Sunday, February 03, 2008

Rethinking Biofuel Enthusiasm

The political importance of corn-growing, ethanol-making Iowa is one reason that biofuel mandates flow from Washington the way oil would flow from the Arctic National Wildlife Refuge (ANWR) if it had nominating caucuses.

ANWR's 10.4 billion barrels of oil have become hostage to the planet's saviors (e.g., John McCain, Hillary Clinton, Barack Obama), who block drilling in even a tiny patch of ANWR. You could fit Massachusetts, New Jersey, Rhode Island, Connecticut and Delaware into ANWR's frozen desolation; the "footprint" of the drilling operation would be one sixth the size of Washington's Dulles airport.

To avoid drilling for oil in ANWR's moonscape, the planet savers evidently prefer destroying forests, even though they absorb greenhouse gases. Will ethanol prevent more carbon-dioxide emissions than would have been absorbed by the trees cut down to clear land for the production of crops for ethanol? Be that as it may, governments mandating the use of biofuels are one reason for the global rise in food prices, which is driving demand for more arable land. That demand is driving the destruction of forests—and animal habitats. In Indonesia alone, 44 million acres have been razed to make way for production of palm oil.

If the argument for ethanol is that domestically produced energy should be increased, there are better ways of doing that. On the outer continental shelf there is a 50-year supply of clean-burning natural gas, 420 trillion cubic feet of it, that the government, at the behest of the planet's saviors, will not allow to be extracted.


~George Will in his Newsweek article "
The Biofuel Follies"

23 Comments:

At 2/03/2008 1:19 PM, Anonymous Anonymous said...

http://quotes.ino.com/chart/?s=NYBOT_CI&v=dmax

The next great bubble continues funney money has to flow somewhere.

 
At 2/03/2008 2:49 PM, Blogger rufus said...

I guess the first step in George Will's energetic rethinking should be getting his facts straight.

If we really did use our entire field corn (cattle feed) crop (13.1 bu) for ethanol processing you would end up with 4.3 Billion Bushels of DDGS (a better cattle feed,) and about 26.1 Billion Gallons of Ethanol. That would be equal to about 18%, not 3.5% of our gasoline usage.

However, as George Will should know (if he's going to write about such things) the RFS clearly states that 21 Billion Gallons must come from Non-Corn sources. ie. Cellulosic

As for the tariffs: It should be noted that ALL ethanol (Brazilian, Chinese, and Bangladeshi) is granted the $0.51 Blender's Tax Credit, and that the tariff only serves to offset the Blender's Credit, and keep the taxpayers from subsidizing foreign ethanol.

It should, also, be noted that there is an exemption for an amount equal to the first 7% of the prior year's production. This amount has never been exceed; thus, there has never been a tariff collected on any foreign ethanol.

With the world, for all practical purposes, at Peak Oil it should be noted that the 600,000 Barrels of ethanol we use every day is, quite likely, having a very positive (for us consumers) on gasoline prices. Some postulate that it's as high as $0.47/gal.

 
At 2/03/2008 3:00 PM, Anonymous Fred said...

We buy gas by the gallon but, we use it by the mile.

It is operationally cheaper for me to buy the mid grad premium gas with no ethanol rather than the apparently cheaper ethanol blend becuase I get much better mileage. The cost difference would need to be near 40 cents a gallon before the ethanol contaminated gas matches the per mile cost of using premium.

 
At 2/03/2008 3:24 PM, Blogger rufus said...

chuckling

Fred, you might want to read the fine print, carefully. Many of the "Majors" use ethanol in their "Premium" gasoline to raise the Octane.

btw, I'm not telling you your business, but many cars have been shown to, actually, get better mileage with an ethanol blend than on straight gasoline. Other, lower compression/older engines can lose up to 2.5% mileage on an E10 blend.

The Good News is that there is a new generation of engine, soon to hit the market (think Ford's eco-boost,) that should give virtually identical fuel economy.

Are you sure the break-even is $0.40? That seems like a lot.

 
At 2/03/2008 3:30 PM, Blogger rufus said...

I googled around; and the best I could come up with is that Indonesia has 12.5 million acres of oil palm. Palm Oil has been a Major commodity in that area of the world for a long time. It's much less expensive than soy oil.

