Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!





Will ethanol E85 catch on in the US? Will we Live Green and Go Yellow?

1474850525370

Comments

  • gagricegagrice San DiegoPosts: 28,886
    we'd all be driving diesels, which clearly we aren't and probably won't

    We were headed that direction in the last gas crisis of the late 1970s & 1980s. Every major car maker had diesel cars for sale. They were noisy, smelly and slow. That is where your perception and most of America's perception of diesel comes from.

    If E85 was cheaper or perceived as being "better" in some other way, that would generate sales.

    Perception by the uninformed is that E85 is going to save us from the evil oil empire. E85 burns cleaner granted. At what cost in pollution to grow and produce? You read 10 studies and none agree on how much fossil fuel it takes to make ethanol. More than likely with having to truck it across the country to the coasts it takes more fossil fuel to produce ethanol than you get out.
  • socala4socala4 Posts: 2,427
    "we'd all be driving diesels, which clearly we aren't and probably won't"...We were headed that direction in the last gas crisis of the late 1970s & 1980s.

    I'd like to see some hard data about that. I don't know what penetration diesel may have had during the seventies, but based upon what I remember from the time, I seriously doubt that diesel comprised even 10% of the light vehicle market in the US.

    You read 10 studies and none agree on how much fossil fuel it takes to make ethanol.

    Yet you always go with the worst case scenario. Why not look at the range of data, and consider the merits and flaws of each of them? There's no need to grind an ax, pro or con, about any of this stuff.
  • gagricegagrice San DiegoPosts: 28,886
    There's no need to grind an ax, pro or con

    There most certainly is a reason. It is my tax money and I assume your tax money that is subsidizing this boondoggle called ethanol from corn. Or to make it sound good to the masses "Live Green and Go Yellow". I have no problem with ethanol if it is left to a free market to grow the corn and produce the ethanol. It is the subsidies and the tax breaks that I am upset about. I am not behind subsidies for biodiesel either. If it cannot make it on its own merit it must not be viable.
  • gagricegagrice San DiegoPosts: 28,886
    Not a lot of info on the subject. I did read somewhere that in the 1980s the MB 300D and 300SD comprised 80% of their US sales.

    In 1975, only Mercedes-Benz, Peugeot and Opel sold diesel cars in the United States. GM got into the diesel market in 1977 and sold one million of them from 1977 to 1981 as buyers looked for a hedge against rising fuel prices.
  • snakeweaselsnakeweasel a Certified Edmunds Poster.Posts: 11,700
    I agree that comparisons to gas are to be expected, but MPG is not the only benchmark.

    I don't think anyone is using MPG as the only benchmark. Most people are basically using the cost per mile. Of course many people would accept 20 MPG on a $1 a gallon fuel than get 35 on a $3 a gallon fuel. But thats not the case with E85 is it?

    The sign said "No shoes, no shirt, no service", it didn't say anything about no pants.

  • gagricegagrice San DiegoPosts: 28,886
    Cost per mile is the most important factor. The best mileage car you can buy that is flex fuel is the 2006 Chevy Monte Carlo. On E85 it gets a combined 19 MPG. For comparison the slightly larger midsized 2006 Camry gets combined 28 MPG. So if you are looking for a car based on economy you would not even consider a FFV. If you happen to live in MN or SD where E85 is more heavily subsidized than other states you may get E85 as much as 80 cents per gallon cheaper. Based on E85 @ $1.99 vs $2.79 for unleaded regular the cost per mile is as follows.

    Chevy Monte Carlo = $.1047 per mile
    Toyota Camry = $.099 per mile

    Does not look bad for E85 at 80 cents per gallon cheaper. That was the best case scenario. Most of the time E85 is within a few cents of gas.
  • socala4socala4 Posts: 2,427
    Of course many people would accept 20 MPG on a $1 a gallon fuel than get 35 on a $3 a gallon fuel. But thats not the case with E85 is it?

    But again, we cannot look at today's pump price differential, and presume that this margin will remain constant.

    Let's review what has happened as of late. Before the E10 mandate, E85 was relatively cheap because there was minimal demand (fuel had minimal distribution, and most vehicles don't run on it). It has recently leaped in price because of new regulations that have imposed increased demand for ethanol before the supply sources were in place.

