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

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Comments

  • socala4socala4 Member Posts: 2,427
    I pointed out what both goals were.

    I don't see there being any set of goals that is universal to everyone.

    While you have identified those as goals that you maintain, not everyone shares them. It's fair enough to argue why you believe your goals to be worthy, or why someone else's are not, but let's not assume that your list is a given for everyone else.
  • markcincinnatimarkcincinnati Member Posts: 5,343
    I do know these people (well some of them anyway.)

    Sure, folks are quite willing to take a handout, more or less.

    I don't know anyone who thinks this has much chance to lower "our" cost of driving a car based on using E85, that is.

    If your PT cruiser had one of those DC diesels "Dr. Z" keeps talking about on those new TV spots, you mileage would be at least 36MPG, but you would have to take a more durable and powerful engine as a trade off. ;)

    The "Ask Dr. Z" ad campaign, while I'm at it, is a campaign that, unlike Bill Ford's "Live Green with Ford" has, IMHO, a lot less spin to make it sound attractive.

    I may be driving a DC car if Audi, BMW, Ford and GM don't step up to Z's concepts.

    Google Ask Dr. Z if you want some more info on this.

    Or, just:

    Klik Here

    I just asked Dr. Z for his take on diesel economy and pollution -- he responded that his diesel engines would provide up to a 30% reduction in fuel use and reduce pollution (greenhouse gasses) by 20% (on fuel that costs less, often, than mid-grade gasoline.)

    Wonder if he REALLY is a Dr.?
  • gagricegagrice Member Posts: 31,450
    Wow! I never expected you to attempt something that blatantly non-constructive. But you did!!

    I was only responding to the word games you like to play. We are not all bowing to the PZEV pagan gods. As far as I am concerned the automotive industry hit the point of diminishing returns on emissions in the 1990s. Any more attempts at squeezing the last possible ounce per year out of the equation, is a TOTAL waste of money. Mine and yours. If it is worth $5k more per car to you for so little gain in eliminating "x" amount of pollution, go for it. I think the bigger picture of running out of fossil fuel trumps that lame PZEV argument. We know for a fact that just switching to diesel will cut our consumption by 25% with all other things being equal. There is no move in that direction that I can see. So why should I worry about it. There is plenty of oil to last until I'm pushing up daisies. There are also many things we are doing and planning to do that pollute far worse than a VW diesel car. All the new coal fired ethanol plants for example. You or no one else on this thread have come up with any evidence that can be substantiated by a non participating entity that we get one extra BTU of ethanol energy for an equal amount of fossil energy. Corn Ethanol hype is all driven by money paid by the Mega Ag corporations and the greed of those in the Midwest that think they are going to make some money. From where I stand it is ripping the heart out of the Heartland. It will only leave devastation in the ethanol path. You have already forgotten the 90 ethanol plants shut down in 1985 leaving that many towns without so much as a kiss good-bye.
  • gagricegagrice Member Posts: 31,450
    Just got back to Rhode Island from Ohio. Route 80 30 MPG 2001 PT Cruiser.

    Did you have any trouble finding E85 to run in your PT Cruiser?

    As far as Ohio being willing to take Uncle Sam's handout for four Ethanol Plants. That is a no brainer. Found money, ours or at least mine. That is what this discussion is all about. Scamming the American citizens out of billions of dollars to make a few folks rich. And nothing gained in return.
  • markcincinnatimarkcincinnati Member Posts: 5,343
    Those folks in Cadiz, Ohio may take some issue with your use of the word greed. Perhaps they would accept, however, opportunist as a descriptive word.

    This little town is so pleased some 100+ jobs will be added to its economy it can hardly contain its glee.

    These folks may ultimately drink the E85 kool-aid, right now they are just happy to see some money (even though it is largely public money and lord knows Ohio cannot afford much, right now) coming into the region.

    Who can blame them?

    They probably know, too, that the effects may be ephemeral.

    They certainly hope they won't.

    I am, unfortunately, in violent agreement with you, with the above "clarifications" -- for I simply do not see this depressed area is at fault for picking up the money that is being thrown their way. They're not stupid (not that you said they are), they just want to work.

    What a waste (of public money), though.
  • gagricegagrice Member Posts: 31,450
    They're not stupid (not that you said they are), they just want to work

    Absolutely not. They are just like the rest of us. The land of opportunity. The problem is they may get a nice paycheck for a few years then get dumped on. The economy will go up and housing will be expensive.

    I cannot for the life of me understand how San Diego keeps going. The average home is now $605,000. Who can afford that? People are living so close to the brink of disaster. I think the Midwest is getting set up for a big fall. Unless they have something else to fall back on. I know the 3 years I spent on the farm in Minnesota were the toughest of my life. Rewarding in many ways. Just the hard realities faced by all the family farmers being shoved out by large corporate farms. Very sad to me.
  • snakeweaselsnakeweasel Member Posts: 19,290
    Did you have any trouble finding E85 to run in your PT Cruiser?

