A recent article in BusinessWeek (BW) investigated the reasons behind the "shortage" of E85 pumps down at your local gas station– a situation which displeases Detroit's Corporate Average Fuel Economy (CAFE) compliance-seeking automakers no end. Apparently, Big Oil's to blame. Shell spokesperson Anne Bryan Peebles admitted her employer is not exactly chomping at the bit to install ethanol spigots. Peebles says E85 requires separate pumps, trucks and storage tanks. All in, it costs some $200k to set-up an E85 pump– whilst satisfying the farrago of local, state and federal health and safety regulations surrounding its installation. [Hence almost all of America's E85 pumps are run by independent gas stations. ] Why not just switch-out a standard pump? The American Petroleum Institute says its pilot programs reveal that many flex fuel consumers fill up just once– after clocking E85's 25 percent hit on their fuel economy. So E85's business case is dubious. Just don't expect much sympathy from automakers. "'Big Oil is at the top of the list for blocking the spread of ethanol acceptance by consumers and the marketplace,' says Loren Beard, senior manager for energy planning and policy at Chrysler. What's more, oil company "foot dragging" is set to worsen the current ethanol glut– which could lower prices to the point where E85 becomes profitable enough for oil companies to accommodate with new pumps; providing federal subsidies continue to prop-up ethanol production. [Thanks to starlightmica for the tip.]
[RF interviews the Mark Cooper of the Consumer Federation of America on Big Oil's anti-ethanol conspiracy]
“The American Petroleum Institute says its pilot programs reveals that many flex fuel consumers fill up just once– after clocking E85’s 25 percent hit on their fuel economy.”
How about that? As green as so many people would like to be, the economics are simply not on ethanol’s side. It seems that both the consumer and government agencies have spoken and that the shortage of pumps is not so much due to Big Bad Oil as to the invisible hand.
Let’s see… lousy fuel economy, costs more energy to produce than you get burning it, and demand drives up corn prices to the point where poor Mexicans can’t afford to eat.
Can we end the Ethanol experiment already? Big Oil may hate it, but the only people benefiting are Big Corn.
Biodiesel, OTOH…
Ethanol is another case study of government run amok. Were ethanol to stand alone, without subsidy of any kind, it would fall on its face. Joe Sixpack, after realizing his fuel system is in for an overhaul after one season of E85, together with the hit on performance and economy, will walk- no RUN- away from this alternative. But, were we to take the depletion allowance Big Oil has enjoyed for decades, gas would probably be $4-5 per gallon, too, so I guess it’s a case of better the devil you know……I really have doubts that there will be a significant shift from internal combustion until some breakthrough is made in battery technology. If you offered me a plug-in car with 100 miles of range, and overnight re-charge, for the same money, I would buy it tomorrow. That said, I would also keep my 740 for the long trips I enjoy so much when visiting relatives, etc. I guess it is going to be up to my 15 year old and his peers to alter the transportation landscape- and they seem to be up to the task. Dinosaurs like me are the biggest problem by our lack of flexibility.
And all you naysayers thought we would never be able to produce enough to meet America’s fuel needs. Turns out there will be plenty to go around for the half dozen hold outs that will continue to use it :)
The thing that is most frustrating to me is that ethanol doesn’t *have* to be a bad business case… It only is because of the current tax/tariff and subsidy arrangements… If we imported our ethanol without the tariffs (Brazil is currently experiencing a glut) instead of trying to process it ourselves from inefficient sources (Corn), the price of a gallon would be a full $.50 – $1 less than it is now… This seems to me to be one of those “let the Market work” situations… It’s unfortunate that we’ll likely not see the tariffs fall until the point is moot.
@AndyR –
Sure, imported ethanol might be cheaper on a gallon by gallon basis, but it still doesn’t address the following:
1) Worse fuel economy;
2) Energy independence;
3) Infrastructure to transport & store.
So it’s really still not an option even if the $.50-$1.00 figure you state is accurate. Seems a little high to me.
I have always been for energy independence, but I am not about doing it at the expense of the free market. Fighting the invisible hand is a good way to get slapped.
