The Ethanol Rhetoric Ramps Up
Posted by Robert Rapier on November 23, 2010 - 10:56am
It has been interesting to watch the flurry of ethanol rhetoric since the recent elections. With the $0.45 per gallon subsidy (called the VEETC) and the ethanol tariffs both set to expire at the end of next month, both sides feel that there is a lot at stake, and they have really ramped up the rhetoric. One side will claim that ethanol is the greatest thing since sliced bread, then the other side claims it is an environmental disaster. Around and around the claims go. Misinformation abounds.
Mortgaging the Future
I am not going to argue in this essay that U.S. ethanol policy is good or bad, but I am going to argue that extending the VEETC is fiscally irresponsible. There are a couple of issues that influence my thinking on this: (1) I think governments need to be better stewards of taxpayer dollars; and (2) I hate waste.
Over the past decade, the U.S. has been on a spending binge, spending far more money than we have collected in tax revenues. That means that we are burdening our children with debt. I believe this is incredibly selfish and irresponsible. We are supposed to work to improve the future for our children, not sabotage it. So my view is that when we spend tax dollars, we need to have a very good reason for doing it.
I also hate waste. Wasted food, energy, money, time – I loathe them all. So any time I see wasteful government spending that mortgages the futures of the next generation, I am determined to fight it.
If, however, I thought that the VEETC was actually doing something to improve the prospects for future generations, I would suggest that it was money well spent. But I don’t think that’s what it does at all, for reasons I will get into below.
The Redundant Subsidy
To review, here is where things stand. There are two pieces of legislation set to expire at the end of this year. One is the $0.45 per gallon subsidy (called the VEETC) that is paid to oil companies to blend ethanol into gasoline. Because the oil companies are also mandated to blend ethanol, the subsidy is mostly redundant. That is, we are paying a subsidy for something that is already being compelled by law. As I have argued before, it is like paying people to obey speed limits. I don’t know too many people who would think it is a good idea to borrow money from our children so we can give it back to their parents for obeying traffic laws. (You can find a more detailed discussion on the VEETC here).
The second piece of legislation is an ethanol tariff that is applied to ethanol entering the U.S. market. Brazilian producers want to see that tariff removed to open up the U.S. market, and U.S. producers want to see it maintained to protect their market. For a more detailed look at the issues around the tariff, see Implications Of The U.S. Ethanol Tariff.
I believe that the ethanol lobby recognizes that they don’t really need the VEETC with the mandate in place. After all, we had subsidies for 30 years, but the explosive growth in the industry only happened once the Renewable Fuel Standard (RFS) was passed into law in 2005. The RFS meant that it was no longer optional for the oil companies to blend ethanol; they were compelled by law to do it.
Following the passage of the RFS, ethanol use exploded, tripling in 5 years following passage of the Energy Policy Act of 2005. In fact, growth was so fast that ethanol producers produced too much ethanol. So they went back and lobbied Congress to increase the amounts that oil companies were mandated to blend. Originally scheduled to blend 7.5 billion gallons of ethanol by 2012, the new schedule increased the blend amount to over 13 billion gallons of conventional (corn) ethanol by 2012 and 15 billion gallons of corn ethanol by 2015.
The Subsidy Protects the Tariff
So if the RFS accomplished what the VEETC was intended to accomplish, why is the ethanol lobby so concerned about seeing the VEETC extended? What I think they fear is that since a cited justification for the ethanol tariff is that it prevents foreign ethanol producers from benefiting from tax credits for U.S. producers, if the tax credit goes away then so does that cited justification of the tariff. Then, corn ethanol has to compete against imports. This is something that corn ethanol producers do not want, so they lobby to keep the VEETC, which then gives them cover to argue to keep the tariff.
Shifting Strategies
It has been interesting to watch the shifting strategies of the ethanol lobby. Initially, they distanced themselves from the VEETC, saying that it really benefited the oil companies. When it became pretty clear that the oil companies couldn’t care less, they started talking about jobs, foreign oil, etc. All of that was irrelevant with respect to the VEETC, because the mandates ensured that any benefits (e.g., displaced imports) would occur with or without the VEETC in place. Later there was some dissension in the ranks, when Growth Energy suggested (as I had long suggested) that perhaps the subsidy no longer serves the function it was designed for, and perhaps some thought should go into using some of that money for developing infrastructure for E85.
Lately, however, their argument goes like this:
Unlike most subsidies the ethanol blenders tax credit does not go upstream to ADM or stay with the blender. IT GOES TO THE CONSUMER @ the rate of 4.5 cents in savings for every gallon of e10 they buy. It’s simple, just follow the money.
One thing I wanted to comment on is that these are clearly talking points that one of the ethanol lobbying groups has sent out. How do I know? They once sent out talking points related to something I wrote, and they had the same characteristics. People suddenly start to show up parroting the same line of defense. I have now seen the above argument — in almost identical style and making the same claims — popping up in lots of places where people are critical of the ethanol subsidies. The idea is to simulate this big, grassroots movement in favor of continuing the subsidy. But the comments are so similar, it is clear that this was organized.
Subsidizing Consumption
So how about the claim, that the VEETC slightly lowers gasoline prices? Actually, I agree with it. One thing the subsidy does is subsidize the price of gasoline. So it can be argued that some or even all of the savings passes through to consumers. In fact, ExxonMobil recently said as much to me:
ROBERT RAPIER: What is your position on the expiration of the VEETC at the end of the year? Do you object to that expiring? Would you be happy to see that expire? What’s your view?
MR. SPELLINGS (XOM spokesman): I think we would be content for it to expire. We do not see ourselves as the beneficiary of that subsidy. We think in the marketplace today, that subsidy probably flows through to the consumer. We do not see how it’s a subsidy that benefits us or a subsidy that benefits ethanol refiners or farmers that produce the corn, although some folks continue to think that this is a subsidy that benefits either ethanol producers or corn producers.
So let’s agree that the subsidy, at a taxpayer cost next year of $6 billion, will flow through to consumers. Now I ask you, why on earth is it a good thing to hit all taxpayers with a $6 billion bill (again, borrowing money from our children) only to subsidize fuel consumption for motorists? Why is it fair for a person who doesn’t drive to subsidize the fuel of those who do? Or for those who are very fuel efficient to subsidize those who are not?
I believe with every fiber of my being that WE SHOULD NOT SUBSIDIZE CONSUMPTION OF A DEPLETING RESOURCE. If the subsidy lowers the price of gasoline, it encourages consumption. That is the exact opposite of what we should be doing, and therefore the worst possible reason for extending the subsidy. We are not only mortgaging the next generation’s future, but the money we are using to do so will cause us to consume resources that will put them at an additional disadvantage.
The Cost of Discretional Blending
So what about the argument that the subsidy encourages gasoline producers to blend more than they are legally required to blend? This is the essence of the argument that chief ethanol lobbyist Bob Dinneen used recently when he talked about extending the subsidies without having a debate:
Bob Dinneen: In the absence of the tax incentive discretionary blending evaporates. With more than 2 billion RINs through the RFS program that are out on the marketplace, they would quickly be bought up by refiners. So there’s no question that in the absence of the tax incentive demand for ethanol will fall.
So let’s take that one on. What this means is that ethanol producers have overproduced ethanol to the tune of 2 billion gallons. (Remember, the last time they overproduced, ethanol producers lobbied for and received a new RFS schedule that benefited them). It means in 2011, for instance, that gasoline producers could buy and blend 2 billion gallons less ethanol (actually it is more like 1.4 billion gallons since the mandate increases in 2011) than the mandate requires. So if removal of the subsidy caused ethanol to be more expensive per unit of energy than gasoline — almost a certainty since it is more expensive than gasoline today — then demand for ethanol would indeed fall.
So what? Is it the fault of the taxpayer that ethanol producers produced more than the legal requirement? Should we be in the business of encouraging overproduction, or protecting industries who overproduce from the consequences of doing so? Further, what is the price that we are being asked to pay? In 2011, it would amount to around $6 billion to protect 2 billion gallons of ethanol. Really? Someone can seriously suggest that we should pay a subsidy equivalent to $3 per gallon of ethanol (on top of the cost of the ethanol!) just to make sure ethanol demand doesn’t fall? Preposterous.
Too Late for Debate?
Incidentally, what about Dinneen’s argument that it is simply too late in the year to debate the issue, and therefore the default position should be to extend the credits?
Bob Dinneen: You can’t have that in the week or two that you’re going to have in a lame duck session. So they can extend this tax incentive with, you know, a stroke of the pen, a little bit of Whiteout, just change the date. That’s what they need to do this year and let’s have a robust discussion about future biofuels tax policy and make sure we’re thinking about it in terms of what’s the best policy to promote cellulosic ethanol?
The problem with that is that Dinneen wasn’t interested in debating that issue earlier this year either. He could have been proactive and said “Let’s have that discussion.” Instead, he has simply repeated the mantra all year that the tax credits should be extended. When Growth Energy tried to have that debate way back in July, Dinneen wasn’t interested. His response to their proposal was:
“Now is not the time to add uncertainty and complexity to the energy tax debate,” said Bob Dinneen of the Renewable Fuels Association. “Losing the tax incentive will shutter plants and cost tens of thousands of jobs.”
So it should be clear that Dinneen isn’t interested in having a debate. His strategy is to stall, delay, and then claim it is too late for debate. Top it off with a bit of fear-mongering on the horrible consequences of not extending the tax credits, and you have the stale, backward-looking strategy that he has used for years. I say enough. If it is too late to have a debate, then don’t ask taxpayers for $6 billion. We are broke.
In the next post, we will examine the possibility that part of the VEETC is going toward subsidizing exports.
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http://theenergycollective.com/nathanaelbaker/47551/al-gore-says-support...
Al Gore Says Supporting Corn Ethanol Was a Mistake
Has Al Gore's persona dropped so far that a statement like this receives so little attention, press, etc. I was astounded when i saw this yesterday, but the silence following it has been deafening.
He has actually made several statements over the past couple of years that tipped off that he was thinking like this. So it wasn't a big surprise to me.
Robert, It was definitely a surprise to me although you follow the ethanol debate a lot closer than I do or even wish to.
Yeah, he is pretty much "over" in terms of the limited attention spans of people moving on to more compelling
shiny objectspublic-policy stories. Actually, he got quite a lot of attention, considering. Maybe he should try to get on Dancing With the Stars.Seriously, it isn't getting attention because of the powerful forces that don't want it to. All of the corn-state politicians, all of the sugar-state politicians, ADM, sugar producers, SecAg Vilsack, etc.
sugar-state politicians...sugar producers
I'm under the impression that it's mainly one very powerful family in Florida.