    The economic implications of this are clear: because ethanol cannot currently be produced fast enough to meet the demand, its price has gone up. However, if the basic laws of economics apply here, then we could expect that ethanol prices will fall when production levels have increased.

    The follow-up question is whether the cost of ethanol production will decline going forward. If there are going to be cost reductions, I see two basic possible sources for savings: (a) scale economies and (b) cheaper biomasses. To the extent that there is a benefit from (a), the production capacity isn't yet there but will be soon enough. As for (b), increased capacity might create inducement for developing an alternative biomasses. (Presumably, any company that can generate an alternative that will lead to large cost savings for the producers will be amply rewarded.)

    Bottom line is that we can't use today's pump prices as the main determinant of what could happen in the future. The current price of ethanol is clearly not in equilibrium, so I wouldn't forecast future events based upon a temporary disparity.
  • markcincinnatimarkcincinnati Posts: 5,071
    The disparity is probably temporary. Also, probably, we can find erudite and creditable authors who will say ethanol will rise in cost (relative both to where it is today and in synch with "gas") and those who say it will fall.

    Similarly, there are emerging into the mainstream, articles suggesting a possible "oil glut" (even if it is only a steep decline in per bbl costs and NOT really an endless supply.)

    If all of the points of view (with their explanations intact) that supported E85 actually costing less than petroleum based fuel were to be proven accurate, none of them (that I can find) suggest price decreases for E85 that WITHOUT subsidy or even WITH the continuation of a $.51 "hidden tax" will make E85 cost less than using gasoline.

    I have read a report that suggests that it MAY be possible, if we figure out a way to produce enough E85 to cut the price of a gallon of E85 to "about" a dollar less than regular petrol based gas, IF we continue the $.51 subsidy.

    These viewpoints assume no oil glut and also assume that somehow the factors that effect gasoline's prices will somehow be suspended with respect to ethanol.

    OK, leap of faith hat chin strap in place:

    If gasoline would "settle" at about $3.25 per gallon and if E85 could somehow be made to be $2.25 per gallon (with the subsidy in place), what would be the motivation to use ethanol?

    A tankful of gas (20 gallons) would cost a bit more than $60 and in a fuel efficient V6 engined car (an FFV) it could be capable of going about 600 miles.

    A tankful of E85 in the same vehicle would cost a bit more than $40 and in the V6 FFV would go about 400+ miles.

    If you tracked the cost to go 1,200 miles the cost would be the same but you would have had to stop twice for gas and three times for E85.

    If the subsidy went away, IF the cost of E85 could actually be driven down another $.51 (to about $1.75 per gallon), the miles per tankful would NOT change but the cost per tankful would drop about $10.00.

    So, then at $60 per tankful and a cost of $120 to go 1,200 miles (with two stops to refuel) vs $30 per tankful and a cost of $90 to go 1,200 miles (with three stops) there WOULD be some motivation to "fill 'er up" with E85.

    No model from any camp of any repute (and I exclude "us" here on Edumnds since we are mostly writing with only the benefit of published (and summarized) reports) suggests any kind of price divergence -- with or without the end of the subsidy -- that could support such a scenario.

    Many reports, however, suggest that other approaches appear to have more merit:

    a) "breakthrough" internal combustion engine improvements -- possible; "incremental but evolutionary" internal combustion engine improvements -- not only possible but actually happening (at the retail level) about every other year;

    b) improvements in hybrids -- notably marrying electric motors with diesel engines;

    c) diesel adoption, on a relatively rapid (percentage wise) pace over decades;

    d) renewable fuel manufacturing technology improvements and engines that are optimized to use ONLY ethanol based or bio-something based fuels (i.e., not FFV's which seem to offer the worst of both worlds and what many of us here rail on against;)

    e) advanced technologies (some known, some dreamed of and some neither known nor dreamed of yet.)

    Perhaps we "shouldn't" use today's pump prices as the main determinant of what could happen in the future.

    But we do, we are and for the near to mid term, I am convinced, we will.