The Government is planning on adding from 5 to 7.5 million acres. 44 million just isn't in the cards.

Also, the New Oil Palm Tree will "re-absorb" any CO2 released from the harvesting of the old tree. If you're concerned about that sort of thing.

 
At 2/03/2008 3:40 PM, Anonymous bob wright said...

The bigger issue is why the U.S. congress even presumes to have the authority and the competance to be dictating the composition of automobile fuel.

They should stop this folly and do those things they are legitamately empowered to do - like pass a balanced budget and provide for the common defense.

They can't find the time to be fiscally responsible with my money (read taxes), but they have time to waste on:

1) Steroids in baseball.
2) Banning the incandescent light bulb.
3) Dictating how much water should be in a toilet.
4) Dictating automobile mileage standards
5) etc.

They can't (or won't) do their own job but insist on telling everyone else how to do their job.

What a joke. What an abuse of power.

 
At 2/03/2008 3:51 PM, Blogger rufus said...

AND, Spend $160 Billion/Yr, minimum, protecting the Far East Oil Supply.

 
At 2/03/2008 4:07 PM, Anonymous bob wright said...

Sure.

We could save this money and be more energy indepedant by allowing U.S. companies to pump oil and natural gas from U.S. territories:

ANWAR. The Gulf od Mexico. The Atlantic and Pacific coasts. All interior lands.

 
At 2/03/2008 4:19 PM, Anonymous bob wright said...

Politicans are getting their panties in a bunch over $100B in write-offs from the sub-prime mess.

Then they pass CAFE ragulations that will cost automakers an estimated $75B [according to Rick Wagoner, CEO of GM].

sheeesh!

They need to make up their minds. Is $100B a lot of money or not.

One more thought: focusing predominantly on $160B out of a $3T budegt means we're ignoring 95% of the elephant in the middle of the room.

 
At 2/03/2008 4:45 PM, Blogger rufus said...

Bob, I don't disagree with you, but keep in mind that we Use 20 Million Barrels/Oil every day, and we only produce 5 Million. We could, quite likely, up that to Ten Million doing the things you list, but by the time we get it done the worldwide production will quite likely be Down by twice that much. This means the "Price" we pay will, almost certainly, be very much higher than it is Now.

Also, we Might want to give a thought, or two, to the Grandkids.

As of "current knowledge" global crude production "peaked" in May of 2005. Even though we might see a few month, or, even, a couple of years of slightly higher production, almost everyone, even the heads of the major oil companies now admit that the peak is either here, or will be real soon.

I guess a lot of us "free-market, Capitalists" believe that now would be a good time to help a fledgling, and soon to be vital industry get off the ground. Since "Big Oil," obviously, has no vested interest in doing this we figure that, in this case, it's probably worthwhile for the citizens, working through the government, to take the initiative.

I know this goes against the "free market" grain, but a lot of other good ideas didn't meet the laissez faire, criterion, and worked out pretty well.

Anyway, those tax credits probably won't last too much longer, and when they're through we'll, hopefully, have a viable source of energy apart from our limited, and diminishing supply of dead flora, and fauna residues.

 
At 2/03/2008 5:01 PM, Anonymous bob wright said...

rufus, you said:

I guess a lot of us "free-market, Capitalists" believe that now would be a good time to help a fledgling, and soon to be vital industry get off the ground.

Great.

Do it with your money. Not mine.

By the time oil runs out, someone will have come up with an alternative propulsion system.

No government agency helped Mr. Ford invent the Model T.

No government agency invented the steam engine.

No government agency invented the electric motor.

Government agencies come up with things like Amtrak and the Big Dig.

You also said:

"Anyway, those tax credits probably won't last too much longer..."

Can you name one governemnt program, department or subsidy that has been shut down lately?

 
At 2/03/2008 5:08 PM, Anonymous bob wright said...

Incidentally, according to the American Pet Products Manufacturers Association, Americans spent $40.8B on their pets in 2007, one-fourth of what we're spendig to protect the middle east oil supply.

It almost makes $160B seem trivial.

 
At 2/03/2008 5:12 PM, Anonymous bob wright said...

I'm amazed that we can spend $41B on cats, dogs, and birds but we can't spend $160B to protect the foundation of our petroleum-based economy.