No, there are many other powerful special-interest groups who make campaign contributions to legislators of sugar beet and sugar cane states. For example, look at Louisiana. Or Colorado.
It's puzzling. I've personally seen candy makers go out of business or relocate out of the US due to the subsidies.
You would think that candy makers and other food processors would have made countervailing contributions to prevent or repeal these subsidies.
Vested interests will attempt to keep the current system going as long as they can — until the wheels fall off.
Also, fundamental to the issue is that ethanol isn't in any way going to keep the current system going:
In the upper-right corner are the EROEI's of ethanol for studies done prior to 1980. They are around 1 to 1. The red data points are the EROEI's of recent studies. Some are less than 1, some are slightly greater than one.
But whether old or new, no studies indicate that ethanol is anywhere near the EROEI of the fuels with which we have built this civilization.
Only in this energy-abundant environment — with enormous debt accumulation — can some people fool themselves into thinking ethanol is any sort of solution.
There are just SO MANY fundamental, insurmountable, and easily-grasped arguments against this sort of large-scale biofuel nonsense (energetic, agricultural, ecological, social, etc). Even its continued debate is a true sign of our mass-insanity as a civilization. So it goes.
There is a fundamental argument FOR this nonsense.. If you agree with the hypothesis that world population is directly related to available food supply, then taking food agriculture production and converting it to fuel is absolutely the only sane thing for a civilization approaching resource limits to do.
We seem to have two choices:
There is a fundamental argument FOR this nonsense.
For biofuels yes, for the subsidy in question, no.
But the concept that we actually have to produce the fuel we need, rather than just buy it from somewhere else, is great. The sooner this reality hits everyone in the face, the sooner all the really wasteful uses of energy will cease.
The fact that the EROEI of ethanol is low, misses the point about the form of energy going in. Most of it is natural gas, which is not a transport fuel, and is 1/6th price of transport fuel. You put in a gas that is hard to use as a transport fuel, mix with corn, and get out a safe, easy to use liquid fuel, and some corn leftovers. And you get twice the liquid fuel out of the gas you put in.
Take a look at RR's previous post about Shell's Bintulu GtL facility - it gets 0.5 EROEI, though it does not use any biomass.
Yes, corn ethanol is not the EROEI of fossil oil - that is why we use the fossil oil first. But that age is coming to an end - comparing to that is comparing to the "good old days", and they are fast coming to an end. We need to adjust our society to run on low EROEI liquid fuels, and use less of them, because at some point, that is all we will have.
BenjegerdesFarms wrote:
We seem to have two choices:
Your choices are based on false assumptions. Ethanol production in the US is not going to cause hunger. Quite the opposite.
Third-world countries, even those that are rapidly developing, are still largely rural economies based on agriculture. That means there are hundred of millions of farmers whose livilihood depends on the price of agricultural products and in particular the price of grains. The price of grain has been stagnant for many decades. That price stagnation is what causes poverty and bare sustenance economies in much of the 3rd world.
Ethanol production in the US has resulted in unprecedented agriculture commodity prices increases. That is a boon to rural 3rd world economies.
Getting US Ag surplus off the world markets is not a bad thing.
Producing less animal fat by feeding less corn to livestock is not a bad thing.
Producing less sweeteners from corn to feed to children is not a bad thing.
If you start with the correct assumptions you might see things differently.
I have to disagree with you, Aangel. Corn ethanol as it is currently manufactured currently sucks from an energy point of view. Simple changes dramatically change the energy balance for corn ethanol, and these are changes that should be underway for her reasons. By using not tilled farming practices reduces the amount of stover required to be left at the farm. This material is then available to power the ethanol production process rather than using oil or gas. This one change dramatically alters the energy balance as most of the production energy for corn ethanol is in the distillation part of the production cycle. If the US to ever be serious about energy conservation then these are changes that should be made.
This does not make ethanol a total solution. By far the largest reduction in fuel consumption for personal transport will come with the transition to electrically powered vehicles which are far more efficient even when the energy source is coal fueled electricity.
By far the biggest challenge for Americans and Australians alike will be shifting our thinking from huge vehicles down to smaller ones. We have been living an energy lie which will be difficult to give up.
I understand all that. And I still don't think ethanol will keep this form of civilization going — or electric cars. I further think that the day of the personal automobile in its current form is coming to an end.
If we don't fight like cats in a sack over the remaining resources and enter a period of extended war over said resources, the best I can see is that we switch wholesale to motorcycles, scooters and rickshaws and save whatever liquid fuel is produced for the farmers, bulldozers, busses and the occasional airplane. We'll have some form of four wheeled vehicle but most of them won't be highway capable.
I believe what most people fail to see is that there is a societal switch that is about to be flipped. When energy gets expensive all resources get expensive but not just a little, but possibly by an order of magnitude or more.
That's because the ore concentrations we are currently mining are so low that only cheap energy and capital are allowing us to process the enormous quantities of rock it takes to get the valuable minerals and metals out. When either or both of those necessary inputs (cheap energy and abundant capital) go, resource extraction is going to plummet.
Enjoy this lifestyle now because when the cheap energy/abundant capital switch is turned off we enter an entirely new world.
Does ethanol get a subsidy or is it taxed at a lower rate than gasoline from crude oil?
This is an important distinction and a strong case can be made for taxing ethanol at a lower rate than gasoline.
Further, we can have a farm run purely by actual horsepower producing ethanol. Wouldn't this farm clearly be a net energy producer?
Complete and utter BS! Federal spending was 18% of GDP in 1980, today it is still 18%. This is all about starve the beast, and nothing to do with reckless spending, it is out of control tax cutting. You've drunk the coolaid, that decades of rightwing propagandists have been spewing.
That doesn't mean we are spending that 18% wisely. The whole ethanol program is pork for ag interests, with just a bit of wishing for a magic pony thrown it.
It appears that federal spending in 2009 was about 25% of GDP:
http://www.politifact.com/truth-o-meter/statements/2010/nov/15/kent-conr...
The recent increase is due to recession, cutting both GDP and revenues, not because the government has become a drunken sailor on holiday. The meme of "government out of control" has been firmly implanted in the population by those who wish to destroy the mixed economic model, and replace it with oligarchy. They get a lot of inadvertent water carriers (anyone who repeats the various canards that have become accepted public memes). These beliefs can then be manipulated to elect tea party types who will further decimate government revenue. Then they will scream "government is out of control, look at the deficits", and the kneejerk reaction is to cut taxes even more. If we don't wake up and figure out what is happening, but simply emotionally respond to the propaganda, we are doomed.
In nominal terms, the 2000-2009 rate of increase in federal spending would cause spending to double about every 10 years.
http://politifact.com/oregon/statements/2010/sep/27/scott-bruun/scott-br...
But if you account for inflation, the spending total is $1.78 trillion in 2000 and goes to $2.29 trillion in 2009. That’s only a 29 percent increase.
And, GDP grew 16%, so the amount relative to GPD grew by only 11% (1.2865% / 1.1569).
You need to correct for cyclical factors. In 2000, we were near the top of the dotcom bubble, in 09, the peak recession from the GFC. During recession in addition to discretionary stimulus, you have increased government expenditures, for stuff like welfare and unemployment. Absent any policy changes the government/private ratio will vary through the business cycle, with a maximum ocurring during recession.
Absolutely.
Here is another graph that may help you see what RR is pointing out:
Notice how as the private sector is deleveraging the public sector is picking up the difference. Combined, both forms of debt greatly exceed the country's GDP.
The U.S. has been on a spending binge by racking up debt. So has most of the rest of the world, btw.
Andre,
Of course debt far exceeds GDP. Debt is a stock concept; GDP is a flow concept--so much per year.
Look at the massive federal debt after World War II. We managed that debt largely by inflation to reduce its real burden by more than half during the thirty years after 1945.
IMO, most long-term U.S. debts will be wiped out by inflation rates of 5% or much more over the next fifteen years.
Except for a little cash, all my investment funds are in TIPs, Treasury Inflation Protected securities. I think TIPs are much safer than gold, for reasons I've discussed over the years in my TOD comments.
Yes, but the point I wasn't clearly making is that — unless inflation wipes everything out as you say — it is income that must pay back debt and that gets difficult when the debt and thus the interest gets very high, as it is now.
This is the thing traditional economists miss: debt matters. It's not just a transfer of spending power from one group (the lenders) to the another (the debtors).
"Absent implausibly large differences in marginal spending propensities among the groups, it was suggested, pure redistributions should have no significant macroeconomic effects.” (Bernanke 2000)
That's just crazy talk. Of course it has significant macroeconomic effects.
Bernanke is right. There is a ton of economic history that strongly supports BB's statement. For example, see one of the editions of the old textbook (never surpassed, IMHO) by Faulkner on U.S. economic history.
Note that economic history is a separate department from economics--different vocabulary, different concepts and conclusions from mainstream economics.
You might also Google "institutional economics" if you have the time.
Ah, Don, your traditional training (and blind spot) is showing through... ;-)
Andre,
Speaking of blind spots: How many courses have you taken in economics? How many in economic history.
Most engineers know little or nothing about economics or where the good data is on the question at issue. Economists, Economic Historians, and some Sociologists know how to find the data and how to interpret the numbers. Laymen generally do not know these essential things. That is just a fact of life.
Most engineers know little or nothing about economics
Actually, they usually know more about economics than most other professions know about engineering. A standard course in Engin school is called "engineering economics". Much engineering training and practice involves practical elements of economics.
The problem here isn't engineers. I think you'll find they're more sensible on average, because it's perfectly clear to any sensible engineer (who's put some attention to it) that there are lots of substitutes for oil in particular, and FFs in general.
The problem here is people who have neither engineering or economics training. They include journalists like Stoneleigh and Kunstler; lawyers like Simmons (though he was sensible most of the time) and LATOC; druids; biologists who misapply ecological concepts to human systems; etc, etc, etc.
Does Engineering Economics have much to do with macroeconomics? My understanding of Engineering Economics is that it is either all or almost all microeconomics. I've known more or less well about 100 engineers, including several with Ph.D.s (or whatever the engineering equivalent is for a full professor). Of the 100 engineers, one had majored in economics and then changed to engineering in grad school. Two more engineers were interested in and had studied more than the minimum in economics.
You seem to have a good knowledge of economics, so I'll list you as #4 on the list. But have you ever studied the economic history of the U.S.?
In general, it is good advice that the cobbler should stick to his last. There are, of course, exceptions.
Well the engineering economics of this issue are that the subsidy is not actually achieving anything much, compared to if it wasn't there. So it is a waste of money in the first place, and waste being financed by deficit makes it even more wasteful.