    The prices posted several blogs back tell today's stories -- and I'll so stipulate things will change one way or the other "the next day."

    "E" faces challenges that, with history as our guide, we cannot legislate away. Remember prohibition?

    The somewhat confusing and contradictory thing I find (this is not an argument, it's contradiction) is that there are those who are willing to forecast diesel's future based on that technology as it was "then." I.E., a technology that has been proven by time to be "temporary" (e.g., dirty, smelly, noisy, sluggish diesel "Olds and Cadillacs from 20+ years ago.")

    I wouldn't bet on diesel's failure based on a forecast using the old diesel anymore than I would jump to base ethanol's future on what may be proven to be today's temporary disparity. :surprise:
  • snakeweaselsnakeweasel a Certified Edmunds Poster.Posts: 11,700
    But again, we cannot look at today's pump price differential, and presume that this margin will remain constant.

    But we can't presume the margin will change by any great amount either. We have to follow historical trends unless we see something that will say differently. I cannot see the price of ethanol coming down anytime soon save for wasting more taxpayers hard earned money.

    However, if the basic laws of economics apply here, then we could expect that ethanol prices will fall when production levels have increased.

    Two issues with this. First the capacity to produce that much ethanol does not exist and would have to be created which means the price will not go down soon. Secondly Ethanol is made from something else. Increasing the amount of ethanol being produced means using that raw material (mostly corn right now) that means the demand curve for that raw material will shift and the price will increase. As the cost of the raw material increases so will the price of ethanol.

    If there are going to be cost reductions, I see two basic possible sources for savings: (a) scale economies and (b) cheaper biomasses.

    Scales of economy only reduce the cost of a product significantly when increasing productions from a low level. There is something called diminishing rate of return. Increasing production 10% would mean a per piece reduction in cost of X, increasing by another 10% only reduces the price per piece by X-Y.

    Biomass will not produce enough ethanol to make a significant dent, It might reduce the cost somewhat but not enough to make it viable against gas.

    Bottom line is that we can't use today's pump prices as the main determinant of what could happen in the future.

    Again without anything in the future that will significantly reduce cost we have to follow todays pump price. I seriously doubt that within the next 10 years you will see much difference between the two.

    The sign said "No shoes, no shirt, no service", it didn't say anything about no pants.

  • socala4socala4 Posts: 2,427
    We have to follow historical trends unless we see something that will say differently.

    Political issues aside, the biofuels issue will be driven by a change in historical trends, so we can't look just at the history without noting how the situation has changed.

    Except during the seventies OPEC cartel crisis, oil has been a fairly cheap fuel for much of the 20th century, which did not make ethanol price competitive. Now that the fundamentals of demand are changing, the prices are increasing.

    [T]he capacity to produce that much ethanol does not exist and would have to be created which means the price will not go down soon.

    It is reasonable to expect that increased production capacity will lower prices, as the supply catches up with a level of demand that spiked by a large amount due to regulatory changes.

    You are correct that it doesn't exist at this moment, but capacity is being built and planned, so this is a matter of time. All infrastructure takes time and money to build, so we can't consider the potential or lack thereof until we consider the supply side of the equation.

    As the cost of the raw material increases so will the price of ethanol.

    As I pointed out above, that may or may not prove to be true. The final retail price of commodities is largely driven by processing and transport costs, not by the commodity prices themselves, and the increased cost of the crop may be more than offset by a reduction in potential transport costs created by the ability to reduce petroleum consumption.

    Biomass will not produce enough ethanol to make a significant dent

    That is what I would agree seems to be the most likely stumbling block. If we ultimately can only reduce oil consumption by a few percentage points, then it will have proven to be a rather costly waste.

    That's why I'd be inclined to increase the likelihood of success by plowing in significant resources to expedite the R&D effort. The current biomasses of choice (corn-based ethanol and soy-based biodiesel) are fairly inefficient, and alternatives need to be developed that make production rampups more scalable. We are early stages here for all of these things, and there is not much incentive at this stage for the free market to push it along on its own.
  • markcincinnatimarkcincinnati Posts: 5,071
    Do any of us believe the assertions that diesel engined cars purchased in %'s similar to the EU's would NOT reduce our oil consumption by 1.4 million bbls per day?