    Most likely not since the PT isn't a FFV.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • gagricegagrice Member Posts: 31,450
    Most likely not since the PT isn't a FFV

    Yeah I know. He was ranting about how great E85 is and then gives us his gas mileage in a non flex fuel vehicle. Sounds like he is all for E85 as long as he is not paying the difference. A kind of "Do as I say, Not as I do" guy.
  • alp8alp8 Member Posts: 656
    so what numbers are we using for the cost of a gallon of E85?

    I read a recent article that said there is lots of disagreement over how to do the BTU analysis. Some analyses leave out the by-products of the process, by-products which have value on the market. Other analyses don't include the cost of the tractors, etc. involved in planting the corn. It all depends on how you want the study to come out, I guess. The article also said that NO study has been done that is any good.

    Personally, I feel it's like comparing E85 to the cost of gasoline, but not including the cost of the US Military in the equation. Imagine the price of oil if the US Military did not exist. Heck, maybe oil would be cheaper. Actually, since the US wouldn't exist without the US Military, it does make it hard to do a real apples to apples analysis.
  • markcincinnatimarkcincinnati Member Posts: 5,343
    It is written several places that the true cost of "fill in the blank" is A+B+C+. . .Z.

    The cost of gasoline is really $10, $11, maybe more per gallon? Perhaps.

    Will we ever know?

    The consumer may care, may not, may know, may not -- it probably won't matter. The consumer will pull into the filling station and perhaps see 5 pumps, regular, mid-grade, premium, diesel, E85 (maybe another grade or two or three will come along -- maybe additional "renewable" fuels will also be featured.)

    If the vehicle the customer arrives in can accept only one fuel, well that will be easy; else, if the customer can use more than one fuel, a choice will be made. My guess is that the customer at the moment in time will choose the least cost product -- but that is a loaded assumption.

    If the vehicle will accept fuel that is $2.80, $2.90, $3.00 or $2.10 per gallon and the customer has experience, he/she will buy the one that will overall over time cost the least.

    The car, in this case, IF it can use regular, mid-grade or premium -- OR E85 will probably get the maximum MPG's on premium, the least on E85.

    The consumer may calculate the costs or may after having tankfuls of experience, note that E85 will "cost" the same as Premium (lower price and lower MPG's) but will require more frequent returns to the gas station. The consumer may go so far as to place some value on the time it takes for these return visits (even if they don't call it opportunity cost.)

    Now, if the costs (price) of E85 fall and fall and fall and the cost per gallon is, $1.85 rather than $2.10, perhaps the customer will elect to save the money and go with the E85 after all (assuming he knows there are plenty of E85 fueling stations handy.)

    The costs included. . . .? Well, probably they won't care.

    And, it is not impossible to believe someone will invent (and others innovate) new ways to use E85 and other as of yet unknown renewable fuesl that will elimitate the mileage penalty associated with using ethanol (as things stand today.)

    Now, where's that banana peel for my Mr. Fusion?
  • socala4socala4 Member Posts: 2,427
    The consumer may calculate the costs or may after having tankfuls of experience, note that E85 will "cost" the same as Premium (lower price and lower MPG's)

    Why do you continue to assume that E85 will be priced the same as gasoline?

    Again, until the E10 mandate of last year, the wholesale price of ethanol was about $0.75 per gallon below that of gas. This price similarity that you note is a recent phenomenon, and is not even consistent now throughout the country.

    You cannot simply assume that the pricing relative to gas is fixed. That's particularly likely when ethanol supplies are being increased, which is an indicator of lower prices in the future.
  • tpetpe Member Posts: 2,342
    The price for E85 will always be pegged to the price of gas. If ethanol cost a nickel a gallon to produce and gasoline was selling at $4/gallon how much do you think a gallon of E85 would cost? The free market would dictate that the manufacturer would sell it at the highest price he could get and still sell every unit of his product. So it would probably be around $2.75/gallon where the consumer felt like it represented a better deal. The only way this would ever stop being true is if we could produce enough ethanol to completely satisfy our demand for fuel. Then we would see downward pressure on the price of E85. No one thinks that will happen. So this whole economies of scale argument is invalid if you think it will lead to E85 someday being considerably cheaper than gas.
  • markcincinnatimarkcincinnati Member Posts: 5,343
    Actually, I assume E85 will cost MORE than gasoline for some time to come, either in real dollars per gallon or in effecitve dollars per gallon because of the lower MPG's E85 affords.

    It is my belief that the prices, to stimulate E85 use, must be AT LEAST 31% lower at the pump to overcome the lower economy factor and the increased number of trips to the pump people will have to endure.

    I hope E85 falls in price to always be at least 31% lower, but at that price point, the main advantge if you can call it that is that we will have stretched our dino gas supply by adding filler.

    I am in favor of anything, within reason, that will have positive effects in all the areas we have concerns in with respect to fuel -- E85 seems to just be facing a difficult economic challenge to allow us to realize these effects.

    My "assumptions" are based on some relatively simply economic trends/history. E85 will track the price of gasoline -- or vice versa. As a trend emerges that belies this, well, it may simply mean something new has come along to replace gas or ethanol or the fuel du jour.

