Ethanol: Three Developments to Watch

Here are today's biggest stories surrounding the sector:

-The House approved an $18 billion tax package today that would repeal a tax break for the country's five largest oil companies. The money, which would be collected over 10 years, would be used to provide tax breaks for alternative energy sources such as wind, solar, and cellulosic ethanol. President Bush, though, is expected to veto the bill if it passes Congress. This is odd considering Bush was the one who stated two years ago - when oil was at $55 as barrel - that oil companies no longer need government subsidies. With oil currently hovering around $100 a barrel and oil companies reporting record profits, why is Bush threatening to veto? Republicans are worried the new tax "would inhibit investments in domestic oil and gas exploration and production." Oh, Please!

-Another problem has been added to ethanol's list: Ethanol fires are harder to put out than gasoline ones as water cannot be used and a special type of firefighting foam is required. This is a foam that many fire departments in the country don't have and is 30% more expensive than the conventional foam used for gasoline fires.

- Cargill announced today that it will suspend construction on its 100 million-gallon-per-year ethanol plant in Kansas due to high corn prices.

Comments

[count_zero:]

as a conservative independent, we have expressed our displeasure with gasoline compnies and their obsene profits to our leaders. if more do this, bush will be over-ridden. 100+ a barrel and no new refineries is almost treasonist. the green in these companies is unworthy of a free marketplace.

corn prices will drop when it starts rotting in the silos because of futures gambling

whoever said cargill was visionary?

2008 Feb 28 12:45 PM

[frflyer:]

"The House approved $18 billion in new taxes on the largest oil companies"
This is a bold faced lie. It isn't new tax, but elimination of preferential tax breaks.


"The top Republican on the Ways and Means Committee, which developed the tax proposals, he cited statistics that show that oil companies already pay more taxes than many other industries."
Here's another lie. Here's data from a 1995 study, has anything fundamentaly changed since then?

"According to estimates by
the Union of Concerned Scientists (UCS), federal
corporate income tax credits and deductions result in
an effective income tax rate of 11 percent for the oil
industry as compared to a non-oil industry average of
18 percent

The average effective tax rate on integrated
oil operations has fallen from 21.5 percent in
the early 1980s to only 8.7 percent in the 1990s (both
figures are significantly below the statutory rate of 35%."

from the same study, (note these aren't wartime figures)

"US Defense
Department spending allocated to safeguard the
world's petroleum resources total some $55 to $96.3
billion per year."

"Program subsidies that
support the extraction, production, and use of
petroleum and petroleum fuel products total $38 to
$114.6 billion each year."

"When you consider that researchers have
conclusively linked auto pollution to increased health
problems and mortality, the CTA report?s estimate of
$29.3 to $542.4 billion for the annual uncompensated
health costs associated with auto emissions may not
adequately reflect the value of lost or diminished human
life. "
and from a later study

"The total of all oil-related external or “hidden” costs of $825 billion per year. This
total is nearly twice the figure authorized for the Department of Defense in 2006."

"Based on the studies reviewed, our best-guess estimate of the subsidies received by petroleum each year is $84 billion per year"


www.setamericafree.org...

and from another study:
Citizens For Tax Justice Report

"The Bush administration, which claims to support free-market policies, may find it difficult to
oppose a proposal to stop using the tax code to subsidize large energy companies. This is
particularly true of the latest round of energy tax breaks, which were added in the Energy
Policy Act of 2005. These were so embarrassing that even President Bush (hardly an enemy of
Big Oil) opposed them and only signed them into law when it was clear that they were
necessary to get a bill passed through Congress"

"Tax subsidies do not end at the federal level. The fact that most state income taxes are based on oil firms' deflated federal tax bill results in undertaxation of $125 to $323 million per year. Many states also impose fuel taxes that are lower than regular sales taxes, amounting to a subsidy of $4.8 billion per year to gasoline retailers and users. New rules under the Taxpayer Relief Act of 1997 are likely to provide the petroleum industry with additional tax subsidies of $2.07 billion per year. In total, annual tax breaks that support gasoline production and use amount to $9.1 to $17.8 billion. "

"Together, these external costs total $558.7 billion to $1.69 trillion per year, which, when added to the retail price of gasoline, result in a per gallon price of $5.60 to $15.14. "
This was when gas was $1.20 a gallon or so

www.progress.org/2003/...