The amount of nonsense in this guys schtick is too large to list. He summed it up pretty well when he said he doesn’t believe the market works. Of course, the market works pretty well for HIS salary, just not everyone elses. OTOH, he probably believes he is underpaid.
The truth is that the market does work, and the biggest externality presently in it is government. If comrade Cooper really wants to help folks out, why the heck doesn’t HE open a refinery. It’s not rocket science. Iraqis presently steal oil from the pipelines and refine it clandestinely to power their vehicles. The truth is that the market does work, and if any of the oil companies believed they could make an extra buck by expanding refinery capacity, or by using more ethanol, then you could be sure they would do it. OTOH, if they think it won’t help their bottom line – WHO SHOULD BE ABLE TO FORCE THEM TO DO IT?
How about if the government were to step in and force you to do your job they way they want, for less money, and in a way that would eventually ruin you financially? Why is it okay for them to do that to everyone else? And oh, btw, the government has been pretty well known to cheat on their agreements with the oil companies. Maybe we should get a representative from “big oil” on for an interview?
When the hand outs stop and the ethanol market tanks in America, it is possible that other countries better suited to production will step up and make it a viable alternative. Until that time I think these subsidies are just holding up progress. It won’t be such a bad thing to still be dependant on other countries, so long as those other countries are currently at war with you (for a change).
Landcrusher:
How about if the government were to step in and force you to do your job they way they want, for less money, and in a way that would eventually ruin you financially?
Yes, some of us do indeed have those kinds of jobs, you just got to roll with the punches.
The free market is free only within the constraints that market exists within. For starters: geography and natural resources, agriculture, wealth (or lack of it), and public policy regarding allocation of infrastructure rein it in. For example, if the Eisenhower administration poured money into mass transit instead of the highway system, how different would the US automobile market be?
Result: Big Oil has little reason to change what they do, they’re going to make money hand over fist no matter what as long as there is demand for their products. That isn’t happening anytime soon, so: if you can’t beat ’em, join ’em, and invest accordingly if your conscience lets you.
This guy is missing the basics, IMHO. I wouldn’t invest in a new refinery with peak oil around the corner, and I certainly wouldn’t invest in the infrastructure for an alternative fuel that exists because of a temporary abundance of cheap oil.
@ret –
1) Fuel economy – you just have to stop thinking in terms of miles/gallon and start thinking in terms of dollars per mile… Ethanol is ~75% efficient compared with gas? So a gallon has to cost 75% as much as the equivalent gas. It helps, too, if you tune an engine to run solely on ethanol, as these silly FlexFuel designs are less efficient for gas *and* ethanol so that they can claim to run both.
2) Energy independence – Much as I like the idea of not having to go to outside suppliers for our fuels, the idea is unfortunately pie-in-the-sky… We’ve never been energy-independent, and it wouldn’t be economically efficient to be so.
3) Infrastructure – It’s true that ethanol and gasoline can’t co-locate in transport vessels, but as mentioned, it just takes the addition of another pump/tank… The minute ethanol is cost-competitive, I see little reason why gas stations wouldn’t want to share in the new profits…
All of this is not to say there aren’t challenges to be overcome with the deployment of ethanol on a broad base… But there is some major tinkering with the market going on… Here are the subsidy/tariff numbers for reference:
The Brazilian ethanol tariff is $.54/gallon.
The U.S. ethanol corn subsidy was $.51/gallon in 2006.
I would encourage you to look at all that is at play here, including what subsidies the petroleum industry still receives nearly a decade after the industry’s creation. The import tariff on ethanol is not to keep imported ethanol out, but to offset the ethanol subsidy that is given to the entity that blends ethanol with gasoline, which guess what, is the petroleum marketer!
@quail23 –
Not sure I follow – can I get some math and a reference on that?