    Do any of us believe this (1.4MM bbl) is an insignificant dent if these numbers are "real calculations" rather than fuzzy, "hopeful-guess" statements made by our own government?

    The tax incentives are in place NOW, to stimulate the continued and increased sales of fuel efficient vehicles (diesels, too, are included in the group with tax incentives.) My personal wishes for incentives are no longer up for discussion -- the incentives are now the law of the land. I say let's consider availing ourselves of them if we're in the market.

    Of course, what still galls me is that FFV vehicles actually seem to increase CAFE numbers when they do no such thing. Then it galls me even more to see virtually no "widespread" (or, perhaps, better said "mainstream") advertisements or news stories that explain the sharp decrease in MPG's one "enjoys" when using E85.

    It is not even an open secret -- for few seem to want to look into the consequences (or one consequence, economic) of using an FFV with gasoline vs E85.

    The thing missing in action -- and soon to be rectified -- is a variety of vehicles to buy that are FFV's (also missing are diesels -- but Audis, BMW's, Honda's Mercedes and VW's will be a good start.)

    Both of these MIA's should be addressed by the end of the decade -- but since everything has a lead time of 2 years at least, it would seem that it will be possible to actually buy a car you would enjoy driving (financially and performance wise) that uses a clean compression based power plant sooner than you can buy an FFV and keep it economically filled up with ethanol.

    Bluetech and version 5 diesels can be here over the next MY or two without too much trouble.

    An oil glut could make them unpopular -- but that would seem to be the case with FFV's too.

    Much as I want an oil glut and the price decrease that is suggested will accompany it, I'm not holding by breath.
  • socala4socala4 Posts: 2,427
    Do any of us believe the assertions that diesel engined cars purchased in %'s similar to the EU's would NOT reduce our oil consumption by 1.4 million bbls per day?

    I'm not sure about this, actually. Diesel made from oil is being made from oil (yes, I'm stating the obvious), so the argument seems to be that using diesel simply allows us to get more out of a given barrel of oil because we are using that barrel to provide us with both gasoline and diesel, rather than just gasoline.

    But let's remember that it's not as if that diesel is being thrown away, it's being used by somebody, somewhere on the planet. Perhaps Americans may not be the one using that specific quantity of diesel, but that doesn't mean that the diesel never enters the supply chain.

    I may be misunderstanding it, but this argument strikes me as more of a national diversification argument, not one that reduces our global dependence on oil. It's an argument which may hold true when we look at just one group of users (in this case, Americans), but not when we view the global picture.

    If all things were held equal except that we started shifting toward diesel, rather than gasoline, I would expect that this would simply free up more gasoline for someone else to burn, while reducing their available diesel supplies. That might specifically help the US, but it wouldn't necessarily solve the big-picture political problem of our dependency on these dictatorships to fuel the entire world, and what that does to create resource constraints and competition among the rest of us.
  • snakeweaselsnakeweasel a Certified Edmunds Poster.Posts: 11,700
    It is reasonable to expect that increased production capacity will lower prices, as the supply catches up with a level of demand that spiked by a large amount due to regulatory changes.

    That is unless the increased production drives up the cost of the raw material by bidding up that product. Increasing production can reduce the price, or it can be the same or it could increase costs. It all depends on things other that making supply meet demand.

    I just don't see increasing production of ethanol getting high enough without forcing a bidding war on the raw materials to make it to make a real difference.

    The sign said "No shoes, no shirt, no service", it didn't say anything about no pants.

  • gagricegagrice San DiegoPosts: 28,886
    Something that has not been hashed out here is an obvious problem of converting to non-sugar sources for ethanol. It is an entirely different process involved making ethanol from a biomass such as wheat straw, wood chips or switchgrass. Iogen has the only working plant to do just that. They have not gotten funding to build a 350 Million plant in Idaho. Will we ever build those plants? From all I have read current corn stills are not usable for other types of ethanol production. Will anyone want to spend millions and probably billions to ramp up this use of other materials to make ethanol. It is not in the interest of companies like ADM. They want to make all the ethanol they can from corn. Would you invest big bucks in a venture that could be worthless if oil prices drop as they will. It is not too far off. Nobody would believe when I said gas would get below $2.50 per gallon by fall. It has hit $2.12 in KY already. OPEC is not going to let some upstart companies squeeze their money supply.
  • socala4socala4 Posts: 2,427
    I just don't see increasing production of ethanol getting high enough without forcing a bidding war on the raw materials to make it to make a real difference.