    For the near to mid term, E85 will be hard to get and not "cheaper enough," but I could be wrong. I hope so.
  • snakeweaselsnakeweasel Member Posts: 19,290
    The price for E85 will always be pegged to the price of gas.

    Since E85 is 15% gas the price of gas will always influence the price of E85.

    The free market would dictate that the manufacturer would sell it at the highest price he could get and still sell every unit of his product.

    The market would dictate that the manufacturer would sell it so to make the maximum profit. This does not have to mean selling it at the highest price or selling all of his/her capacity.

    So this whole economies of scale argument is invalid

    Economies of scale is somewhat valid, but only at low production levels. Once you increase production the economies of production gets smaller and smaller (the law of diminishing returns). You will get to a point where there is no more economy of scale and the law of diminishing returns kicks in full force and makes the production costs per unit more as you increase production. Since we are at or near our ethanol production limits you won't see any economy of scale in any increased production.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • gagricegagrice Member Posts: 31,450
    This is interesting as Minnesota does not tax E85 the way I understand it. That makes it a lot more expensive even when heavily subsidized. No one in their right mind would fill their FFV with E85 at this price difference.

    E85 Price: 2.999
    Station Name: superamerica grand & milton
    Station City: St Paul
    Unleaded Price: 2.979
    Date: Monday, July 10, 2006


    E85 prices
  • snakeweaselsnakeweasel Member Posts: 19,290
    Actually, I assume E85 will cost MORE than gasoline for some time to come, either in real dollars per gallon or in effecitve dollars per gallon because of the lower MPG's E85 affords.

    Your assumption is correct. I don't see anything in the future that will reduce the price of E85 enough to make it comparable in price per mile with gas.

    For the near to mid term, E85 will be hard to get and not "cheaper enough," but I could be wrong. I hope so.

    No I think you are right on this.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • gagricegagrice Member Posts: 31,450
    Higher prices hamper E85 use

    By ADRIAN SANCHEZ/Telegram Staff Writer


    COLUMBUS - The state's flexible fuel vehicles are the only consumers of E85 fuel in Columbus, which is priced about $2.80 per gallon - for supplies that have been on hand since April.

    If E85 were purchased based on today's wholesale prices, the price at the pump would be about $3.60 per gallon.

    Because of the high cost of ethanol and vehicles receiving lower mileage with the fuel, the flow of E85 has slowed to a drip a year after three area stations installed the pumps.


    rest of the story
  • snakeweaselsnakeweasel Member Posts: 19,290
    Isn't it interesting that not only does the government subsidize the making of ethanol, they have to subsidize the sale of it by being its biggest user. Now since you pay more per mile to use it isn't that just more taxpayer money flushed down the drain for this crap?

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • gagricegagrice Member Posts: 31,450
    The robust demand for ethanol is believed to be pushing up pump prices in the U.S. U.S. ethanol averaged a record $3.98 a gallon last week, more expensive than gasoline, which cost about $2.94 a gallon at the pump on average.

    Current ethanol prices are estimated to add about 20 cents to each gallon of reformulated gasoline, according to Oil Price Information Service. At least in the near term, the ethanol squeeze is aggravating the pain at the pump, contradicting its original purpose to serve as a relief.


    J. P. Morgan believes that gasoline prices would retail between $2.30 and $2.40 a gallon, but for Ethanol.

    Automaker General Motors has more than 1.5 million FlexFuel Vehicles on the U.S. roads and for the 2006 model year, GM offers nine E85 flexible fuel models. As of now, domestic automakers have an edge in the E85 scenario, as Japanese rivals do not sell flex-fuel vehicles in the U.S. Only Nissan offers an E85 compatible version of its pickup, the Titan. Currently, Japan permits up to 3% of ethanol mix at the pump, but with virtually no takers

    Logistics nightmare

    Some analysts believe that logistics would be the nightmare that drives up ethanol prices.

    Ethanol, which in its pure form is an alcohol, can be corrosive on certain metals Unlike MTBE-laced gasoline. Since it may corrode pipelines, the fuel has to be added to the gas late in the supply chain and may have to be transported by barge, train, or truck, leading to distribution bottlenecks.

    The railroad capacity is already stretched to its limits on strong demand for shipping coal, grain and steel, while trucking industry is facing a multiyear labor shortage problem, and barges are also in short supply.
  • gagricegagrice Member Posts: 31,450
    Knapp Chevrolet has been selling cars in downtown Houston for more than 65 years.

    Q: How has the hybrid trend affected the way Knapp Chevrolet views the market?

    A: The hybrid is very interesting. Chevy even has a hybrid pickup, but I think the excitement for General Motors and for us is the fact that they are producing a lot of vehicles that will burn E85 ethanol.

    Q: Have rising gasoline prices affected sales, especially with regard to SUVs?

    A: I think right out of the chute, people kind of took pause, but honestly, our customer base, with the new Tahoes and Suburbans coming out, we're still selling as many as we did before. So I don't think it has affected us at all.
  • tpetpe Member Posts: 2,342
    The market would dictate that the manufacturer would sell it so to make the maximum profit. This does not have to mean selling it at the highest price or selling all of his/her capacity.

