact Sheet: Protect the Air You Breathe With Cleaner Fuels and Vehicles", exactly a ringing endorsement:
This article from the Sacramento Bee, explains further:
So, politics trumps the environment again.
August 5, 2007, 3:24 pmrufus:
Why, yes, Ron, I have decided to remain anonymous. My arguments are either valid, or they're not.
Leaving my family open to insulting emails, phone calls, and correspondence from anyone in the entire world who happens to have an available library internet connection, or a pre-paid phone card seems a little silly. If I DID work for RFA, or somesuch, and was actually getting, you know, paid for the trouble it might be different.
Vinod Khosla, who is putting a hundred million, or so, of his own money up to build a cellulosic forest waste-to-ethanol refinery in Georgia says he'll have the cost to produce cellulosic down to $1.00/gal in a year, or so. He's got a Big Track Record; I believe him.
POET (the old Broin Co) is spending a hundred million, or so, of THEIR money to expand their Emmetsburg, Ia plant to use the corn cobs in addition to the corn. They expect to up the ethanol yield of an acre from 450 gal to about 570, and ELIMINATE 85% of their Fossil Fuel/nat gas usage to boot. Considering what they're doing with their coproducts (DDGS, Char, CO2, Biodiesel, etc.) I expect they will, eventually, be able to make a profit with $0.80/gal wholesale at the factory gate.
August 5, 2007, 3:28 pmRon Steenblik (Global Subsidies Initiative):
Risking their own money?!
Um, these two plants are also recipients of big grants from the U.S. Department of Energy. The Range Fuels plant, in Georgia, will receive up to $76 million. The POET (formerly Broin) plant will receive up to $80 million. And with that much federal money invested in them, the private investors can be pretty sure the government won't let them fail. Some risk!
These plants will also benefit from the 51¢ per gallon tax credit for any ethanol they produce. And the Range Fuels (Khosla) plant, because it will produce less than 60 million gallons of ethanol per year, will be considered a "small producer" and therefore qualify for an additional 10¢ per gallon subsidy on the first 15 million gallons it produces in any given year.
So, no surprise that they're expecting to make a profit. Are you suggesting that after these plants operate for a couple of years, Congress will pull the plug on subsidies?
August 5, 2007, 3:47 pmrufus:
In the real world, as apart from esoteric computer models) California (LA, specifically) had an enormous downturn in the number of Bad Air Days after adopting a 5.7% ethanol blend.
This Jacobsen study has seems to say that the projected higher emissions using higher blends will come, not from the ethanol, but from some proposed, not on the table anywhere, fuel that will be used "In Conjunction" with ethanol. It's very murky and people are, as we speak, trying to make sense of it. Let's just say it flies in the face of all that we have ACTUALLY, OBSERVED about ethanol. It's, in short, unlikely. And, Yes, Exxon has funded his work to rather large amounts, before.
I'm going to shut down, now. Our host has been very courteous, and very patient with me (especially in that I've used a bunch of his bandwidth arguing a side opposite from his own.
In summation, guys, be careful in picking your sources, right now. Big oil has mounted a full-scale offensive against e85, and they are inexorable in their propagandizing. An awful lot of what you're reading in the WSJ, Forbes, the Sacramento Bee, etc. is coming straight from the API. Just because a magazine has the word "Nature," or "Scienc" in it's title doesn't mean you're not getting someones paid propaganda.
Ethanol is going to be quite a bit cheaper than gasoline, it's good fuel, and we can produce a lot of it. The Subsidies (BTW, I thought we capitalists like lower taxes, tax credits, and such) aren't very much; we gave ethanol blenders about $3 Billion last year, and we're saving $12 Billion on Ag Subsidies this year. Ethanol is supporting about 160,000 jobs, and the various sales taxes, refinery taxes, payroll taxes, property taxes and such will probably pay the treasury another $8 or $9 Billion this year. Also, We will send $11 Billion less to the ME for Crude.