RR addressed this further downthread, but I'll quote him here;
Whether it was spending or borrowing isn't relevant to the point that it is deficit spending on a useless subsidy. So I don't want people to become distracted by whether or not the deficit increased from spending too much or taking in too little.
As an engineer myself, I would agree that we know more about economics than most economists know about engineering. We have to , as all engineering projects are driven, ultimately, by economics, but not all economics is driven by engineering.
And I would like to think we are pretty good on microeconomics, again mostly because we usually have to assess that in any project.
For macro, we are probably as knowledgeable, on average, as any other well educated people who don;t work in that field. But, because of our nature, we generally take a fairly pragmatic approach - we like to see government money actually "doing something", because if it isn't, we have plenty of things waiting to do something with it.
In the textbook I wrote, ECONOMICS: MAKING GOOD CHOICES, there is a full-page critical thinking exercise on the inefficiency and undesirability of quotas on sugar imports and other price support policies for domestic sugar beet and sugar beet producers.
To the best of my knowledge, all economists that are familiar with the subject argue vehemently against U.S. protectionist measures on sugar to keep out foreign-produced sugar. They do this because such government interference violates the principle of comparative advantage, which is a Big Deal in economics since the days of the great Ricardo.
For many decades the world price of sugar has been roughly half the U.S. price of sugar. When I can, I stock up on sugar in Canada, because it is so much cheaper than in the U.S. Also, if kept dry, sugar lasts indefinitely.
Sugar is great for making lab alcohol or other varieties of potable ethanol. Of course, I never do anything illegal! My first alcholic drink was lab alcohol (at age 14), and it is the same thing as 190 proof Everclear.
Glad you survived that first drink. When we made alcohol in science at that age , a class mate of mine made a homemade still and made himself very sick - not the alcohol itself, but some impurity in thus.
I have never understood the US sugar thing, but then, I really don't understand why there are a lot of agricultural related subsidies. I lived in New Zealand not long after they got rid of all their agricultural subsidies, and the ag industries that survived the bloodletting were just ramping up for real exports, and now they have world class stuff, that you can buy all over the world - a great Ricardo example.
I wish Canada would do the same they are still subsidising/quota controlling dairy, eggs, even grain, to some extent.
Ricardo had it right then, and still does now (as did and does Adam Smith, in my opinion). The attitude of governments that the economy will totally and utterly fail if they don't "do stuff" is baffling.
Actually its just special interest group politics. The benefit from (say) a sugar import restriction goes to a small but easily identified group, who will be willing to throw their weight and money behind or against a politician depending upon his support of sugar import issue. The losers, are the rest of the country, which is diffuse enough that they tune out the issue. A small but well
connected group will win almost every time. Only ocassionaly does a real analysis of the benefits and costs to the whole economy enter the picture.
Exactly.
Actually, government is often very competent to do the kind of Pigovian adjustments and counter-cyclical fiscal management that government ought to do. But, they're not often left alone to do it properly.
The story of the sugar tariff and its effect on ethanol manufacturing and corn syrup is a fascinating one. And yes, you're right that a small group of people (or a big corporation) can have huge effects on public policy. This isn't my favorite rendering of the story but I'm unable to find my favorite so this must suffice:
"Ethanol's revival is intimately linked to one company, the giant grain-trading firm Archer Daniels Midland, and one seemingly unrelated product, high-fructose corn syrup. The story centers on a man who arguably counts as corporate America's most generous and influential political donor of the second half of the 20th century, former ADM CEO Dwayne Andreas. To understand the weird and lucrative nexus between an industrial sweetener, a gas substitute, and a grain magnate, we need to go back to the days of disco."
http://www.grist.org/article/ADM1/
Catmint, the American politicians bitch like hell if any other country is in the least bit suspected of bribery while, at the same time, accepting the mordidas of campaign contributions.
NAOM
I'd agree with Paul N's comments. Engineering Economics is primarily an intro to financial analysis: present value, cash flow, etc. There is enormous diversity in engineering - branches of engineering deal with cost/other optimization, operations & systems analysis, forecasting, etc. Engineering, as a heavily quantitative field that deals fairly heavily with cost analysis, is a good background for learning economics.
You seem to have a good knowledge of economics, so I'll list you as #4 on the list.
Thanks!
But have you ever studied the economic history of the U.S.?
Sure. I've read several editions of Heilbroner's work, and a number of economic histories - US, world, industry, etc. I particularly liked Yergin's work on oil, Sloan's autobiography (which is mostly a history of GM), and Zinn's People's History (which is technically poli-sci, but has a heavy emphasis on economics).
In general, it is good advice that the cobbler should stick to his last. There are, of course, exceptions.
I think that the important thing is a sense of humility - knowing that there are few truly new ideas, that one has to fully research topics, etc. Also, that one has to specialize to be most effective. Nevertheless, some diversity of ideas and cross-specialty knowledge is essential to almost anything.
I find the lack of humility on TOD to be breathtaking. This lack of respect for other professions, especially economics, leaves TOD often irrelevant and sometimes ridiculous. For this reason, there are very few people to whom I recommend TOD. It's too bad. Perhaps the coming changes will help.
I heartily agree--and most especially with your last paragraph. You said it better than I could have.
Do try to get ahold of a cheap old copy of Faulkner for economic history of the U.S. It is a fascinating book and well-written. I do not like the more recent texts on U.S. economic history, because they tend to skimp on the Colonial period.
Thanks.
I'll add Faulkner to my list of things to read.
Sorry Nick, Don, but before you can make an appeal to authority to bolster your position, you need to ensure that authority is accepted.
Unfortunately economics has demonstrated time and again that it DOESN'T know what the hell is going on, and that by following its 'laws' you can make a right hash of things.
As it is, its an art wrapped in the clothes of science. You can't be surprised when various science/engineering types prod it, find that its not sound, and call it as such. Cold hard light would be the term. House of cards would be another.
I'd suggest that the 'lack of humility' is on the part of the economists - failing to accept the failures of their discipline and fix them. Respect is earnt, not demanded.
Now I won't be surprised to see this posting met with the usual bluster rather than considered acceptance of the truth; but I'll leave you with this thought. Real sciences type to simplify their subject; find essential truths; then build systemic representations of the real world that match. Economics persists in trying to turn rules of thumb into 'laws', ignore the cases that don't match, ignore evolution in the system, and confuse matters by layering complexity on top to hide the reality.
The evidence is that it's simply not fit for purpose.
Economics is a social science, just as sociology, cultural anthropology, and political science are social science. History is also often considered a social science.
I cannot think of one single economist who ever said or wrote that economics is a "science" in the sense that astronomy, biology, chemistry, and physics are sciences. And there are bogus parts of economics, just as bogus elements intrude into the other social sciences--no question about it. I twice failed my oral examinations for a Ph.D. because I explicitly identified some of these bogusities and suggested a radical transformation of the discipline to integrate it with other social sciences. I have never been a mainstream economist, though I admire immensely the work of men and women such as John Maynard Keynes and Joan Robinson.
Hence, I think you are committing the fallacy of attacking a straw man.
BTW, I do not consider economics to be the Queen of the social sciences; IMO that title belongs to anthropology.
Key question: Is economics fit for purpose?
I wouldn't be quite as vehemently down on economics if it actually, scientifically, said that it didn't really have a clue. Then maybe we could clear the decks and deal with the real problem (the system has been setup to be beyond control), and not chase actions based on decade old thesis that have already been shown not to be 'scientifically' right.
Instead we get literally countries being bet on economists' ideas. I had hoped after the massive and obvious failure of virtually all economists to predict the recent financial crash (despite all the evidence) that they would have the honour to slink away - but nope. Even when they were running around like headless chickens after the sky fell, they were confidently stating that we should do the opposite of what the Japanese did; because that didn't work. It's the global society version of the car mechanic 'hitting it with a hammer' because they've no idea what's wrong.
Economics isn't the Queen, and it isn't even the Joker. Nope, its the Ace; played high by the card sharks, but really only worth one.
Agreed. The economics profession as a whole is generally failing right now (this will become more clear over time as this form of economy disintegrates and fails to magically adjust to declining resources and increased pollution i.e. CO2) and, based on the responses of Nick, Don and Jeff Rubin at the ASPO conference when challenged, is also demonstrating an inability to even see the that they have a problem. Thankfully not all of them it seems. The paper from Krugman seems to be a positive step and the economist from the IMF I spoke to at ASPO was able to see that a change in thinking was required, too.
Queen Elizabeth had the right question:
The reason is that the current crop of economists are using a model with a conceptual flaw in it so large that the entire world economy could fall through it — and in fact did.
At least someone in that profession is being critical. Dirk Bezemer, Professor of Economics at the University of Groningen in the Netherlands, put out a paper in 2009 in which he counted how many people predicted what was going to happen in 2008. To be included the following criteria had to be met:
Source: http://www.debtdeflation.com/blogs/2009/07/15/no-one-saw-this-coming-bal...
At the time of writing, the count was a dozen. Since then others have surfaced and the count is now up to three dozen.
Out of a profession with 15,000 practitioners in the U.S. alone, 36 people seeing something as big as what just happened it pretty poor, I would say. If civil engineers had that bad of a failure rate you can trust that there would be some significant soul searching. Actually, because civil engineering math, being based on physics, is so mature that would just never happen in the first place. The occasional failure does occur but nothing like the repeated failures of the economics profession:
What was common in all the predictions that passed the criteria was that they explicitly modeled debt.
Is the small sample size of Nick, Don and Jeff Rubin enough to warrant saying that they economists are still not to be trusted?
It's probably still too early to make that call but it doesn't look good. I'm inclined to think that the current crop has to pass before some new thinking has room to make a difference.
Predictive power is an interesting problem. There are many areas of human endeavor which have difficulties with forecasting. Medicine has a hard time predicting who will have a heart attack. Geology has a hard time predicting earth quakes. Civil engineering has an easier time because they're not expected to make predictions for natural systems - a bridge, say, is a synthetic system, something entirely built by humans, and therefore it's behavior much easier to understand and predict.
Economics is trying to predict one facet of perhaps the most complex natural system in the world: human society. It shouldn't be surprising that this is difficult. Nevertheless, I think you'll find as much correlation in the chart you reproduce as we find in another chart you've occasionally reproduced: the correlation between oil consumption and GDP.
Now, a few people predicted this bank panic/recession. Of course, there are always people predicting recession - they can be described as predicting 20 of the last 5 recessions. Like a stopped clock, they'll occasionally be right.