 
At 2/03/2008 5:40 PM, Blogger rufus said...

Kinda puts that $3 Billion tax break we gave to ethanol in perspective, doesn't it?

BTW, we spent about $8 Billion less on Crop subsidies last year than we did in 06.

Also, if we had converted the 2.6 Billion bushels of corn that we exported, last year (primarily for livestock feed,) into ethanol we would have lowered our trade deficit by about $8 Billion.

 
At 2/03/2008 5:51 PM, Blogger rufus said...

Anyway, Here's the Future.

First "Commercial" American Cellulosic Ethanol Plant Now Operating.

And, here's the part you'll love, Bob; They did it without Government support, ala H. Ford. Of course, the market that the government helped create made it possible. You'll see hundreds, possibly, thousands of these in the coming years.

One more thing (I promise:) ) The reason the car companies didn't fight the CAFE standards this time around is they know their cars are going to be burning more, and more, ethanol in the years to come. That, plus the new generation of Variable Valve Timing, Direct Injection, turbocharged engines coming down the pike make the CAFE Standards a "Moot" point.

 
At 2/03/2008 6:28 PM, Anonymous Anonymous said...

No Rufus, here is the future.

George W. Bush took office in 2001 with budget surpluses projected to stretch years into the future. But it's almost certain that when he returns to Texas next year, the president will leave behind a trail of deficits and debt that will sharply constrain his successor.

On Monday, the president will unveil a $3 trillion-plus budget request for his final year, which is likely to show a deficit of more than $400 billion. New details of the budget emerged yesterday, with officials saying the White House plans to keep a lid on nonsecurity discretionary spending. It wants to cut about $200 billion from the government's medical programs for seniors and the poor. (See related story.)


The longer-term picture is darker. Despite his efforts, Mr. Bush failed to work out a deal with Congress to tackle the spiraling costs of government health and retirement programs. The next president, if he or she serves two terms, could find the U.S. government so deeply in hock that it would face losing its Triple-A credit rating, something that has never happened since Moody's Investors Service began grading U.S. securities in 1917.

http://online.wsj.com/public/article/SB120183030007834031-ab2duXnC6fv1mIXc15Vpdnc290A_20080303.html?mod=fallstreet.com

When the dollar colapses as a result of this folly fuel for cars will be a minor problem.

 
At 2/03/2008 6:59 PM, Blogger rufus said...

Anon, that stuff's for transportin; not drinkin. :)

 
At 2/03/2008 7:58 PM, Blogger rufus said...

Saudi Arabia Ex-Swing Producer?

 
At 2/03/2008 9:12 PM, Anonymous Anonymous said...

Rufus, This isn't peak oil it's the end of cheap oil. There is no incentive for OPEC to cut their own throat like they did in the 80's by increasing production None, zip, nada they learned a valuable lesson after the 70's and I don't see them repeating it. I worked in the oil industry for 25 years and lets just say that the same can be said for domestic producers as well.
I own a farm and will take all the benefits of this I can get from this foolishness but ethanol is at best a joke.

 
At 2/03/2008 10:02 PM, Blogger rufus said...

Anon, everyone's entitled to his opinion, but it seems to me that being able to turn 33,000 btus of nat gas (and, soon to be much less,) and a couple of thousand btus of diesel into a replacement for 116,000 btus of gasoline isn't a "joke."

Anyway, I've pretty much "hijacked" the good Hosts thread all day so I think I'll go have a beer, and celebrate a "lucky" call on the Super Bowl.

Nice chatting with y'all. Later :)

 
At 2/14/2008 3:37 PM, Blogger dttowns1 said...

A couple of points...

1. Ethanol and associated blends cannot get the same fuel economy as 100% gasline because the BTU content of ethanol is about 75-80% that of gasoline. Therefore you have to burn more of it to generate the same amount of enery.

2. The Biodiesel business is an even bigger joke than ethanol. There is a $1/gal tax credit on this product and most of the production is actually exported. We do not even get the benefit of the product here in the US.

3. The freemarket could work for biofuels if the government would let it. Having the tariffs and subsidies distorts the price signal that keeps grain (and other biofuel feedstocks) from truly getting to their most valuable alternative.

 
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