    I think that is true for most markets but not the ethanol market. I believe ethanol producers are running at full tilt and expanding capacity as fast as they can. And still demand is outstripping supply. So in this environment maximizing profit will be accomplished by setting the highest price that will still allow for this excessive demand.

    The fact is there is currently an ethanol supply shortage. This is primarily a result of the mandate to use it as an additive. This makes you wonder why push for E85? We maybe produce enough ethanol to put E3 in every vehicle and since all new vehicles can run on E10 promoting E85 seems like getting way ahead of ourselves. In fact, producing any E85 probably only serves to aggravate the shortage for those trying to create a minimal blend in order to comply with the mandate.
  • tpetpe Member Posts: 2,342
    Last I heard is that despite gasoline being 65 cents higher than a year ago we are still burning more. Apparently the only impact high gas prices have on American's behavior is to increase whining.
  • gagricegagrice Member Posts: 31,450
    This makes you wonder why push for E85?

    Very good question. If the mandate will require 7.5 billion gallons a year, and we are struggling to produce 4.4 billion gallons, it leaves a lot of untainted gas in the US. Now I see where NY & CA are using 22% of that ethanol production to satisfy the craving for the un-needed oxygenator. What a joke this country is becoming. I wonder what the EU thinks of our trying to satisfy our addiction with ethanol? We would be better off drinking the stuff. Of course "don't drink and drive".
  • socala4socala4 Member Posts: 2,427
    My "assumptions" are based on some relatively simply economic trends/history. E85 will track the price of gasoline -- or vice versa. As a trend emerges that belies this, well, it may simply mean something new has come along to replace gas or ethanol or the fuel du jour.

    Mark, you're making up your own laws of economics here. That's like saying that the price per ounce of Coca Cola is going to be the same as the price of Jack Daniels because they are both beverages.

    If ethanol supplies become sufficiently large to satisfy demand, its price will decline from current levels relative to gas because today's prices are relatively high due to temporary artificial supply constraints created by the law. Increase supplies to the status quo situation, and you would expect ethanol prices will decline.

    Just comparing prices between the two products over the last few years demonstrates that your tracking notion is incorrect. The marginal difference in price between ethanol and gas has not stayed the same, and it has increased due to the supply constraint created by the law.
  • socala4socala4 Member Posts: 2,427
    The fact is there is currently an ethanol supply shortage. This is primarily a result of the mandate to use it as an additive. This makes you wonder why push for E85? We maybe produce enough ethanol to put E3 in every vehicle and since all new vehicles can run on E10 promoting E85 seems like getting way ahead of ourselves.

    Because suppliers should be attracted to enter the market because of the high prices. (Producers are attracted by the ability to earn what are called "economic profits", i.e. profits above the norm.) But the emergence of all these new suppliers creates more supply and competition, which eventually reduces prices and eliminates the "economic profit" over the long run. It's a typical phenomenon, and the legal mandate creates the push in the system that provides the stimulus.
  • snakeweaselsnakeweasel Member Posts: 19,290
    I believe ethanol producers are running at full tilt and expanding capacity as fast as they can. And still demand is outstripping supply.

    Give the man a cigar! As long as thats the case ethanol will remain a costly alternative. The bad news is that demand is artificially high die to the ill thought out make ADM rich mandates that are out there.

    In fact, producing any E85 probably only serves to aggravate the shortage for those trying to create a minimal blend in order to comply with the mandate.

    You want a second cigar or the cupie doll? The sad fact is none of this E85 discussion would be taking effect if it wasn't for government interference in the market place, that only spells trouble. Currently the price of gas is inflated due to this mess.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • rorrrorr Member Posts: 3,630
    "It's a typical phenomenon, and the legal mandate creates the push in the system that provides the stimulus."

    I think that what most are objecting to is the LEGAL MANDATE.

    There are a couple of ways to create demand: either offer a product which provides benefits for its use to the consumer at a competitive price (free market)......

    OR....

    ....force consumers via 'legal mandates' to use the product.

    The problem I see is that consumers are being FORCED to consume ethanol (in E10) when it is completely unnecessary. Yes, producers will be 'attracted by the ability to earn' profits, but these are simply SUBSIDIZED profits (and I'm using the term 'subsidized' loosely). Wow, ethanol producers are bellying up to the public trough.....again. And this is somehow GOOD?

    Uh, no.

    Eliminate the mandate. Let ALL ethanol production go toward E85 and sell it JUST in those markets where it can be competitive. Let the natural demand for the product and the current supply for the product establish the price. I'm not going to even complain (that loudly) about the tax credits/foreign tariffs. Just reserve ethanol production for E85 and forget the oxygenate requirements.
  • socala4socala4 Member Posts: 2,427
    Yes, producers will be 'attracted by the ability to earn' profits, but these are simply SUBSIDIZED profits (and I'm using the term 'subsidized' loosely).

    The idea is to create a supply-driven stimulus -- create the incentives to build infrastructure, and then allow suppliers to behave in ways that help to create demand.