On the other hand, we have to ask: can they predict other things? For instance, why has Stoneleigh done so badly? Here's a prediction from November 2008: "We appear to be beginning a market rally at the moment, which should lead to precisely this set of trend reversals. Such a rally is only temporary relief however. It may last for a couple of months, but then the decline should resume with a vengeance." http://theautomaticearth.blogspot.com/2008/11/debt-rattle-november-29-20...
That was 24 months ago...
And, finally, Andre, did you predict the current recovery? Yes, it's slow, but there's no question that there was a bottom, and that things have recovered from there, and that the US economy is currently growing. A year ago, did you predict that?
Civil engineering has an easier time because they're not expected to make predictions for natural systems - a bridge, say, is a synthetic system, something entirely built by humans, and therefore it's behavior much easier to understand and predict.
Nick, you are obviously not a civil engineer, and/or haven't worked with many, or you wouldn't say something like this.
We need to predict natural systems all the time - it is the elec eng's, and some branches of mech eng, that rarely have to do this.
The foundations for said bridge rest on a natural system, and no matter how strong the bridge, if you don't understand what it sits on, it may fail. There is a building in Italy in a town called Pisa that is a good example of this.
When we design a dam, be it for hydro-electric, irrigation storage or flood control, we not only have to understand the foundations, but also the weather/rainfall/runoff patterns, and predict what they may be for the next 100years. Same for designing an urban stormwater system, or a pipeline crossing a fault zone, a road over a swamp, the wind load on a tall building, the impact on river/beach sedimentation of bridge piers/breakwaters, seawater corrosion on dock pilings and on it goes. In fact, almost every civil project involves interaction with, and thus modelling of, the natural environment.
We have to model natural systems all the time - it's part of the job.
Fortunately, what we don't have to model (much) is human behaviour - we simply assume the worst, and work from there!
civil engineer...need to predict natural systems all the time
Of course. I just wasn't thinking - I've actually worked with many. Civil engineering deals with a mix of natural and synthetic systems. I was just thinking of the synthetic designed part, but of course it's embedded in the natural, and perhaps most of it's job is coping with ("taming", if you will) the natural part. That's a lesson in dashing things off too quickly, or perhaps just in the importance of peer review...
The point is simply that engineers design things, which means that they have a basic advantage in understanding how something works and how it will behave, while many other disciplines simply have to cope with natural systems over which humanity has relatively little control (including humanity...).
To most people aware of the issues we discuss here, it's pretty clear how poorly the economists are doing both in the short term (the graph from Société Générale) and the longterm (the imminent collapse of the world economy because of a fundamental error in their thinking):
The biophysical economists are doing their best to rectify the situation but they are so small in number that they aren't making much of a dent.
As for your specific questions about the near-term performance of the economy, the highest granularity I go to is 5 years i.e. if I anticipate something will happen by 2020, I make sure the audience knows that it could happen in 2015 or 2025. The point is to be ready for the event before it happens and that as time progresses the probability of it occurring increases.
Currently I am saying that the chance of a cascading stock market failure is 50/50 by 2015 and 99% by 2020. I base this on my anticipation that a contracting economy due to oil shortages will not support the current stock prices and people will at some point panic and run for the exits. The exact trigger isn't relevant; I believe the system to be in a very precarious state.
On January 1, 2020, if the stock markets of the world haven't crashed, I will gladly buy you a wonderful dinner with some fine wine.
Edit: If you'd like to hear how I typically phrase it, please listen to my interview on CBC Radio with Colin Campbell and Michael Lynch:
http://www.postpeakliving.com/content/cbc-radio-interview
To most people aware of the issues we discuss here, it's pretty clear
I don't know about relying on "common wisdom". For instance, it seems to be the same kind of common wisdom that the US has outsourced almost all of it's manufacturing, when in fact the US has 50% more than it did 30 years ago. The common mistake comes from the dramatic fall in manufacturing employment, due to rising labor productivity.
As for your specific questions about the near-term performance of the economy, the highest granularity I go to is 5 years
Really? You've refered often in the last year or two to the economy being in decline, vehicle sales falling, etc.
I base this on my anticipation that a contracting economy due to oil shortages
Yes, that's our basic point of difference. It still puzzles me. Given that the world has managed to grow strongly for 4 of the last 5 years with oil production flat, I can't imagine how anybody comes to that conclusion.
The world economy grew strongly in 2004-2008, declined only .6% in 2009, and grew by about 4.6% in 2010. http://www.reuters.com/article/idUSTRE6670UK20100708 . The US's economy is 2.5x larger than in 1979, while using no more oil than in 1979.
The world's liquid fuel output in 2020 is likely to be at least 90% of current levels. A 10% reduction would certainly reduce economic activity by a few percentage points (perhaps as much as 5%, total) compared to what it would have been otherwise, but a reduction of .5% per year vs the status quo isn't "that big of a deal", in the larger context.
In the long-run, we can and will eliminate our dependency on oil. I'm looking forward to it.
Yes, I know, and I'm tired of explaining myself to you. You clearly can't see the impact that declining oil is going to have on our civilization. You're like x with EROEI and how he continually misses the point because his foot is nailed to the floor.
Good luck with that.
I'm tired of explaining myself to you.
I understand.
It's too bad we can't get to the heart of why you believe that "the impact that declining oil is going to have on our civilization" is so strong. I've reviewed all of the evidence you've given, and none of it really supports it. I wonder what it was that convinced you, and how we can find that out, so that we can clarify for you why it doesn't make sense?
I just don't understand how one can look at the economic growth in the US and world, in the face of flat or declining oil consumption, and think that oil is this magical, irreplaceable ingredient to economic growth.
Heck, I've almost completely eliminated oil in my daily life, with electric trains. I could use my electric scooter to eliminate the rest, if it was safer. I could buy a Leaf, but the 2k miles I drive per year wouldn't justify a new car.
By the way, x is right about E-ROI: it's less important than liquid fuel returned on liquid fuel invested.
I hit the problem of slightly disagreeing with myself here.
I've said I'm not happy with Tainter's words because he says that complexity necessarily creates extra energy usage and therefore lower returns which eventually cannot be met > collapse.
I don't think the 'necessarily' holds true - that we could have more complexity (in the complexity science definition of the word) and lower energy usage at the same time.
However, I have to give him that generally, when humans increase complexity to deal with problems, they tend to increase energy usage. In short, we're usually quite dumb in what we do.
Roll that into a declining oil situation and you get less energy to deal with problems, at exactly the time those problems are increasing because you don't have the oil available to make the existing system work.
Now we could be super smart this time round, as I suggest is possible, and engineer our societal systems to use less energy to meet the problems created by less oil. Or we could massively ramp up other energy sources, whist re-engineering our society, such that we can use the energy to effect the transition. The possibility for that comes down to time and the steepness of the decline.
I'm not putting my money on us being super smart this time, or of the decline being shallow enough, or of us starting transition in time (that one's a given) - I think we are going to be as dumb as we've always been, and things are going to break.
I'd suggest if you want to understand this area, you need to get a whole system viewpoint - and be prepared to slaughter a few economics sacred cows.
PS we've had anaemic 'growth' whilst a plateau because we've been running up debt and using accounting tricks to paper over the cracks. In essence that 'growth' number you quote is based on poor metric of what's actually going on - and reality is intruding, or haven't you noticed?
> "Absent implausibly large differences in marginal spending propensities among the groups, it was suggested, pure redistributions should have no significant macroeconomic effects.” (Bernanke 2000)
Bernanke is right, in equilibrium.
Eggertsson and Krugman's new working paper provides a macroeconomic model for exactly what aangel is saying. When a large negative shock to debt limits happens, the marginal propensities to spend of borrowers and savers do diverge markedly.
It turns out that the distribution of debt does matter after all.
Now, we just have to wait 30 years for this result to make its way into the textbooks.
In the model, deficit-financed government spending can, at least in principle, allow the economy to avoid unemployment and deflation while highly indebted private-sector agents repair their balance sheets, and the government can pay down its debts once the deleveraging crisis is past.
This doesn't seem to support what aangel was saying.
Aangel: > Yes, but the point I wasn't clearly making is that — unless inflation wipes everything out as you say — it is income that must pay back debt and that gets difficult when the debt and thus the interest gets very high, as it is now.
The paper talks about "the paradox of flexibility" in which the rate at which incomes decline exceeds the rate of deleveraging. It seems to me that André has a worldview which assumes incomes are about to start, or have started, a secular decline, or at best have stopped growing, and his statements need to be interpreted with that in mind.
Of course debt-financed fiscal stimulation of the economy could short-circuit the paradox, ceteris paribus. If everyone's incomes are in a secular decline, that's a one-time delaying tactic.
Note the humongous difference between real (i.e., adjusted for inflation) income and nominal income. Over the next ten years I expect real income to fall substantially in the U.S. due to declining oil production. But I also expect nominal income to rise prodigeously due to accelerating inflation. Debt, of course, is written in nominal terms, except for Treasury Inflation Protected Securities (TIPS).
Keynes noted that inflation tends to exist and increase because of the "superior political influence of the debtor class." He is right. Politics says "No!" to any risk of deflation, but "all right" to QE2, which definitely has major inflationary risk attached to it. The history of the Fed is a history of mostly inflation, with the single exception of the Great Depression. Today the purchasing power of the 1913 dollar (date of Fed's founding) is worth more than twenty-five dollars of 2010. In other words, the currency has been debased and debauched. In this respect, I expect the future to resemble the past.
If we could just get rid of the quotas on sugar imports and other subsidies that raise the price of U.S. sugar, I think that cane ethanol would make sense for the U.S. Not as much sense as it does in Brazil, but still profitable and probably able to scale up to take the place of more than ten percent of our petroleum imports and gasoline imports.
If we could just get rid of the quotas on sugar imports and other subsidies that raise the price of U.S. sugar, I think that cane ethanol would make sense for the U.S.
If you consider sugar as a feedstock for ethanol, it makes little sense to have an import quota on "energy", there certainly isn't one for oil. A similar situation exists with tariffs on lumber imports. If you regard each board foot as solid fuel, or biomass to liquids feedstock, which it can be, then it makes little sense to tax renewable energy imports, and not oil - but that;s the way it is!
Eventually, the south will work out a way to grow more biofuels. It is odd that the warm weather states ideally suite for max biomass production don;t, while the northern states better suited for specialty food, do.
Today the purchasing power of the 1913 dollar (date of Fed's founding) is worth more than twenty-five dollars of 2010.
Don, that sounds a bit high. I would have expected something around 10 dollars. Where did that come from?
Check the endpapers of any major economics textbook (for the macro and micro courses). You will see a chart. What three and a half cents bought in 1913 is approximately equivalent to one U.S. dollar today.
