The Case Against Ethanol
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This view likely reinforces the opinion of many investors. Ethanol and many other grain-based biofuels are an unmitigated folly as both a means of fuel and as an investment.
A fresh comprehensive study of ethanol and other grain biofuels done by an apparent supporter of the global warming supposition, Tim Searchinger of Princeton University, has appeared to shock the global warming community by accusing most biofuels, in certain terms, of actually being worse for the environment than standard fuels.
The ripple effects of the grain biofuels industry are mammoth. Searchinger comments, "The simplest explanation is that when we divert our (grains) to fuel, if people around the world are going to continue to eat the same amount that they're already eating, you have to replace that food somewhere else." The answer to this statement is that grain biofuel production is driving agriculture to expand in other parts of the world. "That's done in a significant part by burning down forests, plowing up grasslands and thus releasing a great deal of carbon dioxide. Right now, there's little doubt that ethanol...is making global warming worse."
Alex
Farrell at the University of California, Berkeley, agrees. "I think
this paper will have major implications for the use of biofuels around
the world. If you care about greenhouse gasses then .... the biofuel
industry is going in the wrong direction."
This is not just an academic matter. Federal law states that future biofuel sources will eventually need to be certified as benefiting the climate. If this latest study holds up to scrutiny, the biofuel industry that is plant-based would flunk that test.
This new study concludes that even vast efficiency improvements in ethanol production won't change the equation. As long as the starting material is grown on farmland, Searchinger says, biofuels will be bad for the planet. And, say I, bad for investors.
One solution would be to replace all farmland-based biofuel with other wastes. Animal byproducts, garbage, etc. appear to by a possible solution. Nova Biofuels (NBF) comes to mind as a play on this theme. As a practical matter, we cannot produce enough roadkill and trash to replace standard fuels. To paraphrase, would you want an animal or garbage rendering biofuel factory near your home?
Not only is an increasingly informed scientific community voting (reluctantly) against alternative grain biofuels in their present form. Companies such as Pacific Ethanol (PEIX), based in Sacramento, California, illustrate the coming fiasco of plant-based biofuel efforts. Profit margins are vanishing, new ethanol plants are being second-guessed or canceled and many existing facilities are struggling.
Investment analyst Eitan Bernstein who follows Pacific Ethanol and other producers, said demand may be increasing but not quickly enough to justify new facilities. Larger producers such as Cargill and Archer Daniels Midland (ADM) "all say they have their antennae up," states Neil Hart, economics professor emeritus at Iowa State University.
The
spike in corn prices which has made the price of ethanol even less
competitive with fossil fuels and has been a disaster which has only
been partially relieved by increasing government subsidies. Our
Congress, of course, cannot subsidize the biofuel crops such as corn
elsewhere in the world whose price spikes have caused riots and near
starvation to the poor in Latin America.
"We now have $6.00 corn and $2.00 ethanol", says Rick Eastman who built one of the first big ethanol plants and is now a consultant for Pacific Ethanol.
I'll bet Bill Gates never thought of the unintended harm from the cool $84m he dropped into Pacific Ethanol during construction of their first ethanol plant in Madera, CA in 2006. Another liberal feel-good program gone haywire? Big surprise.
The only way for grain biofuels to make money is through government subsidies by the wealthy, liberal-leaning nations around the globe. And the higher cost of grain because of its use as a subsidized fuel will push those least able to afford the progressive global warming agenda powering the biofuel engine further into the economic hell which will justifiably spawn more starvation and anti-American angst.
Let's face facts. Ethanol is 20% less efficient than gasoline. It takes 450 pounds of corn, for instance, to produce the ethanol to fill a seventeen gallon fuel tank.
That's enough corn to feed one person for a year or more. And it takes more than one gallon of fossil fuel - coal, oil and natural gas- to produce one gallon of ethanol. Corn and other biofuel grains must be grown, fertilized, harvested and piped (problematic) or trucked (still considered a risky ride for truckers) to ethanol producers - all of which are fuel intensive activities.
