The Inconvenient Truth About Ethanol

gagrice · July 2007

Not to mention getting gouged by our neighbors Canada & Mexico for oil. The Japanese over charging for fuel efficient cars. Now with the Midwest scalping us on ethanol and food, we are in a real pickle.

nascar57 · July 2007

Haha, Yeah gagrice dont sound like a real rosy picture, but Hey at least with ethanol and food, a little money is at least staying in the country. Just a bad situation all together energy wise.

gagrice · July 2007

Your probably right unless those ADM guys are stashing it all in the Caymans.

actualsize · July 2007

There is one crucial aspect of the energy market that consumers can absolutely control. It cuts your fuel bill, reduces upward pressure on oil prices, reduces production of greenhouse gasses, reduces the political power of OPEC and reduces our dependence on foreign oil. What can do all this? Buy a smaller car or truck, drive reasonably, keep your tires aired up.

Its pretty much impossible to control the solutions developed by others - individuals, corporations, governments. But we can all do something. Everyone's griping about the situation we find ourselves in and the direction everything is headed. But let's face it: we as a country have been consuming more oil than we need to for a long time, and its catching up to us. Our vehicle choices have everything to do with it.

kyfdx · July 2007

Nah.... I was at the Porsche dealer on Saturday, and I didn't see any bags of money in the Caymans..

The guy did say, that if I wanted to take a Cayman home, I'd need to bring a bag of money, though...

gagrice · July 2007

You're an Edmund's Host you can afford it. I did option one out for you with every possible option and it has a TMV of $238,586. Better ask for a raise. You guys and gals deserve it.

PS
No Flex Fuel Option

tpe · July 2007

Are Canada and Mexico charging over the market price for oil? Are they charging more than the other countries we import oil from or significantly more than our domestic producers? I doubt it. If you think that an impoverished country like Mexico is going to charge the US below market price because we're all whining about how tough we have it then I've got to disagree. Besides Mexico is rapidly depleting its existing reserves. Another reason they aren't going to discount what they've got.

I'm not sure how the Japanese can over charge us on fuel efficient cars since we have choices. The fact that so many people keep buying Japanese indicates that they feel that represents the better value. Apparently the domestics are the ones over charging.

gagrice · July 2007

I was making a rebuttal to the post that claimed OPEC was overcharging us for oil. It is market driven. If no one will pay $75 for a barrel of oil you try to sell at $74.

In the case of ethanol, we have folks that feel it is OK to run up the price because the money stays in the USA.

nascar57 · July 2007

OPEC is highly to blame for the high prices of crude that we have currently. They are controlling the supply, which in an open market like we have, directly CONTROLS price. They are not producing like they should currently. There have been calls to increase crude production ahead of winter months to alleviate the chance of crude going to $90, but they have sat back and watched this sucker take off to $74 and even headed higher. Ethanol is also on a futures market, try looking at the Chicago Board of Trade, yesterday it closed at $1.99/gallon. So there isnt a group just setting the price of ethanol. But ethanol producers dont have a group oversea's charging this country an arm and a leg. I dont care what it takes, but I want to be able to tell the Arab's to go take a hike with their oil in 10 years, thats why I fully support all domestic renewable fuels. Like I said before, this is only going to add to the momentum of renewable fuels, we arent going to stand complacent and watch OPEC do this to us!!!!

gagrice · July 2007

It costs everyone everywhere $74 per barrel. This is not just aimed at the USA. Part of the problem is our dollar is weak. With oil tied to the dollar it will show the weakness in our currency. The EU is only paying 53 Euros for a barrel of oil.

So how much would a gallon of ethanol be without all the subsidies?

texases · July 2007

As much as we'd like to blame OPEC, another sad fact is that world production capacity is little more than demand, so high prices are here to stay regardless. Previously, when capacity exceeded demand, OPEC couldn't keep prices up, greed won out, production increased, prices dropped. Not the case now, there's little spare capacity.

kyfdx · July 2007

So how much would a gallon of ethanol be without all the subsidies?

You'll never know.. It wouldn't be available without the subsidies..

ateixeira · July 2007

Also, isn't refinery capacity more restricted than oil output?

tpe · July 2007

Iran just recently demanded that Japan's oil purchases be made in Yen instead of the US dollar.

Also, I believe that OPEC is pumping at pretty close to capacity. I know that last winter they decided to reduce production to around 27 mbpd (million barrels per day) but that's still considerably more than they were producing in 2001 when gas prices were $1/gallon. Do they really have an obligation to meet the world's ever growing demand?