    That may be, it's a fair guess. (Which is one of my points -- at this juncture, all of us are speculating, and none of us really know what will happen.) Personally, I don't see the likelihood of a commodity pricing problem -- individual ag producers have virtually no power to set prices -- but I do question the ability for the fuel itself to become so abundant that it will do much to impact the price of oil.
  • gagricegagrice San DiegoPosts: 28,886
    but I do question the ability for the fuel itself to become so abundant that it will do much to impact the price of oil.

    I don't think the actual production of ethanol will have any real affect on our purchasing of oil. It is still very possible that it takes more oil to make ethanol than you get back. So it is a win for OPEC. They just have a history of dropping prices with the least little drop in oil movement. As some of the countries having internal problems come up to normal production levels. They will probably be over producing the demand, and the price will come down.
  • markcincinnatimarkcincinnati Posts: 5,071
    Shell Oil has, in limited quantities thus far, cooked quite a few batches of USA Shale to create oil that is (June 9, 2005 data from the Rand Corporation) doable at the equivalent of $20/bbl.

    They are NOT being subsidized (or at least they were not last year at this time) to do this in the same way ethanol is being subsidized ($.51 per gallon.)

    Were they to build the infrastructure to actually do this on a large scale and produce gasoline and simultaneously reduce our dependency on Middle Eastern oil, there would probably be little more than a "thanks for playing" mention on the evening news (after the initial cheap oil hit the market and we got back to the lower prices we were enjoying a few short years ago.)

    Were there to be tax credits, rebates, subsidies, subventing and subterfuge for all I care, Shell seems to think that we could use ONLY American crude for 100 years and not import another drop. Conversely, Rand says, "well, the more practical way to use this oil is to increase our use of our own natural resources to 25% of our demand, which would essentially give us the ability to use our oil for about another 400 years" [sic] (but at THAT level.)

    The theory continues and perhaps even foreshadows a possible oil glut (theory since it has only been put into small use, rather than big, full - scale pedal to the metal production that Shell (and others) probably would do were they given half the economic incentive to do that ADM (et al) presumably has been given.)

    The data suggests that once we got fully into cooking our shale to create our own crude, the overall cost of a bbl of oil would drop from today's $72+ per bbl by perhaps $15 to $30+ less. The cooked oil, to underscore, from June, 2005, was able to be made viable at a rate about $20/bbl (Rand Report link in previous blogs.)

    Factor in start up costs and other infrastructure build up costs and throw in a couple of 500 million dollar retirement packages and perhaps the cost of a bbl of our own goo would be $40.

    Keep in mind the KNOWN reserves we have identified from this one source are triple the reserves of Saudi Arabia.

    It will take years (more than 10) to do much of anything that will slow down our need for dino fuel. Why not "encourage" Shell and others to see what a little help from their friends might do toward answering the question "what's cookin' underground in Colorado?"

    This, in response to my Congresswoman who claims she'd rather send our money to Iowa than Iran. I don't want to send our money either place. Well, in some free market way, it almost would seem that folks will involuntarily send their money to Iowa (so they have to be "mandated" to do so), yet they [we] have proven time and again to be quite eager to send our money to the middle east, Mexico, Canada, South America and so on.

    My Congresswoman's email to me detailed all the ramp up (and $ encouragement) we are providing companies to build CORN refineries. From what I have read, if we build corn into ethanol refineries they are not "automatically" able to use other biomass for the same purpose.

    Further, if what is being written about the impact upon our ability to export corn (as in sharply reduce or eliminate it altogether) -- and how much of our farmland we would have to devote to the production of food crops that will be instead turned into ethanol (71%) if we choose this route -- is true, won't there be global consequences?