    The best example of how well this worked is in the aftermath of WWII. The war created significant industrial infrastructure which was largely not needed for military production once the war was over. Suppliers responded by converting much of this subsidized infrastructure into factories that could produce consumer products, which helped to ignite one of the greatest leaps in prosperity in human history as Americans got shiny new cars and appliances at affordable prices that they had never owned before.

    The large oil oligopoly creates a barrier to entry for possible substitutes that can't be easily overcome by the free market, so it's naive to expect the invisible hand to help any substitute to rise up on its own. If that's the case, we will simply end up with the status quo, which given current pump prices and the stories from abroad that you see on your nightly newscast, doesn't seem to be working out too well...
  • snakeweaselsnakeweasel Member Posts: 19,290
    There are a couple of ways to create demand: either offer a product which provides benefits for its use to the consumer at a competitive price (free market)......

    OR....

    ....force consumers via 'legal mandates' to use the product.


    Herein lies the problem, a free market working without force will act in the best interests of the people as a whole. This means the economy is working at near effecency. Now when the government comes in and mandates something the economy is not working in an efficent manner. In this case we get shortages and higher prices due to a government mandate.

    again. And this is somehow GOOD?

    Some will say that it is good but it is not. It is taking resources away from more efficent uses of those resources.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • markcincinnatimarkcincinnati Member Posts: 5,343
    When thinking of Jack Daniels vs Coke it is, however, relevant that neither of these products is interchangeable with the other.

    E85, esepcially since its first use will be in FFV's is intended to be a substitute (replacement?) for gasoline.

    The prices should track, i.e., as long as we are in this supply constrained situation.
  • socala4socala4 Member Posts: 2,427
    The prices should track, i.e., as long as we are in this supply constrained situation.

    That's the point. Increasing supply eliminates the effects of the constraint. Given a certain level of demand, prices will decrease if the supplies are increased. The questions are whether those supplies will increase, and by how much.
  • snakeweaselsnakeweasel Member Posts: 19,290
    E85, esepcially since its first use will be in FFV's is intended to be a substitute (replacement?) for gasoline.

    In a free market perfect subsitutes (where the quality of one over the other is not noticible, or there is no preference between the two) should cost the same. Basicaly what would happen is people would use the cheaper of the two until they bid it up to the price of the other (which should also fall due to lack of demand). Or to put it simply the market would look at the two as one and set prices accordingly.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • rorrrorr Member Posts: 3,630
    "Herein lies the problem, a free market working without force will act in the best interests of the people as a whole."

    Yep; can't have that, can we?

    "This means the economy is working at near effecency."

    Yikes! What are we thinking?

    "Now when the government comes in and mandates something the economy is not working in an efficent manner."

    I just KNEW those government mandates were good for something.....

    "In this case we get shortages and higher prices due to a government mandate."

    Well, the OBVIOUS solution to shortages and high prices is government mandated production levels and price controls. Problem solved.

    ;)
  • socala4socala4 Member Posts: 2,427
    I just KNEW those government mandates were good for something.....

    If the government hadn't mandated the Manhattan Project, you would not have had a nuclear bomb as quickly as you did, and would have seen an American invasion of Japan that would have killed untold numbers of people.

    The free market can't fix everything, particularly when there are high barriers to entry and large entrenched competitors. Do you want to have $150/bbl oil before the market is sufficiently aroused to find a solution on its own?
  • rorrrorr Member Posts: 3,630
    "The idea is to create a supply-driven stimulus -- create the incentives to build infrastructure, and then allow suppliers to behave in ways that help to create demand."

    Okay, but shouldn't the stimulus come from the PRIVATE sector rather than the PUBLIC sector?

    "The best example of how well this worked is in the aftermath of WWII. The war created significant industrial infrastructure which was largely not needed for military production once the war was over."

    I really expect better from you than such a POOR analogy. The government didn't create the industrial infrastructure with the INTENT of making nice shiny cars and appliances in the 50's; they did it to fight a WAR. They did it because they HAD to. And the amount of funds invested (as a % of our GNP) was absolutely staggering. You think the current expenditures in the Mid-east are high? They aren't even within an order of magnitude compared to what was invested creating the 'industrial infrastructure' for WWII.

    Are you suggesting that we WOULDN'T have had nice shiny automobiles and appliances if the U.S. had NOT invested in the industrial infrastructure? That's the only conclusion I can come to from your assertion that we WON'T get ANY alternates to gasoline without both government subsidies AND government mandates forcing 'demand'. Interesting. I wonder what government intervention was necessary for the vast improvements we've seen in cars over the last 25 years.

    Oh, wait; that was that darn 'free market' and 'competition' thing working again........

    "The large oil oligopoly creates a barrier to entry for possible substitutes that can't be easily overcome by the free market..."

    Why? I've seen numerous reports that the ethanol producers CAN get E85 to market for substantially less than gasoline. IF THIS IS THE CASE, why should it be necessary to ARTIFICIALLY create a large demand for ethanol for E10? Why couldn't they simply devote all of their ethanol production to E85, and sell it the old-fashioned way (you know, offer a better product at a better price) and create demand through the market.
  • rorrrorr Member Posts: 3,630
    "The free market can't fix everything..."