The high price of oil is based on the believe that with such a slim margin the slightest disruption in supply will have a large impact on price. So the options traders see this as a wager with a bigger upside potential than downside. Basically even though the price of oil should probably be $50/barrel the traders see a better chance of $90 oil than $40 oil and they bet accordingly.

nascar57 · July 2007

Yes obviously it costs everywhere if its on a market, but maybe instead of sitting here talking about how much oil is going to go up until we want to do something, maybe we should start thinking of doing something NOW. Its foolish to just rely on crude, thats basically the basis of my argument, absolutely foolish to rely on a non renewable product that comes from the armpit of this earth.

ateixeira · July 2007

armpit of this earth.

It's attitudes like that that let them overcharge us in the first place and still sleep at night without feeling guilt.

What makes you any better than them? :mad:

tpe · July 2007

While refinery capacity isn't increasing all that fast in this country it is increasing very rapidly on a global level, in areas where environmental issues aren't as big a concern. We already import a lot of refined, unleaded gasoline and maybe we'll end up importing more in the future. No big deal. It's quite possible that it will end up being cheaper to refine somewhere else and ship it in.

texases · July 2007

Also, if you owned a refinery and were thinking of expansion (or building a new one), how could you justify it with the stated US goal of reducing gas consumption and increasing biofuels? Would be an extremely risky investment.

jkinzel · July 2007

If our country were really interested in reducing consumption and increasing mpg then we would be using all the enthusiasm and resources directed at ethanol into bio-diesel and getting the auto industry to develop clean diesel passenger cars.
That is not happening.

gagrice · July 2007

I would expect the diesel from natural gas to be in ships headed our way from Qatar before long. That will ease the need for diesel refining in this country. That diesel is nearly sulfur free. Extremely fine diesel. Just in time for the flood of diesel vehicles coming to the USA.

Some remote natural gas can now be economically converted through a GTL process into an ultra-clean fuel for diesel engines. At times this fuel can be economically blended with conventional petroleum diesel fuels to: extend California's diesel fuel supplies, and improve refinery capacity of cleaner diesel fuels.

http://www.energy.ca.gov/afvs/synthetic_diesel.html

gagrice · July 2007

We might ask our friend in the ethanol business how he feels about getting cheaper ethanol from Brazil when they lift that stupid tariff of 53 cents per gallon. I do not believe corn ethanol can compete with sugar ethanol. My understanding is we are currently importing about 50 million gallons a year to meet the demand in the North East US.

nascar57 · July 2007

Gagrice, my lord, that tariff is protecting the young ethanol industry in this country. We have to protect it until it gets off its feet. Yes, anyone that knows anything about ethanol knows the yield is much better from sugar, but you know what, the yield from switchgrass is 2-3 times that of sugar, and thats what we are moving towards after corn. They do NOT need to lift that tariff right now, we would be right back in the same old situation, importing energy in. Its time to make it DOMESTICALLY, Obviously in this forum you can see that there is a different mindset here in the Midwest than out in California, night and day! You can import your energy, I will burn American ethanol in my Silverado!!!!!!!!

gagrice · July 2007

Building corn ethanol plants is in NO way moving toward switchgrass ethanol. It is an entirely different process and will require all new facilities. Making the ones we are buying with tax dollars obsolete piles of rust. If we followed the example set with ethanol tariffs from Brazil to auto manufacturers we would be adding 30% tariff on every car that comes in from another country. Either we are a free market country or we close our doors with large tariffs on every thing not made in the USA.

PS
There are those in the Midwest that consider ethanol a boondoggle to make a few people wealthy. I guess we know your position.

jkinzel · July 2007

They do NOT need to lift that tariff right now, we would be right back in the same old situation, importing energy in. Its time to make it DOMESTICALLY

At what cost?
When we end up doing more harm to our own environment and economy than we would by importing or using a different alternative fuel, then it might be time to rethink our position.

tpe · July 2007

Another thing to keep in mind is that the ethanol industry is not all that new. We aren't exactly subsidizing some revolutionary, developing technology.