Ethanol would not survive in the free market. That is why Congress enacted ethanol subsidies of between $1.05-$1.38/gallon. One more tax on the U.S. consumer. Incredibly, we charge a 54 cent tariff against Brazilian ethanol made from sugar cane - a much more efficient bio-feed for fuel. Perhaps burning away chunks of the Amazon rain forest to plant the sugar cane for ethanol may have played a hand in this.
Grain-based ethanol mania has driven up the price of livestock, poultry and dairy products. Your breakfast cereal, too.
The grain-based ethanol hoax is a sterling example of a program economists refer to as narrow, well-defined benefits versus widely dispersed costs. It pays the ethanol lobby to organize and collect money to grease the palms of politicians willing to do their bidding because there's a large benefit for them - higher wages and profits. The millions of fuel consumers, who fund the benefits through higher fuel costs and food prices, as well as taxes, are relatively uniformed and have little clout. - Dr. Walter Williams, distinguished professor of economics at George Mason University.
Eventually, the grain-based ethanol charade will have to come to a conclusion. My bet is that non-grain biofuels will benefit. But so will coal, oil and natural gas companies presently on the global warming hit list. As P.T. Barnum said,"You can't fool all the people all the time."
Thanks to sources such as NPR, Townhall.com and Sacbee.com for providing material for researching this post.
The author does not own any of the securities mentioned in this article.
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This article has 35 comments:
I recently did a piece on food energy prices:
fiateconomics.blogspot...
Another factor driving ethanol investment is the simple fact that we have likely reached peak oil and the US and the developed countries do NOT want to continue sending billions and billions of dollars of wealth to dictators in the Middle East and South America.
Your analysis ignores that huge dilemma that our grandchildren will have to deal with. Yes, ethanol is driving up food prices and grain-based ethanol is not an optimal solution. However, neither is transferring our wealth to dictators who hate us and therein lies the paradox...
Not to mention the amount of water it takes to grow the corn -- a very water-intensive crop. I agree w/ your premise that the whole ethanol thing is a charade. Your idea that it's a "liberal feel-good program," however, is plainly contradicted by the full-blast, and as usual unconsidered, support it has gotten from this president.
So there is little need for ethanol. No need to raise world grain prices, no need to tax working people for a fashionable energy agenda and no need to wring our hands over our poor grandchildren dealing with the issue.
They should do a much better job of it than we will, learning from our environmental lobby mistakes.
Calder
A new study says biofuels from switchgrass (cellulose) will never be cost effective.
www.card.iastate.edu/p...
See biofuel facts at:
home.att.net/~meditation/bio-fuel-...
Think about it. We need oil and all the important things we build with it. We just don't need it to burn in our cars and throw in the air for all of us to breathe in our lungs. Burning biofuel also will end up in our lungs. We have electric cars on the road that work right now. They could be built to be any size, speed, or power.
What about hydrogen? Again that is bad for us. Who is going to pay for all those hydrogen stations to be built? That is right…our tax dollars will go to make yet another small group of people very rich.
Look you already know how to plug in your TV set, so why not ask the auto makers to put a plug on your car, truck, or SUV so you can get 100 or even 200mpg. Some people will even go most weeks without using any gas.
Plug-In cars will not work for everyone, but they will work for enough people so that fuel prices will come down. For those who will be able to drive plug-in cars, they will save lots of money. For those not willing to plug-in or can’t, I can only say…It sucks to be you.
Plug-In cars can be built to be any size, speed, or power. They are good for our environment, our economy, our wallets, and our national security. 100mpg cars are real and on the road now. If Auto makers won’t make them, too bad, because guys like me are going to keep building them. Americans are meant to be free, and we are not going to stay slaves to foreign oil any longer.
video.google.com/video...
About the article, I'd like to see some citations for the numbers. "Ethanol is 20% less efficient than gasoline"? What does that even mean? If the author is referring to the lower energy density of ethanol, then Mr. Smicklas needs to be more clear and get his numbers right. A gallon of Ethanol has only 66% of the BTUs of a gallon of 88 octane gasoline in the lab environment, but the reduction of knock can yield better real world performance.