In short, I'll work out pretty good. Good Luck, Tomorrow. Again, Thanks to our Host.
August 5, 2007, 3:53 pmTJIT:
Rufus has produced a great number of comments supporting ethanol. I thought it would be useful to take a closer look at some of his comments.
Rufus in block quotes
Correlation is not causation.
Ethanol is an oxygenate which modern cars with electronic controls do not needed. Ignores the excess ozone production caused by ethanol blends
Ignores the fact that California has desperately been trying to get a waiver from the ethanol mandates because of the high pollution ethanol is causing.
Ignores impact on other commodity prices caused by farmers switching from their usual crops to corn.
Gives cost increase in pounds instead of the standard grain unit (bushels) to make cost increase seem smaller.
Ignores fact that by time food gets to supermarket commodity portion of cost is a tiny fraction of the total cost.
Ignores the negative impact doubling input costs has on other sectors of the economy.
August 5, 2007, 8:27 pmTJIT:
rufus in blockquotes
In the software business we call this vaporware. A lot of technology is mentioned in that paragraph, most of it does not exist in a form that is usable.
Ignores petroleum usage again.
Biomass is not going to wish itself to the plant it is going to be hauled there in petroleum burning trucks.
Few regions of the country have the capability to produce sufficient biomass.
If you mapped it I doubt the areas that have corn and the areas that have biomass are not close together = more petroleum used for transport.
More vaporware.
August 5, 2007, 8:36 pmIgnores the damage rain forest destruction causes
TJIT:
Rufus in block quotes
Got cite?
Or is this more vaporware / wishful thinking / exaggeration of the wonders of ethanol?
August 5, 2007, 8:41 pmTJIT:
rufus in block quotes
Got cite?
Good news if true.
However, I suspect that the plants that have these returns exist in extremely limited, unique settings. The production from these plants will never amount to even a tiny fraction of the ethanol produced.
August 5, 2007, 8:48 pmTJIT:
rufus in blockquotes
The government has been paying farmers hundreds of millions of dollars to take marginal land out of production because of the environmental problems it was causing.
Now thanks to the ethanol boondoggle the government is paying hundreds of millions of dollars to have farmers wreck more marginal land.
The mind boggles
More vaporware.
August 5, 2007, 8:54 pmTJIT:
This comment illustrates the degree to which Rufus is either ignorant of the facts of ag economics or completely callous toward the damage the ethanol boondoggle is doing to hard working families.
Those cattle feeders don't raise their cattle they buy them from other people. When the cattle feeders are losing money they have to pay less for the cattle they buy.
The livelihood of the thousands of small producers that sell cattle to the feedlots is threatened by the ethanol boondoggle.
Rufus either does not understand this or does not care.
August 5, 2007, 8:59 pmTJIT:
rufus in blockquotes
Ethanol has been subsidized for 27 years. Would another 50 years of subsidies be enough to get ethanol from being an infant to a teenager?
Ignores the fact that if ethanol actually had a positive energy balanced and worked as advertised "big oil" would be producing massive amounts of it.
If ethanol worked as its supporters say it did there would be less risk and more profitability in producing ethanol as opposed to trying to produce oil in places like Venezuela and Nigeria.
August 5, 2007, 9:03 pmTJIT:
rufus in blockquotes
More economic ignorance from Rufus.
If the cattle feeders had not been feeding corn the surplus would be bigger, the prices would have been lower and Rufus would have been paying even more in taxes to support the corn farmer subsidies.
Furthermore, rufus misses the obvious solution to the problem. End the corn subsidies don't replace them with the boondoggle that is ethanol.
August 5, 2007, 9:11 pmTJIT:
rufus in blockquotes
Ignores lower energy density of ethanol which reduces this figure to three percent.
Ignores all of the petroleum inputs to make ethanol which is going to reduce the displacement even further.
Ignores the considerable economic damage caused by displacing less then 3 % of us gasoline consumption.