I took economic statistics from a man named Kuznets. (You can Google him.) He said in regard to price level index changes over a hundred years: "We're lucky if the first digit is right."
The price-level index I most often use is the GDP deflator, because almost all economists agree that this is the best index to use. Unfortunately, we do not have solid GDP data before about 1940, so once you go back farther than 1940 you have only SWAGS for GDP data. So far as I know, all macroeconomists know about the great difficulty in constructing price-level indexes over long periods of time. I took a year long course (two graduate seminars) in constructing price-level indexes--one on theory, one on real-world problems.
The problem of constructing long-term price level indexes is hairy. But consider the following:
1. When I was a kid, movies cost 12 cents--10 cents for the ticket and 2 cents war tax.
2. When I went on my first date, in 1948, the price of a goodly portion of Coca Cola at the soda fountain was 5 cents--one cent more if you wanted a cherry coke, which both me and my date (a sexy second-grader) did.
3. For a long time the price of a stamp for first-class mail was 3 cents--5 cents for airmail. And the postal service used to be much better than it now is. You could get a special delivery stamp for 25 cents; I don't know if you can buy special delivery stamps anymore. Also we used to get two deliveries of mail per day, one in the morning and one in the afternoon. Local deliveries were made in 24 hours or less.
4. The price of a paper kite was 5 cents when I was a kid--then it rose to 10 cents. Shocking.
5. My father bought the house at 51 Lake Ave. in White Bear Lake, MN for $4,800 in 1943. It's current appraised value is well over a million dollars (lake frontage and two lots on a desirable corner).
6. An office call to the doctor was $4.00. A house call was $5. Do doctors even make house calls anymore?
7. Gasoline was 15 cents per gallon for a long time. Gradually it rose to 25 cents during the early 1970s.
8. Milk delivered to the door in quart bottles was cheap. Do milkmen still make deliveries?
I looked at the BEA, and they say that the deflator for 1940 was 7.7% of the 2010 figure. So, that suggests inflation of 120% from 1913 to 1940. Given the deflation of the Depression, that seems a bit high to me.
Oh, well. If it's on textbook endpapers, I suppose it's probably correct.
Greg - Your comment ("it is income that must pay back debt...") brings me back to the chat we had earlier. For the most part we aren't paying back debt...just paying the interest. The net presenty value of the debt payoff is reduced by the discount (inflation) factor. But we're not paying off these debts for the most part...we're refinancing them. And the NPV works against in this aspect, doesn't it? IOW when we refinance a $10 billion bond in Year 20 the NPV today of that future $10 billion note is significantly larger than when we issued the original bond in Year 1.
Does that make any sense. It gave me a raging headache as I typed it so I'm not sure if I have any idea what I'm talking about. Do you? Thank goodness I'm a geologist and not an economist...Don might take some mercy on me.
I think geology and economics are equally difficult. You can believe the numbers the economists publish just as much as you can rely on petroleum exploration geologists to give you accurate and valid numbers on oil reserves in a field.
Perhaps I'm doing an injustice to economists;-)
Err, I'd say your doing an injustice to geologists.
At least in the end, if the field doesn't deliver the oil they claimed, they will admit they were wrong.
gary - Not entirely. If we don't get the recovery projected geologists can always fall back on the last line of defense: damn production engineers screwed it up.
Or blame it on the damn exploration geologists. I'll repeat a tale that shows just how wrong they can be. My first assignment with Mobil Oil in 1975 was to begin development drilling on a new field discovery in the GOM. My job was to just shuffle the paper work while we drilled off the exploration groups maps. My first 5 wells off the platform were DRY HOLES. Field reserves dropped from 125 bcf to 25 bcf and 25 million bo to 1 million bo. I was dubbed the "undevelopment geologist" of the year. The 2 exploratory wells found x number of reservoirs. The exploration group assumed they would be productive in all the different fault blocks. Obviously a very BAD ASSUMPTION!
Thus began my career as a development geologist who never believed another damn thing any exploration geologist said. LOL. To be fair the explorationists often work with a minimum of data. More drilling = more data. And then when you get to the production phase the knowledge base really expands. That's why it's a shame the KSA et al won't share their data. We could very accurately predict future oil production rates from the known fields today...probably down to 5-10% accuracy. Production trend lines are always much more telling than any map set.
This is religion for GaryP and the engineerists. They're ranting not listening, so you will never convince them. Engineers perfect, economists devils.
Well, a few things.
1) I'm a scientist first and engineer second.
2) My view of economists is a learnt affair. I didn't always have such a downer on them, but the more I learnt, the more I couldn't believe the junk they took as 'laws'. If it were archaeology it wouldn't matter, but this is what societal decisions are based on - and its not even close to fit for purpose.
Frankly I think they are at about the level of water dowsers; and we need REAL science in there, its too important.
Don't bring up water dowsers. The last time I did that several people chimed in to say it was real.
But they weren't all economists
I know a lot about income distribution, both from my roughly 200 credits in sociology but also from classes in economics and economic history.
Your statement that the Bernanke quote is only true in equilibrium is highly misleading. The whole point of economics is that economic variables (such as MPC and MPS) tend to move toward their equilibrium point.
And yes, I have also studied economic dynamics in some detail.
> The whole point of economics is that economic variables (such as MPC and MPS) tend to move toward their equilibrium point.
Yes. Well, no. An equilibrium. After a shock, the system could move to a new one. E & K's paper discusses this for the situation that the US now finds itself in. They say that the key insight is that the distribution of debt does matter in this situation. Neither of them is an economic slouch, either, Don.
Thanks for joining the conversation, gregvp, I'm catching up to the comments as I eat my dinner.
I haven't looked at the paper to which you linked but it does sound from your description like what Keen has been demonstrating for some time now. His various presentations (including the recent one at the American Monetary Institute) point out why debt matters.
Don: as for your suggestion that people should "stick to their knitting," forgive me if I politely ignore that. I'm of the view that a reasonably inquisitive person who doesn't have their foot nailed to the floor (i.e. some agenda or ideology) can understand just about anything — including the very hardest math. Of course it can sometimes be real work but mostly people give up before they gain the understanding they seek.
Or they don't even start because they made some decision about themselves when they were eight years old, like "I'm not good at (math/science/art/whatever)", which they sentenced themselves to for the remainder of their lives. When people truly let go of these sentences they have issued to themselves they almost always are surprised by the results.
This seems to be a consistent theme of yours that people shouldn't ask tough questions if they happen to re-examine a popular belief (in this case, yours).
Sorry but no thanks. Those are the best kind of questions. So you might as well stop making those suggestions to me because I'll tell you now that the chance of me following your suggestion is just about nil.
I assert that the current understanding of economists has at least one fundamental flaw that I know about, which is why their predictive power is just so damn poor:
Since you are writing economic textbooks, I'm inclined to think that your world view shares this flaw and what you have written so far seems to confirm it.
I'd be glad to send you a copy of my textbook; it is very cheap on amazon.com
So you think I'm qualified to debunk engineering just because I'm good at math? I think not. I leave engineering to the engineers--even though they sometimes make huge errors such as on the I-35W bridge over the Mississippi that collapsed. In other words, engineers make faulty predictions (Remember that engineers signed off on the final and fatal launch of the space shuttle Challenger.) all the time--exactly as do economists.
I'm no more qualified to debunk engineering than you are to debunk economics.
A cobbler who sticks to his last generally can make excellent shoes. He isn't likely to be much good as a gunsmith.
Don, you are of course free to think whatever you like. In the meantime, I'm going to continue to point out the flaws of the economists and you are very welcome to point out the ones the engineers make. I have no problem with that.
The funniest (and possibly true to some extent) critique of engineers that I've heard came from a clinical psychologist (Ph.D. and about fifteen years of practice as a psychotherapist). Here is the essence of what she said: "All engineers are more or less autistic. Most seem to have Asperger's Syndrome."
Now I am not a psychologist, so I cannot offer an expert comment on this generalization. If the generalization is true (and she did use the words "All engineers . . .), that would explain a lot of the behavior I've seen among the roughly 100 engineers (mostly EE) I've known.
Umm....
From Wikipedia on Asperger's syndrome;
"Asperger's syndrome (pronounced /ˈæspərɡərz/) is an autism spectrum disorder that is characterized by significant difficulties in social interaction, along with restricted and repetitive patterns of behavior and interests. It differs from other autism spectrum disorders by its relative preservation of linguistic and cognitive development. "
So she is playing up the stereotype that engineers have poor communication and social skills - and there are certainly some that do, but engineers do not have monopoly on that. As for repetitive patterns of behaviour and interest, absolutely - that is why most of us engineers love doing engineering.
And it is a good thing that we have these repetitive patterns, because we want to get what we do, right. Like the saying goes, "doctors get to bury their mistakes, but engineers have to live with theirs for all to see" I would also add, that engineers, more than anyone else, have the potential for hundreds/thousands of people to die from their mistakes, so we take not making them very seriously. If that means we are portrayed as being obsessive/compulsive, verging on autistic, then so be it. You want the person who is charge of providing clean, safe drinking water to you, to be obsessive about the cleanliness of such.
A clinical psychologist makes a mistake - and what happens?
An economist makes a mistake and ...?
I'd suggest that says more about psychologists than it does about engineers.
Look at the massive federal debt after World War II. We managed that debt largely by inflation to reduce its real burden by more than half during the thirty years after 1945.
Agreed that debt has been much higher as a fraction of GDP, but after WWII prospects for the U.S. were very bright. I can't say that today.
IMO, most long-term U.S. debts will be wiped out by inflation rates of 5% or much more over the next fifteen years.
Whether you are wrong or whether you are right, it doesn't change the fact that we are needlessly going into more debt by spending money on foolish programs. So whether the debt is wiped out or not, this essay describes $6 billion a year that we should not spend.
Robert - a couple of points you might elaborate upon when you have a moment. I understand the inflation argument with respect to paying back a loan with $'s of reduced value. But isn't that the most valuable when you're making one balloon payment at the end of the loan? But we aren't doing that. We're making interest payments this month on money we borrowed last month. And those interest payments are coming out of this year's budget...not decades down the road. Also, doesn't the concept of reduced value of repayment due to inflation depend upon actually paying off the loan? In other words, aren't we essentially refinancing old loans every month? IOW we aren't paying off the loans with reduced value $'s because we aren't actually paying off the loans. We're just paying the interest on the loans. And know we're borrowing a portion of those interest payments by taking out new loans? We have X trillions in loans we're paying interest on with today's $'s...not reduced valued $'s decades down the road.