In the long run how much is this ethanol policy going to cost us and how much oil is it going to save? With these numbers in hand the decision makers need to really ask themselves are we getting the most bang for our buck? I'm an EV proponent but realize one of their biggest deficiencies is the high price of batteries. If the government is going to embark on programs that don't make financial sense then why don't they choose to heavily subsidize the battery manufacturers. I suspect there would be a lot more fuel savings per dollar spent. BTW, I think this would be a stupid thing for the government to do, just less stupid than throwing money at ethanol.

elias · July 2007

personally i support the oil producers pricing THEIR OIL however they want and producing however much they want, no matter their ethnicity. (I had the same viewpoint in 1973.)
But if/when the proceeds are used to attack USA/allies or support terror, it's time for a big hammer to drop.
I suppose I would apply the same idea for the ethanol-producers too.

gagrice · July 2007

You are absolutely correct. If ethanol is a good alternative this makes sense.

One solution might be for the United States to import more Brazilian ethanol to blend on East Coast, where transportation costs significantly raise the price of Midwest ethanol. That would, however, require the politically difficult step of ending the protective tariffs on Brazilian ethanol that now shelters the U.S. industry. It makes strategic sense to import environmentally friendly ethanol from a reliable friend like Brazil in our own hemisphere. After all, the United States doesn't tax imported crude oil, which pollutes and often comes from unstable suppliers.

http://www.renewableenergyaccess.com/rea/news/story?id=44896

Our friends in Brazil are trying to get rid of ethanol plants. Are they not making any money?

Ethanol plants for sale

jkinzel · July 2007

Until about 5 years ago a small tanker would deliver alcohol to a tank farm in Tacoma, WA. Where this tanker came from I do not know. Since then I have not seen any tankers at that dock, just barges with refined petroleum (gas, diesel) from Ferndale or Anacortes, WA

ateixeira · July 2007

Our friends in Brazil are trying to get rid of ethanol plants. Are they not making any money?

I was just there in January, and note that Ethanol costs a little less than gasoline does there. So they're not getting the premium for it that US distributors do.

Makes sense to sell it to the highest bidder, and that makes the US a likely buyer.

gagrice · July 2007

I think we will see that stupid tariff dropped before long. There is no way we can grow enough corn to meet the ethanol mandate. So far all ethanol has done is run up food and gas prices. The real knife in the back was seeing the Agave fields of Jalisco being put into corn.

When I drove through the El Centro area two weeks ago I saw corn fields for the first time ever. This is where we get our lettuce and winter vegetables from in the USA. I am not ready to give up having salad to fill my gas tank.

jkinzel · July 2007

Gary, You can still have a salad, it is just going to cost as much as your steak. :sick:

tpe · July 2007

Unfortunately using corn for ethanol is also driving up the price of steaks. At least we're getting a lot closer to energy independence.

ateixeira · July 2007

They feed corn to those bulls, right?

gagrice · July 2007

I am fortunate enough to live where I can grow lettuce and tomatoes year round. I wonder how pleased the folks in the Midwest will be with ethanol when a head of lettuce is 5 bucks.

gagrice · July 2007

Yeah we save 1% on imports and OPEC drives the price of the other 99% up by $20 per barrel. We are really getting independent fast.

kyfdx · July 2007

Agave fields being taken out of production!!

Now, we have a crisis.. Do what you want with my fuel, but keep your hands off my tequila!!

Kirstie_H · July 2007

Yes, this potential loss was first mourned by me back in May:
kirstie_h, "The Inconvenient Truth About Ethanol" #37, 31 May 2007 11:52 am

kyfdx · July 2007

Sorry, Kirstie.. I was on vacation on the 31st, doing my part to further deplete our agave crops..

I'm still indignant!! Just 7 weeks behind, is all..

Since you knew about it, have you been conserving the agave crops for the rest of us?

ateixeira · July 2007

Only worms are happy!

gagrice · July 2007

Yes it is Kirstie's story. It was well worth repeating. It is really more serious than some here would like to admit. When you quit planting crops that we eat, to plant fuel crops you are not helping our independence. Food was the last thing we were good at growing for our citizens.

I think Mexican farmers are planting corn where once fine crops of Agave grew is a result of the rising price we charge for corn as an export. So we are losing one of the few things that we once exported. I doubt we have cut our consumption of foreign oil by one barrel. So what does that do for our balance of trade?

ateixeira · July 2007

When Cuervo prices go up, we've gotta take some serious action.

gagrice · July 2007

I bought a case of Hornitos when it was on sale. So I am good for a while.

When will people learn that alcohol is for drinking not driving. :shades:

ateixeira · July 2007

What has this world come to?

At least if you run out of fuel you won't die of thirst.

tpe · July 2007

So we are losing one of the few things that we once exported.