A study by the University of North Dakota Energy and Environmental Research Center and the Minnesota Center for Automotive Research suggests that ethanol can actually improve performance. In limited trials, they found that a mix of 20% or 30% ethanol boosted mileage on some E85 test vehicles.
s
Liebman
And the troubles in the world have an awful lot more to do with Oil, Coal & "Natural" Gas, than crop prices...The world's poorest and warring countries are suffering a terrible drought!!!
Of all the best possible solutions, we can bet the fools in "Big" government will promote the most expensive and least effective way
to try to solve our energy needs. Only the free market can do this if it is given the chance to do so without stupid regulations.
Finally, America is the biggest consumer of everything: energy, food.
Make the connection fatzo: eat less - drive more!
e
bobbyfontaine@verizon....
Ethanol ( as of 3/26 noon) is at $2.47 while corn is at $5.48.
A price difference of $3 versus $4 is a LOT.
Now for the other facts:
1/ "The corn used for ethanol could be used for feeding the poor" Question is : would the corn be grown at all if there is no ethanol sales to supplement oil-based gas?
2/ "Ethanol uses as much energy as the coal, oil and natural gas that it takes to make the ethanol".
Question is : why is it we do not turn coal or natural gas into gas?
So taking coal or natural gas energy and CONVERTING it to fuel to put in a car is ingenious!
3/ "The cost of subsidies pf $1-$1.38...'
a) My understanding is that the CORN ethanol subsidy is 50c a gallon. It goes to the REFINERS to kick start their investments to build the infrastructure to store/mix/distribute ethanol. Now this infrastructure is partly USABLE for cellulosic ethanol in the future.
b) the $1-$1.38 is to have the ethanol industry do the research/development/b... new plants for ethanol which will not depend on corn.
So first the author of the article blames the use of corn, then votes again approach to develop ethanol with other than corn.
OK, let's hear your POSITIVE proposal on how to solve the energy challenge. I will start first : I am all for conservation=driving less, buy smaller cars. Any other ideas to burn LESS OIL BASED GAS?
In 2007, the ethanol industry alone provided the following benefits to the nation:
• U.S. Production and use of 6.5 billion gallons of ethanol in 2007 displaced the need for 228.2 million barrels of oil at an estimated value of $16.8 billion with the accompanying benefit to the United States trade balance.
• The Federal government received 4.6 billion in sales taxes against an expenditure of $3.4 billion in incentives. States received an additional $3.6 billion in taxes
• The rejuvenated agriculture community allowed the Government to reduce subsidy costs for farm programs by an estimated $8 billion
• Helped support the creation of 238,541 new jobs, more than 46,000 of which are in the manufacturing sector;
• Increased the Gross Domestic Product by $47.6 billion
• increased household incomes by $12.3 billion
This contrasts with the effects of continuing the existing status that is crippling the US economy through massive imports.
And what about the tremendous advances occurring because we are using two of the countries basic tecnological strengths? biotechnoloy and agriculture.
Please read Energy/Victory by Zubrin before you reach post again
I've been using Clean Domestic Wind Energy for about a year now to charge my Plug-in car and I do get over 100mpg. I know others who have solar panels that have long since paid for themselves, and they now plug their cars in at home too so their transportation fuel is free.
Let me concede this fact: “You can’t predict when the wind will blow or the sun will shine.”
Now I hope you can concede this fact: “The wind will blow, and the sun will shine, eventually”
That being said we need Coal and Natural Gas, but that does not mean we should not use natural resources.
As far as being a “greenie-weenie idiot”…
Well, I might be a weenie, but as far as Greenie, or and idiot, you have me all wrong.
I’m a conservative who has found a way to invest a little in a car so I can get over 100mpg, saving me money to help make my stock portfolio even bigger. I can take my family to more places and on more trips now that I save over $600 per month in overall energy savings. I am all for our free market and I am against regulations that limit a company’s ability to make money. However I have seen lots of companies improve their bottom line by embracing clean technologies and crushing their competition who try to save a nickel at the cost of our health.