    Nope. Never said it could. But I honestly believe that virtually EVERYTHING that the government mucks about with would be better served by the private sector.

    "Do you want to have $150/bbl oil before the market is sufficiently aroused to find a solution on its own?"

    Yes.

    Because any solution derived by 'the market' stands a much better chance of being a REAL solution rather than some idea that the government threw billions of taxpayer money at just to say "we're concerned and we know better than you how to invest your money".
  • snakeweaselsnakeweasel Member Posts: 19,290
    Okay, but shouldn't the stimulus come from the PRIVATE sector rather than the PUBLIC sector?

    Stimulus should come from the private sector. But more importantly is that it has to be demand driven. You cannot stimulate something by creating a supply. The adage "if you build it they will come" doesn't work. The stimulus comes from satisfying a demand.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • rorrrorr Member Posts: 3,630
    "You cannot stimulate something by creating a supply."

    I think we are ALL in agreement there; especially socala4 (just look at GM; they've certainly got the supply side figured out; but it certainly didn't generate the demand....).

    We all realize the demand must come first. With demand (and initial short supply) comes higher prices (and higher profits). With the higher profits comes the incentive for more and more producers to get into the picture and increase the supply - eventually MEETING the demand resulting in lowering prices (and more demand etc etc etc).

    The difference in opinion comes from how to stimulate the demand.

    Maybe socala4 would be in favor of government mandates regarding the purchase of GM automobiles? Let's NOT let the free market determine which car (fuel) should get the most acceptance; it's clearly in our "best interest" (cough cough) to be less reliant of foreign cars (oil)......
  • socala4socala4 Member Posts: 2,427
    Okay, but shouldn't the stimulus come from the PRIVATE sector rather than the PUBLIC sector?

    The private sector isn't a sacred cow. Energy consumption is a matter of public policy, it's too important and subject to shocks and foreign policy dilemmas to be left entirely to the market.

    The problem with the free market is that it can't react quickly or plan ahead for sudden, drastic shifts in US foreign policy. If at some point in time, the House of Saud was to fall in favor of some radical anti-western Wahhabists, then the gun will be pointed at our faces and short of a massive war, all you'll have to protect yourself is your invisible hand.

    Your argument is akin to not having extra food in your garage because you can simply buy it at the supermarket, while freeing up costly storage space in your house. However, the reason for being prepared is not to save money, but that so you don't die in the event of a crisis, so depending entirely on the outside world for help misses the point. This free market theology is going to simply set us up for blackmail or something worse, and if we do end up being put into this vise, the invisible hand will cost far more in the long run than it saved.
  • socala4socala4 Member Posts: 2,427
    Maybe socala4 would be in favor of government mandates regarding the purchase of GM automobiles? Let's NOT let the free market determine which car (fuel) should get the most acceptance; it's clearly in our "best interest" (cough cough) to be less reliant of foreign cars (oil)......

    If our vehicle choices were limited to GM cars made in the US, and cars made in Saudi Arabia, you're damn straight that I would support GM until I was blue in the face. But I'm not fearful of Germany, Sweden and Japan either collapsing or becoming full-fledged enemies of the US, so it's an entirely different circumstance for the vehicle market. Increased self-sufficiency is important because of where the oil comes from, and the sources of it are not benign.
  • gagricegagrice Member Posts: 31,450
    That's the point. Increasing supply eliminates the effects of the constraint.

    Congress has come up with this arbitrary figure of 7.5 billion gallons per year. What happens if we cannot grow enough corn to produce that much ethanol? Or corn is more valuable for the 45k food products that currently use the corn. I think it is a contrived program to keep gas prices high and Midwestern mega farmers happy.
  • snakeweaselsnakeweasel Member Posts: 19,290
    With the higher profits comes the incentive for more and more producers to get into the picture and increase the supply - eventually MEETING the demand resulting in lowering prices (and more demand etc etc etc).

    That doesn't always happen, many times when supply meets demand the price doesn't go down. Many times when supply meets demand and prices start going down many who joined in production will drop out simply because the price isn't as high as it once was. Oft times it will just roll back to a lower price but never drop down to previous levels, unless there is a change in either the supply or demand curves. This is call demand pushed price increases.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • gagricegagrice Member Posts: 31,450
    Maybe socala4 would be in favor of government mandates regarding the purchase of GM automobiles?

    Maybe they have. GM is the largest producer of FFVs. The government is giving lots of money to WalMart and other chains to put in E85 Pumps. The only vehicles that can use the stuff are built by the Big 3.
  • snakeweaselsnakeweasel Member Posts: 19,290
    The only vehicles that can use the stuff are built by the Big 3.

    I believe Nissan makes a couple.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • rorrrorr Member Posts: 3,630
    "The problem with the free market is that it can't react quickly or plan ahead for sudden, drastic shifts in US foreign policy."

    That's the funniest thing I've read in a while. Hmmmm, who can react faster / plan ahead better: the government or the free market.......? You've GOT to be kidding. :confuse:

    "If at some point in time, the House of Saud was to fall in favor of some radical anti-western Wahhabists..."