Isn't that the running joke with the credit card companies: they don't really care if you eventually don't pay the loan off as long as you keep making those high interest payments for the next few decades. IOW they may not get that $10,000 balance paid off but they collect $60,000 or so worth of interest over the life of the loan.
Rock - the other blade of the debt repayment scissors is growth. If you take out a loan when your income is $10,000, repaying it when your income has grown to $50,000 is much less of a burden.
Assuming the loan is nominal (not inflation adjusted) then, as your income grows, the interest payments become progressively less of a burden as well. $50 per month means a lot more to the person on $10,000 than to the person on $50,000.
If you assume you income is always going to grow, it doesn't really matter whether you pay off the debt, because you know you can pay it whenever that might be necessary. And governments always have something else to do with their income -- or, rather, pressure groups always find them something else to do with it.
But note that assumption. It's a biggie. I never really understood why Gail made such a big to-do about debt in some of her posts here on TOD, but I'm starting to get it now. Switch from inflation and growth to deflation and ... what's the antonym for growth? shrinking? ... and debt looks like a Very Bad Thing Indeed.
Hey! I've just turned into a Debt Bug! ;-)
...and yet one aspect of de-growth is very low interest rates, which leads to the Treasury borrowing more with less burden. I have read that the US government's payments on debt interest are much lower now than in many years.
Of course there's likely to be a catch there, such as if one's position becomes one where high interest rates cannot be survived.
Valid points Greg. But my point was that you don't pay the note off when you're making $50,000....you borrow the same money back again. And this time you're borrowing value reduced $'s thanks to inflation...so you have to borrow more to buy the same stuff you bought decades earlier. And while you were growing you were paying part of your increased earnings in interest. So you've given up part of your increase while at the same time didn't pay the balance off. So now you have to pay back the same loan all over again. And you're still just paying interest and not balance. Add to that the new loans you've taken out to pay for your budget short fall which is partly due to the interest payments you have to continue paying on loans you took out decades earlier.
I know what you mean about being a debt bug. What did it for me was to pay close attention to how much of the fed budget is going towards interest payments. One interesting metric of that aspect: the interest payments we're making to China today is more than they spend on importing oil by around 25%. So not only are we turning over a big chunk of the fed revenue but are also funding China's effort to buy up future oil reserves thatwe won't have access to. Framed like that I wonder how many would really see the inflation adjusted payback as a good thing.
the interest payments we're making to China today is more than they spend on importing oil by around 25%.
hmmm. IIRC, China is importing about 1.5T b per year of oil, or about $120B. China has about $2.2T in Treasuries, at perhaps 2%, on average, for about $44B in revenue.
That sugggests that US interest payments are only funding less than half of the Chinese oil bill.
Nick - I don't have the link nor can I confirm it's accuracy.
Just pulled this up from wikipedia (http://en.wikipedia.org/wiki/United_States_public_debt): as of 7 Nov our T note debt was $13.732 trillion. China owns $846.7 billion of the T bills (July 2010). Using your 2% that means we're delivering almost $17 billion/yr in interest payments to China.
EIA says China imported 1.57 billion bo in 2009. Or some where north of $100 billion/yr today. So the interest doesn't even cover 20%. I must be more careful who I reference. Thank goodness few pay attention to any economic statements coming from a geologist. Otherwise I would feel very embarassed
Well, heck, I just had a flaky mistake caught by Paul Nash.
That's part of the fun of TOD...
True Nick. One reason I don't mind tossing out questionable reports: almost always someone who has the facts straight.
Happy Gobble Gobble to the TOD mob.
Happy Thanksgiving to, and all!
As you can see, the really big issue, is private, not public debt. And countercyclical spending means the government has to increase its debt burden while the private sector unwinds its own. The government can't go broke, it creates/destroys money via the central bank. And it isn't vulnerable to hyperinflation either. With a constant velocity of money the inflation rate is the rate of increase of money minus the rate of increase of net production. So the government could fund an X% deficit indefinitly as long as
the sum of the inflation rate minus the GDP groth rate equals X. So if we take some reasonable numbers say X=5%, and the growth rate is 2%, the long term rate of inflation would be only 3%. This is in stark contrast to the way it works for families and businesses, where a builtup debt hole is a serious problem. Since people don't understand this, and the special status of government feels unfair, this meme is endlessly pounded in. The result is just more starve the beast politics. The result is to let the oligarchs take it all.
Philosophically, I'm closer to your thinking than my comment may first appear but it's still important to note what I think is an error in your thinking:
That is in a strict sense true but misses the point. Debt and the changes in the level of debt currently far outstrip the capacity of the government to flood the market with money for a variety of reasons. The biggest reason is that most of our money comes from the banks, not the government. The next big reason is that we are firmly in a liquidity trap.
Still, as you point I do believe the ideology of "starve the beast" is currently gaining traction. As for me, I have no trouble paying my taxes because I think I get value from them. But what has happened in the last few decades just doesn't work with excess expenditures, both private and public. Everyone has been spending beyond their means anticipating that future growth would just make it all work out.
Then, unless I'm misunderstanding what Don is saying, there are people who with all sincerity try to say that the current model being used by Bernanke et al is accurate. Redistributions in the form of debt are benign only in small amounts.
I was just a kid when Reagan the air traffic controllers that went on strike. Looking back, it marked the beginning of a new era of Reaganomics. Cut taxes, cut spending and then wealth will trickle down to the little people. We, the working class, have been trickle on, for sure. Oh yeah, if you have to fight a war, just borrow the money from the US tax payer. How are we going to tax cut our way to prosperity and fight two lost wars simultaneously?
I was just a kid when Reagan fired the air traffic controllers that went on strike. I apologise for my bad grammer.
I was just a kid when Reagan fired the air traffic controllers that went on strike. I apologise for my bad grammer.
Hi W. c. c. t.,
If no-one has yet replied to your post you can edit it - there should be the word 'Edit' before "Reply | Reply in a new window | ..." at the bottom of the post. ("Edit" only shows on your own posts, of course.)
Don't worry too much about grammar. Many commenters have English only as a second, third, or fourth language, and everyone makes typing mistakes or drops the occasional word, so we all tolerate mistakes.
If you'd like people to read what you say, though, keep the paragraphs short -- which you're already doing. Keep up the good work!
Federal spending was 18% of GDP in 1980, today it is still 18%. This is all about starve the beast, and nothing to do with reckless spending, it is out of control tax cutting. You've drunk the coolaid, that decades of rightwing propagandists have been spewing.
Sources please. As the graph in my essay shows, public debt grew very rapidly from 1980 (largely under Republican administrations), and of course in the past couple of years with all the bailouts we are spending more even as we are taking in less. And contrary to your claim, we have had a good deal of reckless spending.
To repeat, I loathe waste, and I loathe borrowing from my children for foolish spending today. I can give you a long list of items that fall into the "foolish spending" category, one of which is the topic of this essay.
Outlays and receipts as a percentage of GDP can be found in Table 1.2 from the OMB. While e.o.s. has the specifics wrong, he is right that federal spending during the 30 years has not changed significantly. Spending increased in 2009 in response to the recession, which is appropriate, while at the same time revenues fell. The combination of increased spending, decreased revenues, AND a smaller GDP is why the deficit for 2009 was the largest as a percentage of GDP since WW2. (The 2010 numbers are estimates in copy I downloaded.) e.o.s. is also right that the current outcry is largely driven by efforts to cut Social Security and other non-defense spending. The real problems in the long-term budget outlook are, in order, health care costs, military spending, and tax revenues. Social Security is solvent until the 2030s, and everything else is noise.
I'm a bit surprised you posted the graph of nominal debt in the first place. Because of inflation and substantial population growth, naturally nominal spending increased significantly since the 1930s. But the two factors also render the chart meaningless, bordering on deceptive. In macroeconomic discussions, only ratios relative to GDP matter.
I don't know how I missed that the graph was in 2009 dollars, but it is still meaningless due to population growth and general per capita economic growth. Only the percentage of GDP matters.
I'm a bit surprised you posted the graph of nominal debt in the first place. Because of inflation and substantial population growth, naturally nominal spending increased significantly since the 1930s. But the two factors also render the chart meaningless, bordering on deceptive.
Well, no, not deceptive, just poorly worded. All I intended to convey was that we are deficit spending to fund this ethanol subsidy. I am amazed at the digressions around my actual wording, but will be more careful in the future.
RR:
Sorry I took the discussion so far off topic. We have two separate discussions going on here. One is about macroeconomics, and debt in general, the other is about
ethanol subsidies. We are entirely on the same page about the later. Its just that
I see my country heading for some very bad times, and some memes you repeated are a big part of how we are being manipulated onto this path.
Early in the program ethanol subsidies might have made policy sense, i.e. we didn't
know if it was a viable technology worth pursuing so some public investment was justified. But, the susidies acquired a life of their own based primarily upon
geographically concentrated interest groups. Its really really hard to get good policy when strong political forces get involved.
And getting back to ethanol - have any of you read David Blume's work on sustainable ethanol? He claims that the focus on corn-based ethanol (30G/acre/yr) is crazy, there are plants (feedstocks) that will make thousands of gallons per year and can improve the soil, grow in waste lands in the U.S., use sewage as fertilizer, and generally benefit the environment and local economy while providing fuel... My physics degree is pretty rusty, but I exercised it a little bit to look into his claims, and thought they have serious possibilities. http://alcoholcanbeagas.com/
Shodo,
Blume's book is excellent and has forced me to reverse my once-negative opinion of alcohol. While corn may not be the best feedstock, as I recall he claims the dregs from distilling are even healthier for animal feed than the plain corn. And the many by-products from distilling apparently give a very high ROI to ethanol production.
In that vein, I've been doing small batch distilling with my little square foot solar cooker, and can get about 4 to 6 ounces a day of ethanol. Of course, to bump it up to fuel-usable level is going to require a few more distillations, but as far as I know, no one is using solar for this. It works very well, and you can set it and forget it, at least in small batches.
Blume's book should be a must read for ANYONE with an opinion on ethanol. First rate, first class.
Of course, NO fuel is going to last given our current level of use, which will drastically decrease at it hits the fan, however, alcohol MAY prove helpful on local levels.
Complete and utter BS! Federal spending was 18% of GDP in 1980, today it is still 18%. This is all about starve the beast, and nothing to do with reckless spending, it is out of control tax cutting. You've drunk the coolaid, that decades of rightwing propagandists have been spewing.
There was actually a bottom portion of that graphic I posted, which shows debt as a fraction of GDP. It clearly shows that you are wrong:
We have an almost vertical spending line over the past few years, even as a fraction of GDP. Overall spending has been on an uptrend since 1980.