This is from the ethanol industry, but it is all referenced. Cut and paste.
http://www.cleanfuelsdc.org/pubs/documents/CFDC_Fact%20Book_1107.pdf
Gasoline’s energy content is 125,000 Btu/gallon. Ethanol’s is 84,000 Btu/gallon. To purchase the same energy one gets from one gallon of gasoline you need to purchase 125,000/84,000 = 1.49 gallons of Ethanol. Thus for real price parity pure Ethanol would need to sell for 1.00/1.49 = 0.67, or 67% of the price of pure gasoline.
$3.00 per gallon gasoline is thus equivalent to $2.01 per gallon pure Ethanol. Of course in the US most of us are paying for gasoline but are actually getting E10 or some other watered down mix.
I don’t blame Big Oil for not being excited about spending $200k per filling station to put in pumps almost nobody is going to use. The whole Flex-Fuel program is a bunch of smoke and mirrors BS and has been for a long time.
Why don’t we simply buy biofuel from Brazil, and encourage production in warm, wet places like Vietnam and central Africa?
It doesn’t make sense to grow corn to produce fuel at our latitude. Brazil, being on the equator, is far better suited to this.
There are plenty of countries near the equator on the globe that have the land, water, and cheap labor to grow biofuel in the form of sugarcane, like Brazil does.
Forgetting for the moment that all the farm land in Brazil comes at the expense of rain forrest. Brazil is part of Bush’s Jr. axis of evil, I am speaking of course of Hugo Chavez’s latin america. If you are going to ask Bush to take welfare from US farmers and give it to Brazilians, you might as well ask him to apologize for Iraq too.
I absolutely hate ethanol. It is absolute garbage. One acre of corn produces ~330 gallons of ethanol. One acre of sugar caine produces ~650 gallons of ethanol. One acre of Switchgrass produces 1,150 gallons of ethanol and can produce two harvests in a season. Not to mention that it is a lot less “needy” when it comes to the climate it grows in, how much water it gets, *if* it gets fertilized, etc.
Why aren’t we using Switchgrass?
Ethanol is a huge and complete joke.
I love ethanol and E85. I come from a farming family. Ethanol has helped to increase prosperity in my home town. Life is starting come back and farmers are optimistic about the future for the first time in years. People are actually moving back to the farming towns to help build ethanol plants and work the additional crops. I can remember as far back as a little kid and my Dad would make ethanol and we would run the farm trucks with it. Ethanol is as Americana as apple pie and my grand pop. To say you hate ethanol is to say that you hate my farming family who are hard working Americans. Brazil’s economy is flourishing from ethanol production and we can make America’s economy strong once again by following thier lead. We just need to stop sending our money overseas for oil. I also run E85 conversion kits in all of my vehicles. I don’t know where these people come up with a 25% loss. I only lose 3-12% in my vehicles and here in Colorado E85 is 80 cents cheaper per gallon. Here is a press release about the myth http://www.prlog.org/10025933-e85-ethanol-use-will-get-40-to-50-less-mileage-per-tank-myth-busted.html I leave money in my pocket everytime I fill up my vehicles. Everyone should buy either a conversion kit or a Flex Fuel vehicle and run E85 ethanol – it’s good for Americans and better for the environment than gasonline.
The truth is Big Oil lost that notorious percentage depletion allowance a long time ago.
I have to agree with the detractors of corn based ethanol here. Ethanol reacts chemically with trace amounts of water and corrodes whatever pipelines or machinery it’s run through, over time; so you’re talking about a huge infrastructure cost to create new pipelines and storage tanks for this duplicate fuel source. For a less efficient fuel. A fuel that when produced from corn (as opposed to the Brazilian switchgrass which is a different, more efficient process) drives up the cost of corn, contributing to inflation in food prices and regressively taxing the poor.
So the rationale for ethanol is clearly altruistic, but the practical execution is just not there yet.
I like the idea of a biodiesel hybrid that manages 50 mpg, if I could have my dream fuel. Citroen has a cool hatchback that does just that, too bad we can’t get behind something like that.
There are many ways to argue ethanol. No it does not have as much energy per unit as gasoline and making it from corn is not an ideal solution. But no one seems to ask how much we actually are paying for our gasoline. Folks have mentioned the petroleum industry subsidy (which is egregious) but what about the massive cost of keeping our Navy in the Persian Gulf?