    Reality check time: The oil still goes on the market (oooh, there's that dirty word); just as oil currently hits the market (whoops, I said it again) from any number of OTHER 'radical anti-western' groups.

    Why? Because if they DON'T put their oil on the market (we are the knights who say.....'market!'), then all those other countries who DO put it out there just get that much richer while they get that much poorer.

    "Your argument is akin to not having extra food in your garage because you can simply buy it at the supermarket...."

    Really? And all this time I thought my argument was akin to not wanting to be forced to buy soy burgers at an inflated price just because a bunch of vegans decided that red meat was bad for me. I'm glad you set me straight on what my argument was....

    "However, the reason for being prepared is not to save money, but that so you don't die in the event of a crisis, so depending entirely on the outside world for help misses the point."

    I'm glad you acknowledge that we aren't going to be saving any money with ethanol. So, if we are pursuing this to avoid 'depending entirely on the outside world', how long before we open ANWR and the off-shore reserves? When do you advocate subsidies and government mandated use for biodiesel? How many OTHER government mandates are you in favor of since we are now apparently talking about our national survival? Fuel Ration Cards? Should we be required to get our travel plans approved by Central Planning?
  • markcincinnatimarkcincinnati Member Posts: 5,343
    E85 is said to be able to substitute for gasoline.

    This, superficially is correct. You can fill your FFV with gasoline or E85 or even mix them -- the car will adjust and run along, singin' a song, do da do da.

    If the supply of E85 and all the factors in addition to sheer quantity are such that E85 can be brought to market at a lower price and with profit it will be sold at the highest price the consumer is willing to pay.

    At some point, E85 certainly appears to stand a chance of not being a fungible commodity. E85 will be limited in its interchangeability, that is, unless the selling price drops to the point where ethanol and gasoline again become economically fungible.

    Once the two products are interchangeable from the customer's selfish point of view, they/it will seek price equilibrium.

    So, while supply of E85 is constrained (for whatever reason), it will (as it appears to be now) be more expensive than gasoline -- and this is in part, I think, but cannot prove, because the miles per tankful provided by E85 are not widely perceived to be substantially different than would be provided by gasoline.

    Indeed, the commercials for FFV's are careful to NOT claim the mileage with E85 will be equal to or better, but the information that follows the FFV information suggests that "FFV will join Ford Motor Company's group of green vehicles." And, "we're proud that Ford has more [alternative fuel motivated] cars that get over 30MPG's than any other domestic automaker."

    My lawyer wife said, "the implication is that the FFV's from Ford will achieve better gas mileage than cars that are not alternative fuel cars." But, technically, the spots never say the FFV cars/trucks will go further on a tank of E85 vs gasoline -- the implication by association is what makes it appear to be so.

    Once we get beyond the naive understanding of the differences in "range" per tankful for E85 vs gasoline and once we link a price per tankful more to a cost per mile to drive (even if we just do this casually, "you know Bob, I seem to fill this dang thing up nearly twice as much as I used to fill it with regular?") than just the pump price, we will need to have the price of E85 be at least the same "per mile" if not slightly less to offset the added inconvenience of using it (more trips to the fueling station.)

    When we get to a point where the market is able to understand the differences and accept a price that equates the price of E85 with gasoline (and perhaps a few cents less per gallon to offset the noted extra trips for refueling), when gas prices go up, E85 prices will also "track" gasoline.

    The price of E85, for some time, will have to be no more than 68% the price of gasoline (and I submit E85 will have to be more like 65% -- or less -- of the price of the dino fuel.

    Then to use a somewhat flawed analogy from above, we will not be looking at Coke and Jack Daniels, we will be looking at Coke and Pepsi and the prices for E85 and E0 or E10 will remain reasonably close to each other.

    These commodities will only be able to widely diverge in price to the user if they somehow do become Coke and Jack Daniels in the customer's mind.

    The situation as it stands now seems to be to claim E85 vehicles won't cost any real money more to acquire and that they will run similarly on E85 or gasoline (and this, today, is simply NOT the case.)

    The individual consumer will NOT behave this way:

    Columbus Telegram - Columbus, Nebraska 11 July 2006

    A major increase in the price of ethanol, resulting from limited supply and high demand, has drastically affected E85 sales.

    Jeff Johnson, general manager of Sapp Bros.' Sinclair, 4300 23rd St., said when the pumps were opened last July he hoped the station would be one of the first to offer an innovative and lucrative product. When the pumps opened the price for E85 was set at $1.899, but since then pure ethanol has increased by $2.30 a gallon, more than double the price a year ago.

    According to Johnson, last year, on July 1, unleaded gasoline sold at Sinclair was $2.19 and now it is $2.76, not the dramatic jump reflective of E85 prices.

    “Since we have gotten into the E85 business, ethanol has gone through the roof,” he said. “Ethanol prices are killing E85.”

    White Star in Albion and AJ's C Store in Duncan, both owned by John Sellhorst, installed E85 pumps in April and June 2005, respectfully.

    Sellhorst said ethanol prices have hurt sales to the point that he has not ordered E85 since April, when a price boom occurred.