Ignores some really basic math that shows what a destructive, counterproductive, boondoggle ethanol is.
We are using around 16% of the corn crop to replace (at the very most) 3% of current US gasoline usage. If we scale that up it would take 96% of our current corn crop to replace less then twenty percent of the us gasoline.
The mind boggles at what a massive boondoggle ethanol is.
August 5, 2007, 9:21 pmRon Steenblik (Global Subsidies Initiative):
Thanks TJIT. You put it succinctly: "The mind boggles at what a massive boondoggle ethanol is." Unfortunately, emotion and wishful thinking -- and, above all, a refusal to acknowledge the true cost of the nation's biofuel policies -- seems to rule this debate.
Rufus, like many ethanol true-believers, sees an oil-company conspiracy behind every uncomfortable fact. Naturally, oil companies don't like having to incur extra expenses to handle and dispense ethanol. But my guess is that they are actually pleased with all the investment going into biofuels. Why? Because biofuels have to be blended with their product, thus stretching out the era of the internal combustion engine and therefore demand for liquid transport fuels. The oil companies are certainly going to look more favorably on biofuels than on electric vehicles!
Finally, rufus resorts to that last refuge of the ethanol scoundrel: "We're spending $120 Billion/yr in Iraq because we're dependent on the ME for our prosperity." The USA is spending that kind of money there because it broke Iraq and now it is having to fix it. No conceivable domestic production of biofuels is going to make one bit of difference to what the USA spends in the Middle East over the next decade. And, in any case, the need to reduce consumption of oil does not lead in a straight line to a need to produce massive amounts of biofuels domestically. There are many other options that would be far more cost-effective.
August 6, 2007, 2:43 amrufus:
Ah, come on; you don't have to call me a "Scoundrel.":)
Actually, Ron, one of the things that the oil companies probably don't like is that ethanol works very well with fuel cells. Biopact.com had a very good article, yesterday, about this. Also, troubling to big oil is the fact that other than solar generated electricity, the cleanest, most efficient, and economical system is a fuel cell/Biogas system.
I'm not going to spend the whole day, today, rearguing the same old arguments I knocked down yesterday. Just one thing: you are pounding on btu content, and completely ignoring Octane. This is a Mistake.
Many of our Vehicles give up 5%, OR LESS, when using ethanol. 105 Octane means the fuel gives up it's energy MUCH MORE EFFICIENTLY. As a result of this fact, it is a mistake to try to claim that 6 Billion gallons is only equal to 4 billion gallons of gasoline. It just isn't true. The newer flexfuels are tuned a bit better it seems; and, all indications are that the next wave of flex fuels will be improved over the current generation. An Example: I run about 20 ethanol in my non-flexfuel expedition when I get a chance. The change in fuel mileage is negligible. My gas use gauge doesn't even pick it up.
BTW, it takes about 2.6 lbs of corn to get a pound of Beef. At today's prices we're talking about $0.14/lb. Last year, I guess, we were at a touch less than a dime a pound. That means that 500 lb animal in the slaughterhouse has an extra $25.00 of corn in it. (1) They are starting to get that $25.00 back by feeding DDGS, and (2) They are finding that they can get between 5 and 10 times that amount back by running the manure through an Anaerobic Digester, and, either selling the methane to an ethanol distillery, or Selling Electricity to the Grid. One of the refiners (I think it's Panda - Could be White) is buying the Manure, unprocessed from it's local feedlot, and burning the manure.
A good location for some of this info is foodandfuelamerica.com
Gentlemen, have a Nice Day. I'm sure you're fine folks, but you're on the wrong side of this argument. - The Scoundrel
August 6, 2007, 9:14 amRon Steenblik (Global Subsidies Initiative):
No offense intended, rufus. It's just that to invoke Samuel Johnson's phrase, "The last refuge of", demands it be accompanied by "scoundrel"!
August 6, 2007, 9:22 am