    Is it really "OK" with the rest of the world to no longer get any (or at least a lot less) corn from us?

    The economic and practical evidence continues to mount, seemingly against, this course of action.

    We have the resources and we have the technology to extract a lot of "time" from the oil we have right here, right now.

    It seems like much of what we discuss, argue, debate and contradict here is mainly about buying time without bankrupting ourselves.

    Shell must feel like a screaming voice in the wilderness from what I can gather. Meanwhile, King Corn, not Big oil (this time) dips into the public pocket for help.

    Don't cry for me Argentina -- whatever.
  • gagricegagrice San DiegoPosts: 28,886
    This, in response to my Congresswoman who claims she'd rather send our money to Iowa than Iran.

    Sounds like your Congress woman needs to do some homework. Last I heard we are not getting any of that crap oil that Iran is selling. In fact that is a part of all the saber rattling. They have very high sulfur crude that is not much in demand around the world. I think they have some of the same ideas about taking over Saudi oil as Saddam had in 1990.

    Shale oil is an interesting prospect for sure. I think the natives of the area are nervous. I would look for the same kind of resistance to shale oil as we are seeing off the coast of Florida. CA & ANWR. As has been shown we can have all the reserves in the World and still not get to it. Lots of obstacles to producing oil.

    Our Congress talk a good story about energy independence. Too bad their actions do not accomplish anything to achieve that goal.
  • markcincinnatimarkcincinnati Posts: 5,071
    The impact on jobs, the economy and National Security (but three of the + impacts) alone have, according to Rand, made the oil shale states willing to raise their hands, and yell "pick me, pick me!"

    Send your tax-donations to King Corn, P.O. 3.14, Black Hole, USA, Planet Earth.

    Sheeesh. :surprise:

    Have a piece of pi on me.
  • gagricegagrice San DiegoPosts: 28,886
    oil shale states willing to raise their hands, and yell "pick me, pick me!"

    I would think they would want the business. I know in Alaska it has been an uphill battle keeping the Left Coasters nose's out of the state's oil business. They like using lots of oil. They think it grows on trees and you just reach out and pick it, nice and pretty like. I do believe that ANWR will come on line in due time. It is a great reserve and very easy to get at in a sound environmental fashion. The capacity of the oil pipeline is such that it would not be possible to transport it for a few more years. They are keeping the flow at about 1 million barrels per day. I think there are some sections that need to be replaced. They don't want another incident like BP had last winter. It is amazing how oil can wear out a big thick pipe. At least 90 miles have been replaced of the original pipe installed in the 1970s.
  • scott1256scott1256 Posts: 531
    E85 isn't close to being competitive with regular unleaded right now.

    If E85 becomes competitive (about 2/3 the price of regular unleaded) there is still the annoyance of stopping more often for fuel.

    Eliminating the subsidy of $0.51/gallon might make E85 competitive. Brazil and other nations would be quick to send ethanol here.
  • gagricegagrice San DiegoPosts: 28,886
    Eliminating the subsidy of $0.51/gallon might make E85 competitive. Brazil and other nations would be quick to send ethanol here.

    That is just the latest subsidy. Corn has an additional subsidy. The real kicker is the Tariff of 54 cents per gallon on Brazilian ethanol. That was put on long ago to protect the less productive ethanol producers in this country. Brazil is selling us about 20 million gallons a year. They are competitive even with the more than a $1.50 disadvantage tacked on by our wise leaders. If the subsidies and tariffs are removed our ethanol industry would die a quick death. Every Caribbean Island would be growing corn and making ethanol.
  • captain2captain2 Posts: 3,971
    didn't exactly say I wanted the Japanese to develop anything - only that in most likelyhood if an 'efficient' E85 specific engine would be developed this is where it would come from. It has to do with having the money for the R&D, and the fact that the 'US' mfgrs. have consistently shown the inability to produce anything innovative (but gas hog V8s) over the last 50 years or so. And that was before we became 'lazy'.
    The Europeans have been doing a good job with diesels - if E85 is going to get anywhere something has to be done to increase engine efficiencies, something that the GMs of the world have never been able to do. The FFV V8s that GM is pushing is nothing but a means to dodge some CAFE requirements and at 10-12 real mpg (on E85) - obviously not any kind of answer. The 'Japanese' 3, on the other hand, develop and produce some of the best smaller displacement engines (4 and 6 cylinder) available. Since a very large portion of their production is now in the US, and the US market is the bulk of sales; there should be some REASON for them to take a serious look at it - under the assumption that the E85 becomes available.
  • scott1256scott1256 Posts: 531
    Fuel efficiency of vehicles burning E85 is limited by the properties of the fuel.