    When E85 “first started out, it was well received,” he said. “But the price of the product has skyrocketed and hurt sales. ... We have not been changing our price because it has not been selling.”

    Johnson said Sinclair was in a similar bind, and the current price of $2.769 is reflective of when the price of ethanol was purchased at a much lower cost.

    Last year, according to Johnson, E85 offered at Sinclair was 30 to 40 cents a gallon cheaper than unleaded gasoline.

    Currently, Johnson said E85 prices have shifted and would be more than 40 cents a gallon more expensive than unleaded gasoline if the tanks were refilled.

    Phyllis Stopak, manager of AJ's, said E85 sales were extremely slow.

    “I don't think we have sold any in the month of June,” Stopak said.

    Joan Sokol, manager of White Star, said there were no sales of E85 last week, and less than 20 gallons were sold the week before.

    “People won't pay higher prices to get less gas mileage,” Sokol said, except for state vehicles.

    Johnson said he also noticed a trend of state vehicles being the primary consumers of E85 fuel.

    “The sad part is the only people we are selling to are government entities,” he said.

    Steve Sulek, administrator of the Nebraska Transportation Services Bureau, said the state utilizes 690 FFVs and during the 2005 calendar year consumed more than 75,000 gallons of E85.

    “It might have been more if (E85) was available in more locations,” Sulek said.

    Consumption is expected to be approximately the same in 2006, he said, because of an increased number of commercial filling stations offering E85, from 15 to 29.

    Sulek said the last time he fueled a state vehicle, the purchase price of E85 was $2.97 a gallon, but if it “reached around $5 a gallon it would obviously make a difference” in terms of an executive order by Gov. Dave Heineman.

    On May 20, 2005, Heineman signed an executive order directing “all state agencies using fleet vehicles to require state employees to use E85 ethanol ... whenever available within a reasonable distance, while operating a state flexible-fuel ... vehicle,” according to a weekly column he had written at the time.

    FFVs are built to handle E85.

    “There's no doubt that alternative fuels have a positive impact on local economies,” Heineman said. “We will all save money as state agencies pays (sic) less for fuel."

    Yeah, why sure, you betcha! :surprise:
  • rorrrorr Member Posts: 3,630
    "That doesn't always happen, many times when supply meets demand the price doesn't go down. Many times when supply meets demand and prices start going down many who joined in production will drop out simply because the price isn't as high as it once was."

    Makes sense. As profits go down, investors would move on to greener pastures (hmmmm, like switchgrass?)

    sorry, couldn't resist..... :blush:
  • alp8alp8 Member Posts: 656
    One guy said: "The problem with the free market is that it can't react quickly or plan ahead for sudden, drastic shifts in US foreign policy."

    Then rorr said: "That's the funniest thing I've read in a while. Hmmmm, who can react faster / plan ahead better: the government or the free market.......? You've GOT to be kidding. :confuse: "

    I think this was meant to disparage any governmeht efforts. Of course, rorr's comment assumes a working free market, which is a fiction that apparently exists in his head. I'm not sure of any resources that are governed by a "free market" (in anything close to what Adamn Smith and the economists meant), but I know for certain that gasoline/energy is NOT one of them.

    I'd rather have some government interference than a belief in a fantasy. Of course, I'd rather just own $10 million of EXXON, Chevron, Halliburton, ....:-) Then I'd be CERTAIN that the free market is supremely better than the gubmint.

    Leave ir to the anti-gubmint types to assume that the argument is (a) free market or (b) central planning of our travel plans.

    Do you guys really think ALL the readers of these forums are that naive and uninformed? Who the heck are you guys arguing TO?

    Please have some respect for the readers here, as we are apparently far more intelligent than you think.
  • snakeweaselsnakeweasel Member Posts: 19,290
    E85 is said to be able to substitute for gasoline.

    Well it isn't, E85 is a near perfect substitute for Gasoline in FFV's only.

    E85 will be limited in its interchangeability,

    There are two things which limit E85's interchangeability. First is the fact that it cannot be used unless the vehicle is set up for it. Today the vast majority of cars cannot use E85. That means that E85 is not a substitute for Gas. Secondly is price, but since most cars can't use it it could be free and still be useless.

    "we're proud that Ford has more [alternative fuel motivated] cars that get over 30MPG's than any other domestic automaker."

    Ford has no FFV that will get over 30 MPG regardless of it running on gas or E85. The best is the Taurus that gets 27 highway gas and 20 highway E85.

    2011 Hyundai Sonata, 2014 BMW 428i convertible, 2015 Honda CTX700D

  • socala4socala4 Member Posts: 2,427
    Because if they DON'T put their oil on the market (we are the knights who say.....'market!'), then all those other countries who DO put it out there just get that much richer while they get that much poorer.

    It's good to see that you have so much faith in religious dogmatists who would love to strike a blow against the west, even if it costs them. Free trade didn't prevent Hitler from conquering Europe, and it won't stop zealots who hate you more than they love money.

    Putting all your eggs (or at least a lot of your eggs) in the theocratic Middle East basket is foolhardy beyond belief. I'm not willing to bet that your analysis of foreign policy precludes us from the need to be prepared.
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