Robert,
Your graph shows debt, not spending. The sharp increase in debt shown in the 1980's was caused primarily by tax cutting, not increases in spending.
I agree that much of the Reagan and Bush tax cuts were irresponsible.
I also agree that most of the anti-tax/anti-spending rhetoric is also irresponsible. Please, try to fine-tune your writing so as to not fuel anti-government propaganda.
Your graph shows debt, not spending. The sharp increase in debt shown in the 1980's was caused primarily by tax cutting, not increases in spending.
Are we really debating whether federal spending is sharply up over the past two decades?
But you are getting side-tracked here. Whether federal spending is up, down, or sideways -- the key point here is that there are programs that are wasting billions of dollars, like the VEETC -- and we are deficit spending to do it. There is no argument there.
Please, try to fine-tune your writing so as to not fuel anti-government propaganda.
Of course I am not anti-government. Where spending is clearly justified, I have no issue. Heck, I favor national health care. But the VEETC is an utter waste of money.
Are we really debating whether federal spending is sharply up over the past two decades?
Sure. Before the justified counter-cyclical spending of the last 2 years, Federal spending hadn't risen greatly as a % of GDP. The fact that this isn't clear is a triumph of anti-government propaganda (and I use that word carefully).
Of course I am not anti-government. Where spending is clearly justified, I have no issue. Heck, I favor national health care.
That's great. What I'm suggesting is that you
1)include those last two sentences in a post like the above, and
2) change "Over the past decade, the U.S. has been on a spending binge, spending far more money than we have collected in tax revenues. " to "Over the past decade, the U.S. has been on a borrowing binge, cutting taxes to a level far below spending.
That would help a bit towards improving the national mental health.
Before the justified counter-cyclical spending of the last 2 years,
Not all of it. Cash for Clunkers, IMO, was a waste of money.
That's great. What I'm suggesting is that you 1)include those last two sentences in a post like the above, and
Well, one of those sentences is in the essay.
Dashing out the door for the rest of the day. This essay will probably end up in Forbes, and comments like this do help. Whether it was spending or borrowing isn't relevant to the point that it is deficit spending on a useless subsidy. So I don't want people to become distracted by whether or not the deficit increased from spending too much or taking in too little. For the point I am making, that doesn't matter so I will make sure that Forbes readers don't get lost in the weeds.
Yes, Forbes readers will be very apt to get distracted by something that has a hint of the growing anti-government spending anger.
There was actually a time when governments could make "decisions" and implement "policies" which did not HAVE to involve spending, but these days, ti seems that government activity is measured by spending, whether or not the spending actually achieves anything.
This ethanol subsidy is a prime example. The RFS policy is doing the job, and they could have done without the spending.
Another example is the $20bn for high speed rail. It is being spread around so thin, it probably won't result in a single project, just lots of studies, plans, and some incremental improvements to make existing passenger rail (where it exists) faster.
Health care is actually the reverse - a policy only thing when it probably should be gov spending, like in most other advanced countries.
But it often seems that spending is regarded as an end in itself, and that leads to poor spending decisions, like the ethanol subsidy.
No, the spending is not an end in itself. The sugar subsidies of the U.S. (and other subsidies on peanuts, rice, cotton, corn, soybeans, etc.) all reflect POLITICS. They are 100% political and have nothing whatsoever to do with economic logic. Indeed, as you pointed out, such subsidies violate economic logic. The U.S. House of Representatives and even more the Senate, have logics of their own. Who do you think contributes most to the campaigns of legislators from Florida, Louisiana, Colorado, N. and S. Dakota and other sugar beet or cane producing states?
Yup. You "guessed" it.
My guess is the healthcare sector. Let's go see:
I know, different election cycles. American Crystal is #103 on the list of alltime "heavy hitters":
http://www.opensecrets.org/orgs/list.php?order=A
Thanks for your responses, Nick. And yes, I can imagine the readers of Forbes will clearly take the message as government over-spending rather than under-taxing. Btw, US costs in Afghanistan must dwarf spending programs like "Cash for Clunkers," etc., no?
Yes, I'm endlessly fascinated by the ability of people who identify with the "conservative" tribe to thoughtlessly approve of massive military expenditures, while objecting to much smaller items that they associate with the "liberal" tribe.
Quoting you Enemy, "Complete and utter BS!"
Kent Conrad says federal spending's share of GDP is at 60-year peak,
Ron P.
It seems delusional to me to discuss the recent economic salvage mechanisms as simple "government spending", they are not. The fact that right-wing de-regulation allowed subprime lenders and derivative writers to go stupid with banking companies on which the entire world depends, then the following administration got stuck with the bailouts, says nothing about Republican or Democrat fiscal policies.
In general, my observations over the past decades is that in the US, right-wing governments run up deficits, less-right-wing governments try to reduce deficits. That applies not only in the US, eg. it was conservatives under Mr. Mulrooney who ran the Canadian budget into near-collapse territory (also with tax cuts incidentally, except for a slightly increased VAT tax system mainly paid by poor-middle classes) while Mulrooney and Reagan sang "Irish Eyes" on a bandstand in Quebec. Then the subsequent Liberal government in place nearly 15 years completely eliminated the budgetary deficit and ran the country for years with a serious budget surplus. Then along came the right-wing reform-conservatives under the present yahoo and here we go again.
The right-wingers aren't only disruptive of good government, they're lying jerk-off disruptors.
Looking at various numbers, Ron, it seems that yours include Social Security payments and also payments for Medicare and Government pensions and Veterans benefits. Technically, these are correctly called "transfer payments" and do not represent government spending on goods and services.
Economics has special words to avoid such confusions. The simple fact is that Government spending on goods and services has not increased during recent decades as a percentage of real GDP. What has happened is that Federal Government transfer payments (generally from the more rich to the low-income categories) have increased at a rapid pace--several percent a year in the case of Medicare, for example.
Transfer payments are counted as income by recipients (with the exception of Medicare and Medicaid). But they are not part of GDP because they do not represent current wages, interest, rent, or profit. Thus what transfer payments amount to is taking money out of Peter's pocket and putting it into Paul's pocket. What has been causing runaway increases in Government spending is huge increases in transfer payments--and nothing else. Of course the Federal Government finances these transfer payments with trillion dollar and rising deficits.
Both the Government deficits and also the rapidly growing Federal debt are matters for serious concern by economists; there are a zillion articles by mainstream economists in the most prestigeous journals of economics on these topics, e.g. THE AMERICAN ECONOMIC REVIEW. In contrast to the numerous statements by various posters on TOD to the effect that economics is inadequate because of lack of attentions to deficits and debts, all I can do is to call B.S. on this critique--and urge people to read some good economics, e.g. the old Macroeconomics and Microeconomic paperbacks by Heilbroner and Thurow. (The two volumes are combined into one hardcover economics text also.)
I used to review economics textbooks for money, and all I can say is that it is one of the most lucrative parts of the college textbook publishing industry. Successful economics texts can earn many millions for the author and even more millions for the publisher. (Joseph Stiglitz was paid $3 million as an advance for writing his economics book after he won the Nobel Prize in Economics. It isn't as good as several other competing texts.)
RR -
Haven't you given corn ethanol an EROEI of 1:1 or 1.1:1?
My wife's SUV got @19 mpg on strait gasoline. The 10 % required ethanol drops her mpg to @ 14.
So we are using 25% more gas to drive now.
Does the ethanol mandate help the oil companies? It would appear so.
comments?
You wife is putting E85 in your car, Delusional.
(I guess crazy runs in the family. Just kidding Hardeeharhar!)
10%-
http://news.opb.org/article/2666-oregons-ethanol-mandate-under-fire/
Only -10%...you let me off easy.
Check your tire pressure, and log all your fill-ups, and average speed. My 2001 prius was at 35MPG on a tank of straight gasoline, and then on the next fill-up, with 30% ethanol (blender pump), and after I inflated the tires from 25lbs to 35lbs, I was getting over 50MPG. The effects from tire pressure, wind, and average speed are almost an order of magnitude larger than the difference from regular gas vs ethanol.
Oh, and btw, the check engine light actually came on with regular gas, since I've been averaging 20%-50% ethanol so long the long-term fuel trim adjusted to the different energy content.
Quite so. An old mechanic, with whom I did business for fifteen years, told me that the Ford Taurus runs much better on E-85 than it does on regular unleaded. Also, my doctor drove his Taurus on E-85 for more than 500,000 trouble-free miles. I seriously doubt that many Taurus engines of the nineties lasted this long on regular unleaded. E-85 is a cleaner burning fuel (at least in some engines) than is regular unleaded.
"In the next post, we will examine the possibility that part of the VEETC is going toward subsidizing exports."
Robert,
I just wrote about the DDGS export market, which is a big component of the ethanol export story these days. Dineen recently reported that 27% of our DDGS product has no use here in the U.S. since our market is maxed out and is pleading for more exports. We produced the same volume of distillers grains in 2009 as the amount of grain fed to all of the cattle in American feedlots.
See: The Distillers Grains (DDGS) Export Market
Kalpa -
Your article on the DDGS market was informative and very enlightening.
From what I have gathered the only thing that gives corn ethanol a (marginally) positive EROI is the energy credit assigned to the DDGS co-product. I was always suspicious that this was somewhat of a fudged analysis intended to make the energy return for corn ethanol look better than it really is, and it now looks even more dubious to me. (I'm not sure if this is how it's done, but to be realistic the energy credit for the DDGS should be set equivalent to the energy content associated with the production of the mix of grains that the DDGS displaces rather than the energy content of the DDGS itself.)
But now to my main point: If indeed it is true that we have DDGS coming out of our ears and need to export that surplus, then does it not follow that the energy credit associated with the exported DDGS can no longer be assigned to US energy consumption, but rather now goes to the energy consumption of those countries that import the DDGS from the US? And if that is true, then doesn't it also follow that the EROI for a certain fraction of our corn ethanol production now dips below unity as far as the US is concerned?
Somebody out there please show me the flaw in the above reasoning.
My impression is the DDGS credit is fudged also. Nowhere have I seen it actually itemized on the credit side of the energy analysis. Shapouri et al tack it on after the energy analysis of the ethanol, almost as an afterthought. They argue that because X% DDGS protein replaces X% "other" protein, then energy invested in "other" protein must be saved and can be credited to the ethanol account. That is wrong, because Shapouri et al have not bothered to actually measure the energy cost to dry, bag, transport, store the DDGS. They assume that it's use is automatically credited, rather than a possible waste product that must be handled at an energy cost.
Robert,
As you have pointed out in other posts over the years, corn ethanol may make good economic sense in certain niche markets, e.g. in Iowa and southern Minnesota.