    Gallon for gallon, ethanol only has about 67% as much energy as gasoline.

    Most vehicles using E85 only get about 72-75% of the mileage they achieve running on regular unleaded.

    How would engine design overcome this basic property of ethanol?
  • albert6albert6 Posts: 52
    OK, I may not have it entirely clear, but a few years ago 'the other white meat' was going to be a great thing for a number of farmers. Lots of farmers went to raise a lot of pigs. So many that the spot market for pigs dropped the price below the cost to raise them. It was tough on the farmers who got to choose whether to ship to market and lose even more money on transportation or shoot the pigs and bury them on the spot to cut their losses.

    The peculiar thing was the price for pork in grocery stores did not drop. Beef prices stayed high due to limited supply and the grocery stores saw no need to undermine them with lower pork prices.

    I see the same with Ethanol. Even if it was free to produce, until it is the majority fuel it won't be priced much lower than gasoline, either on a per-gallon basis or on a per-btu basis. What would the point be of doing so? One can't pull a market that does not exist.
  • scott1256scott1256 Posts: 531
    congress has given US ethanol plants a $1.50 per gallon subsidy/tarriff protection (see Gagrice's post #1503).

    If this was removed E85 would be lots cheaper than regular unleaded even adjusted for energy content.

    Brazil could export very large quantities of ethanol if the playing field was level. Other countries would also quickly develop ethanol capacity.
  • gagricegagrice San DiegoPosts: 28,886
    Without the subsidies farmers would not grow as much corn. ADM and Verasun would not build ethanol plants. The whole ethanol scam is to beef up the midwest in time for elections. after the fall it could all go away. That 54 cent tariff should never have been implemented.

    Hollman W. Jenkins words it - “The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. … This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.”

    Our government in deja vue action:

    1980 - The Energy Security Act offered insured loans for small ethanol producers (less than 1 million gallons per year), up to $1 million in loan guarantees per project that could cover up to 90 percent of construction costs on an ethanol plant, price guarantees for biomass energy projects, and purchase agreements for biomass energy used by federal agencies.
    1980 - Congress placed an import fee (tariff) on foreign-produced ethanol. Previously, foreign producers, such as Brazil, were able to ship less expensive ethanol into the United States.
  • gagricegagrice San DiegoPosts: 28,886
    Here is one of the arguments used, to try and convince the Congress and President, not to lift the ethanol tariff on Brazil.

    Renewable fuels are produced only in countries where programs have been created to assist in their production. Thus, any reduction in the U.S. secondary tariff on ethanol would result in U.S. taxpayers further subsidizing imported ethanol beyond the subsidies that are already be given in the country of production. Since imported ethanol receives the 51 cent per gallon tax credit, if the U.S. tariff on ethanol is removed or dips below 51 cents, then U.S. taxpayers would be effectively subsidizing imported ethanol. The subsidy would be equal to the difference between the tax credit and the amount of any reduced tariff.
  • jim314jim314 Posts: 491
    The heat of combustion of ethanol is lower than that of a typical hydrocarbon, but ethanol has a higher octane rating than most hydrocarbons. So E85 could have a higher octane rating than regular gasoline. If the engine controls can adjust spark and valve timing depending on the amount of ethanol in the fuel, then the engine would convert more of the free energy of combustion into output power. See link http://en.wikipedia.org/wiki/Octane_rating
  • jim314jim314 Posts: 491
    See http://en.wikipedia.org/wiki/Gasoline

    Ethanol is added to gasoline both to act as an oxygenate (to reduce pollution) and as an octane booster (to reduce knocking).
This discussion has been closed.