So Mixter, if you don’t mind I’m going to take myself out of the “Oil sold to a SUCKER” equation as much as possible. Look at it this way; it saves more Oil for you to buy. Don’t worry about your finances though, I’ll be sure to leave you a big tip when you’re waiting tables at your second job. Then again, you could try to do something good for your family and for our economy by conserving and spending more of your hard earned money in your local community instead of giving it to foreign oil.
I never said we don’t need oil, I just don’t think burning it and throwing it in the air for all of us to breathe into our lungs is the best use of our resources.
Now if you will excuse me, I’m going to go cook some weenies for my family on my solar oven, not because it is Green, but because it will save me even more money to invest!
Umm...explain to me again how ethanol somehow became a liberal/progressive agenda, when clearly Bush was the one pushing so hard for corn ethanol to help solidify the Republican's political backing in the farm belt?
If anything, liberals have been among the staunchest opponents of biofuels as the least effective alternative energy source to combat global warming. This sounds a lot like the way Fox News likes to spin all bad news towards the Democrats, how convenient.
d_prosper_sT
ock
The point is that Eth is "drive around" energy !! The coal isn't. The Nat'l gas sure isn't very. And the "green energy" from the Nuke plant also doesn't use any petro products. I can drive to our local Nuke plant, and right adjacent to it is the power company's biggest customer -- a Cargill corn processing plant. Some studies say the gain from ethanol is up to SEVEN times in "drive around" energy consumed. That said, in no way are bio-fuels THE answer!! But they are a PART of the many answers. Invest in / or work for / even better batteries -- then you can put the output of the wind, the Nuke, or the solar power "in your tank" directly.
Riesenberg
I would urge people to look at the numbers for themselves instead of taking one side or annothers view for granted. You never know the motivation of an author.
The decisions being taken by governments around the world in the quest for sustainability are a catastrophe for humankind in the long-term. Two of these decisions at the forefront of news are biofuels, and carbon capture and storage.
Biofuels -- the fuel revolution that will supposedly help us:
(1) Growing crops in the United States for biofuels requires around the same energy input for fertilisers and processing the crops as that saved by replacing petrol on the forecourt (Biofuels - A solution worse than the problem, Daily Telegraph).
(2) By harvesting the peat bogs for biofuels, we release 30 times more carbon dioxide than will be recouped by burning the biofuel produced (Prof. Jack Riley, University of Nottingham).
(3) Growing biofuels takes a lot of land and huge amounts of water -- neither of which the world has to spare.
(4) China and India risk famine if they proceed with their biofuels plans, because they don't have enough water to grow both fuel and food (International Water Management Institute).
(5) Biofuels are killing forests and leading to more global warming, besides taking land away from food crops (Global Forest Coalition).
(6) The diversion of land meant for food crops to agrofuel production is a "crime against humanity" (Jean Ziegler, UN Special Rapporteur on the Right to Food).
Carbon Capture -- putting off today what others will have to solve tomorrow:
(1) Carbon sequestration and storage (under our oceans and land) is an untried method of locking up carbon dioxide forever, but there is not a 100 per cent assurance that it will not escape. Possible escape routes include earthquakes, land shifts, terrorism (holding the world to ransom) or human disasters/accidents.
(2) Sequestration and storage of carbon dioxide is not a solution, but a problem that humankind will have to face in the future -- one that might eventually threaten the existence of human life itself on Earth, for nothing ever designed has lasted forever.
(3) Governments, as usual, are only looking at solving problems today without any understanding of what this will bring in the future. They are attempting to lock up gases that are toxic to humans -- leaving any problems for future generations to solve.
(4) If there was a rupture in the storage vessel, the ramifications for the world would be immense, to say the very least. Therefore, carbon capture is a method of putting off today what others will have to fix tomorrow (if they can).
Dr David Hill
World Innovation Foundation Charity
Bern, Switzerland