We spend about 500-600 billion dollars a year on defense (not including Iraq and Afghanistan) and how much of that is protecting the shipping lanes for oil tankers? How much could be saved if we could bring some of those folks home?
Energy independence is possible (we were energy independent prior to WWII). If we can figure out (and I strongly suspect we can) how to make ethanol from cellulosic sources (cheaply) then a farmer’s subsidy is not needed and ethanol becomes economically viable on a wide scale with or without the petroleum industry’s support. They know it too. It is not a final answer but a part of an energy plan to independence which is sorely lacking in this country. The solution here folks is political leadership and vision.
We won the cold war, but now somehow we are adopting the failed policies of the Soviet Union: a centrally planned economy.
Our government has chosen the “right” alternative fuel – ethanol. We have five year plans (sound familiar?) and mandates and subsidies and large tariffs. Both Democrats and Republicans are fiercely competing to see who can throw more taxpayer money, er deficit financing at this boondoggle.
What about cellusosic ethanol? Still unproven, but the initial results don’t look good. Despite be touted as “more advanced” or “economical” cellulosic ethanol producers are asking for *addtional* subsidies of 25 to 50 cents per gallon.
Does ethanol help some rural communities? Absolutely. Pork barrel spending always has benefits, but overall it makes the US less wealthy.
“I don’t know where these people come up with a 25% loss.”
It’s no myth. It is a scientific fact that Ethanol has less energy content per gallon than Gasoline does. It is also well documented in EPA standard fuel economy tests.
He never addressed who will pay for all of the costs associated with building and entire infrastructure. He also points out that his magic beans (cellulose) aren’t even viable yet. What a nut. If there were a demand for ethanol, somebody would build stations independent of the oil companies. The truth hurts though, as consumers will stay away in droves.
I don’t know where these people come up with a 25% loss.
I see the loss just from using E10. With regular gas my 500cc single cylinder motorcycle gets between 55-60 mpg depending on how much highway driving I do. With E10 the best I have been able to do is 45 mpg and this is all highway. And the bike runs like crap on it, definate loss in performance and it doesn’t have much to begin with at only 26hp.
I like ethanol from a fuel standpoint just not this retarded system we have been forced into. If we had properly designed engines to take advantage of the higher octane with less hot spots and much higher compressions that used 100% ethanol I would jump all over it. But the way we have it now with stupid flex-fuel engines it’s just too much of a compromise all around.
It would be nice if we have some real leadership that could provide good solutions and not just ways to make the rich richer.
Starlight,
There have been times that the oil companies were laying off people and contracting in a big way. If you think Oil companies are so insanely profitable, by the stock. The P/E ratios are rather low even now, so I think maybe the market knows something you don’t want to believe.
Quail23,
What subsidies are you upset with? The subsidy they get to use ethanol? That’s a great example of government stupidity. OTOH, what about all the taxes on the other end? Much like the airlines, the oil industry is insanely regulated and taxed. Any discussion of subsidies without looking at the overall balance provides no information to the listener except about the bias of the speaker.
Dave Justice,
I would encourage you and your neighbors to be very careful about how much of your economic future is riding on government largesse rather than the real market for your products. The corn subsidies could end at any time. Best if the end sooner rather than later. The government MAY have an interest in getting ethanol up and going, but they have no business choosing corn as the best source. Diversify your personal assets.
As for your lowered performance not being so bad, there could be lots of reasons for that. One of them being that your truck may not be as efficient with regular fuel as it could have been. Another may be that you are accelerating less quickly using E85.
lewissalem,
Well said.
This guy sells the rope for the noose of his argument – saying the “marketplace” does not work for refining biz or gas prices (taxes)…
Does he have any idea of the huge capital, environmental, and (hugely uncertain) NIMBY factors needed to build a domestic refinery from scratch? Look for refineries in Mexico or Asia shipping us gas first…
The ethanol mob’s fantasy is slowly unraveling in the face of tough media scrutiny…