I've got to believe that the only reason we export crops is because they are so heavily subsidized. So it's not entirely clear whether this is really good for our country. The government could decide to heavily subsidize any producer/manufacturer and magically it would appear these products can be made more cheaply here than in China et al. The reality is that the countries importing these artificially cheap products are only making a partial payment. The rest is being picked up by the US taxpayer. The subsidy for ethanol just makes an already convuluted system worse.

gagrice · July 2007

I guess the question would be:
If we are using all our excess crops for fuel, what happens to the countries we were giving food to as aid? Do we now buy from other countries to maintain the level of aid? Like buying wheat from Russia to feed people in Africa. Is this ethanol business in reality costing us more than before? My guess would be YES! It is kind of a Robin Hood Program. Only they are not stealing from the king. They are taking our tax dollars and giving it to the folks in the Midwest, via ADM. Just more corporate welfare.

tpe · July 2007

It certainly does seem that when you hear an ethanol supporter talk about energy independency all you need to do is scratch the surface a little to find a financial motive behind his views.

gagrice · July 2007

It seems that way. Or someone that just wants an alternative at any cost.

ateixeira · July 2007

I think they are hoping for a viable alternative, and subsidizing what they see as a potential one.

Other call that a "pipe dream".

actualsize · July 2007

Yep. A lot of the alternative fuel schemes are the equivalent of a fad diet.

The real solution is to eat less and excersize.

jkinzel · July 2007

http://www.marketwatch.com/news/story/corn-gobbles-up-crop-land/story.aspx?guid=- %7BB3BFD94A%2DD8FF%2D43E4%2DBA30%2D081E8A96523F%7D

Myra Saefong's Commodities Corner
Corn gobbles up crop land, then withers
Corn's use for ethanol promising, but soybeans, cotton rally instead
By Myra P. Saefong, MarketWatch
Last Update: 7:30 AM ET Jul 27, 2007

SAN FRANCISCO (MarketWatch) -- Corn's wilting a bit these days.
Futures prices for corn this week dropped to their lowest level since October, a far cry from five months ago when prices climbed past $4 a bushel to their highest level in about nine years.
In an interesting twist, soybean and cotton prices have rallied to levels not seen since the middle of 2004 and wheat has climbed beyond its 1996 levels.
So what has happened to corn's prospects as a basic material in the U.S. ethanol production? Nothing really. It's just time to take a closer look.
High prices and demand for corn prompted farmers to plant more of the commodity. That took away land from other crops, and now corn plantings for this year are set to be their highest in more than 60 years.
The "massive increase in plantings of corn in the U.S. is a response to the price pressure, short-term, from ethanol-derived demand," said Ned Schmidt, editor of the Agri-Food Value View report.
As of March 1, corn growers planned to plant 90.5 million acres of corn in 2007, according to the annual Prospective Plantings report from the U.S. Department of Agriculture released on March 30. That figure is up 15% from 2006 and if realized, would be the highest acreage since 1944, it said.
'What was originally perceived to be the groundwork for a bull market in corn wound up creating bull markets in soybeans, cotton and partially in wheat.'
 Tom Fritz, New World Trading
"So many farmers planted corn in hopes of selling it for ethanol that we may end up with a glut of supply," said Kevin Kerr, editor of Global Resources Trader, a newsletter of MarketWatch, the publisher of this report.
The increase in intended acres for corn was partially offset by fewer expected acres of soybeans and cotton, the USDA said. Soybean producers expected to plant 67.1 million acres in the 2007 crop year, which would be the lowest planted area since 1996.
Analysts have said that in order for U.S. producers to meet projected demand for corn, 90 million acres of the commodity would have to be planted, according to Tom Fritz, a grain analyst and principle of New World Trading.
With the average planted corn acreage over the past 15 years at about 78 million acres, the market's dilemma was finding a source for all the extra acres needed, he said.
"The U.S. producer was able to get the needed corn acres by switching out of soybeans, wheat and cotton," said Fritz. "What was originally perceived to be the groundwork for a bull market in corn wound up creating bull markets in soybeans, cotton and partially in wheat."
Demand premise
Ethanol production came "into vogue" three years ago when energy prices were beginning to take off, said Fritz. And with corn "relatively low cost, private money came into the ethanol sector and plans for ethanol production literally exploded."
"Demand for corn for ethanol production was doubling, tripling -- almost overnight," he said.
But ethanol was only part of the story.

The Inconvenient Truth About Ethanol

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