"To this base, the Energy Policy Act of 2005 added an additional $85 billion in subsidies over 10 years, according to consumer group Taxpayers for Common Sense (TCS, 2005), and legislative activity to bring still more continues. Earth Track's preliminary subsidy estimates (Exhibit 2) for 2006 peg federal support at between $49 and $100 billion per year. This is well above the 2003 estimate. Neither the 2003 or the 2006 estimate includes credit subsidies to energy enterprises, which would boost the totals by a few billion dollars more."

www.earthtrack.net/ear...


"A number of other factors that in the past have helped to constrain spending have also weakened of late, and are likely contributors to the current spending challenges. For example, Presidential vetoes have historically played a role in curbing Congressional power. The current administration has used its veto only once -- less than any other President in the past 150 years. The Bush administration has vetoed no appropriation bills, in comparison to 6 for Ronald Reagan, 8 for George H.W. Bush, and 14 for Bill Clinton. (Kosar, 2006). Without actual vetos, there is also little threat of a veto to legislators. Both help to constrain spending."

"Growth in particular budget areas have been even higher. A survey of Highway Reauthorization bills, for example, showed an increase from 10 earmarks in 1982 to nearly 6,400 in 2005."


So now, what do you think is Really wrong with the U.S. economy?

And none of these costs reflect the cost of the war in Iraq. Add another $trillion and 4,000 American soldiers lives and maybe 200,000 Iraqi lives, and oil i kind of getting expensive, wouldn't you say?

And talking heads have the temerity to say solar is too expensive. Huh?

2008 Feb 28 01:16 PM

[frflyer:]

I fogot to add one of my sources

www.monitor.net/monito...

2008 Feb 28 01:20 PM

[pansyed:]

Over the past few years I think much has changed in the oil patch. At $55.00 per barrel oil few people worried and few talked about peak oil. Now with oil at almost double the price and the realization that there are a whole lot of people in other countries competing for the oil we are beginning to realize there could be a shortage. In addition world wide traders are having a field day scalping and there is little that can be done about it.

In fact we are just beginning to get to the alternate electric and alternate fuels use. Yes some of it is near economic but we are going to need more oil to even think about holding the price.

For so many years America has not produced the engineers needed to advance the electrical cycle for needed improvement. Advances are coming but solar and wind or present alernate fuels do not and are not going to fill the gap for a number of years. We will not have enough silicon to keep up with demand for present solar needs for a year or two. To accelerate that rate of production is several years off. Wind energy is coming along nicely but it has a number of drawback. Each of the alternate energy products needs time to overcome a number of hurdles.

Drilling is needed just to hold the fort while the alternate methods are developed and implemented. Lets be pragmatic. To think we can overcome the petroleum needs in just a few years is not going to happen.

We do need the oil companies to drill like hell for a few years to fill the gap. But by giving them a tax break there is a necessity to assure they are using the money developing more petroleum reserves. If there is legislation it should state that a tax break is tied to drilling.

2008 Feb 28 09:10 PM

[IsThisRight:]

Which company makes the FOAM needed by the fire houses across the contry. As an investor, this is the type of info I need. Think for the summary of ethanol news.

2008 Feb 29 10:27 AM

[nerfer:]

Pansyed - Do you really think oil companies don't already have enough incentive to keep drilling? The problem is that it's becoming harder to find the oil (and a subsequent short supply of rigs and engineers to search more areas for oil). No matter how much we spend, we won't find the oil (or bring it to market) appreciably faster.

Alternatives are the future. I agree they aren't there yet, but to cut their funding is slapping our children's faces (and my retirement plans). This is what is treasonous to the American public. The oil supply is plateauing and we need to work hard and fast now to come up with good replacements. A breakthrough in biodiesel production (algae, for instance), battery storage, transportation (electric cars, more rail systems), this is what is needed and what will make a real difference down the road. It will take more than a few years to make it all happen, but our petroleum supply won't have enough years (why is Saudi Arabia cutting their production - is something happening with the Ghawar field they aren't telling us?) The more we dither now and try to keep the status quo, the harder the adjustment to a post-petroleum economy will be. This semi-recession will just be a post-note compared to that hit on the economy.

(By post-petroleum, I don't mean there won't be any petroleum like some wild-eyed peak-oilists, but that it will be so expensive we wouldn't dream of burning it up in our cars when it can be used instead to make all the things we expect in our society).

2008 Feb 29 06:56 PM