What about sugar cane ethanol? In your opinion, would it make sense for the U.S. to emulate Brazil by expanding greatly in Florida and Louisiana and adjacent states the cultivation of sugar cane for ethanol?
Also, if the price is low enough, wouldn't it make sense for the U.S. to import ethanol from cane from the West Indies and other nearby locations?
Iowa, Southern Minnesota, Florida, Louisiana, and also Hawaii are all great places where corn, sugarcane, or sweet sorghum ethanol make sense. These places all have either farm owner-operators, or *some* amount of worker protection laws.
Do you wish to drive based on effective slave labor conditions for cane harvesting that West Indies or other 'cheap' sugar producers benefit from?
I would rather see all the credits/subsidies/whatever go towards mandating installation of blender pumps (E85, E50, E30, E20) at all new filling stations in the US, as well as country of origin labeling for fuel.
Let the market and consumers choose, instead of someone in a backroom in washington.
...I'm trying to think of a single example where the slave-labor conditions of the workers (common in every sector of our lowest-cost-gets-the worm global economy) led to consumers making an alternate choice - more expensive but morally comfortable.
What about sugar cane ethanol? In your opinion, would it make sense for the U.S. to emulate Brazil by expanding greatly in Florida and Louisiana and adjacent states the cultivation of sugar cane for ethanol?
I think we would have to address the sugar subsidies first. I have talked to domestic sugar producers, and they have told me that the subsidies always favor the production of sugar over ethanol from sugar. There is molasses byproduct that could be converted to ethanol, but it is currently used in animal feed and the economics generally favor that usage over ethanol production.
I drive a diesel powered vehicle that gets almost 30% better fuel economy than its comparable gas powered counterpart. The gas powered vehicle is getting at least a $0.05 subsidy per gallon as the oil Cos. pass on the ethanol tax credit. Since Diesel fuel cost $0.35 more per gallon here in St. Louis, the more fuel efficient vehicle owners are not subsidized and in most places are paying more tax per gallon than the gas users.
In effect, the VEETC is encouraging less fuel efficient transportation.
Unless some way is found to change the refining ration of gasoline versus diesel, on the system level it is meaningless to claim one fuel is more efficient that the other. We can't shift relative demand from gas to diesel or the inverse without creating a shortage in one an an excess in the other. Diesel may or may not be a good individual choice, but it is not a way to mitigate societywide fuel shortages.
Not completely true.
Many modern refineries have the ability to vary the ratio of gasoline and diesel fuel produced from a barrel of oil. The US exports diesel fuel to Europe because of the higher demand there and better marginal price. This diesel fuel could easily be used by the US market if enough diesel powered cars were produced in the US. Furthermore, if more truck transport would shift to rail (50 to 75% fuel savings per ton hauled by rail) then more diesel is available for cars again.
Why then not attack the elephant in the room? Namely oil subsidies.
They are much larger. If Wars for Oil Security and security expenditures for fighting terrorist flashback are added in, they are gigantic. That oil's de facto subsidies are ignored while a measly mole hill of about $6 billion of ethanol subsides are made into a mountain proves that the whole anti ethanol subsidy campaign is the work of the oil lobby.
When ethanol is subsidized we get more ethanol. Oil is subsidized heavily, but we don't get more oil.
This country runs on subsidies. Subsidies for the unemployed. Subsidies for the retired. Subsidies for health care. Subsidies for education. Subsidies for cars. Subsidies for food. Subsidies for home purchases. Subsidies for banks in the form of free money from the Fed. I can go on and on. The idea that there is a free market with a level playing field in the U.S. economy is pure myth.
Unfortunately the oil lobby's campaign against ethanol subsidies looks like it will succeed. RR will get his way.
We will be left in a liquid fuel market where depleting fossil fuel oil is heavily subsidized and ethanol, the renewable liquid fuel is not.
I have commented before that cellulosic ethanol is dead. The removal of ethanol subsidies will guarantee that is does not rise from the dead. Ethanol will be left to wrestle as much of the market as it can get with one arm tied behind its back and under a blending ceiling.
It this what America needs in a Post Peak Oil world? If the oil lobby gets its way, and it appears it will, a playing field tilted heavily in favor of depleting oil is the mandate for the future.
Americans deserve what they get.
Sorry to sound like sour grapes. The whole EROEI lie where energy content is put above energy form is behind the ethanol put downs. It makes no sense. The big money behind the anti ethanol campaign comes from those who have something to gain.
They are not altruistic as they would like you to believe.
They are not morally superior to those who support ethanol. I will personally will not suffer much if ethanol is stopped in its tracks.
Iowa with its many plants will continue as before because it is the low cost producer.
This year I delivered corn to the Christensen Farms feed mill from where it goes to hog factories. This is a gigantic waste of energy for a product that the pork market says we do not need.
But ethanol opponents should be happy. Now more hog manure can run off and stink up the environment. More surplus pork can be exported to Japan and China.
Who needs liquid fuel for transportation?
Why then not attack the elephant in the room? Namely oil subsidies.
I had this discussion with a journalist yesterday, and I will tell you what I told him. We had several exchanges, and I will repeat my 3 responses:
First Response:
First of all, I don't want to see any kind of subsidies given to the oil industry either. I want consumer to pay fully realized costs for gasoline, because I believe they would use less of it.
Second, even though I agree that oil companies receive various subsidies, if you look at it relative to the amount of oil versus the amount of ethanol we use, the ethanol subsidies are far higher.
But third, and most importantly, is the issue that even if the oil industry is heavily subsidized, they still have to meet their RFS mandates. So the ethanol industry has that captive market; there is absolutely nothing that subsidies do to help them there. It is just money thrown away. The RFS itself doesn't annoy me, and that is a huge subsidy for the industry. That's better than a subsidy. But then to add a subsidy on top of it is silly.
Second Response:
Give me a specific example of an oil subsidy and tell me how you would eliminate it. For instance, the argument on military spending. I have always felt that isn't an oil company subsidy, but rather a consumer subsidy. Taxapayers are subsidizing drivers through military spending. But how would you rectify that? It is much more complicated than if it were a per gallon subsidy that oil companies receive. Believe me, if oil companies got a per gallon subsidy -- and we were being mandated to use their product -- I would scream bloody murder. And if you can show me an analogous sort of situation in the oil industry, I will.
Also keep in mind that I have argued often for much higher gasoline taxes to capture some of those costs that we don't see at the pump. So one way to make drivers pay for military spending is through higher taxes. But I have been making that argument for years. So any subsidies that oil companies do receive would be somewhat offset like that. It would be analogous that instead of me arguing to let the VEETC expire, I argued for higher taxes on ethanol. The end result would be the same, except getting rid of the VEETC is obviously a much simpler solution.
Third Response:
If there is a specific subsidy that lowers the price of gasoline, I am against it.
I think I will write a follow-up that specifically addresses this issue. I have posed the question before of whether oil subsidies are ever justified. I think the answer to the question is that they are justified if you are trying to get oil companies to do something they otherwise wouldn't do (e.g., perhaps the VEETC without the RFS in place) or if the consequences of not subsidizing are worse than the consequences of subsidizing. For instance, some people have called the foreign tax credit an oil company subsidy. In fact, all industries are eligible for this subsidy. If oil companies pay tax on income in the UK, then they aren't double-taxed on it if it is repatriated. So what happens if that tax credit is eliminated? The money won't be repatriated and you put our domestic oil companies at a disadvantage to those foreign producers (like BP) who would still get the credit. To me, this is more like an issue of the small producer credit for ethanol (or oil), which I have never complained about. The nature of my complaint over the VEETC is simply about the redundancy.
I think one other issue is worth mentioning in the subsidy discussion, and that is net revenue to the government. Again, I would eliminate all subsidies (provided they don't put our producers at a competitive disadvantage) but the oil companies do generate enormous tax revenue. So in the context of a discussion of subsidies versus the volume of production versus tax revenues generated, I think you will find that the subsidies are pretty imbalanced when comparing ethanol to oil.
Robert,
I'd be curious to hear your thoughts about the following argument by Jim Woolsey 1.
"About a quarter of what is in your gasoline tank is benzene, toluene, and xylene and those are highly carcinogenic. If you emitted even tiny bits of those form a chemical plant, you would be in deep trouble with the regulatory system but that junk can come out the tailpipes of every car in substantial quantities and it is not effective regulated under US law. EPA has the authority to regulate the aromatics but they haven’t done it for the forty years of the existence of the Clean Air Act.
So there are a lot of reasons to move off oil, and cancer is one. There’s an added cost of 200 billion per year due to health consequence of the aromatics."
1Jim Woolsey Ex-director of the CIA. 1973, general counsel of the Senate Armed Services Committee, four Presidential appointments in the executive branch - two Republican and two Democratic administrations, all related to national security.
http://gm-volt.com/2010/11/22/qa-with-jim-woolsey-energy-independence-ad...
Woolsey is misinformed. Toluene and xylene are not carcinogens. Benzene is, and there are EPA rules in place to phase benzene out of the gasoline supply (so he is wrong about that too). But benzene is a very small amount of what is in gasoline. So Woolsey's fundamental premise of 25% carcinogens in gasoline is simply wrong. I don't know how he came up with $200 billion per year, but given how badly wrong he was on the others I have no reason to believe that is correct.
Thanks.
Any idea how he got this idea, or where it came from? Have you ever heard anything similar before?
Nick, those aromatics are commonly referred to as BTEX (Benzene, toluene, ethylbenzene and xlyene) . They are an indicator used to identify soil and groundwater contamination by fuels (I used to clean these up for a living), and are also usually the worst component - straight chain alkanes biodegrade very easily.
My understanding is that BTEX used to be a much larger component of gasolines back in the mid century, but is not so today. he probably hear of them in discussion about cleanups of contaminated sites - the military used to be one of the worst offenders, and ended up with several Superfund sites.
They are certainly a problem if they make it into the bioshpere, and are something that none of the alternative fuels, even F-T fuels, have. They are also only in minute fractions in diesel fuels.
Any wild guess as to the current costs created by their presence in gasoline?
When I took Environmental Chemistry, I found out that the aliphatic compounds are worse than the aromatics. Please correct me if I'm wrong; I had only one college class in Environmental Chemistry.
hmmm....dunno. I've had many chemistry classes, even taught a few (and have taken at least 2 economics courses), but tend to think of aliphatics as generally safer than aromatics. BUT...each compound does its own things. Toluene is benzene with a methyl groupl. Aspirin is benzene with acetyl and carboxylic acid groups. So..if one found the top few carcinogenic compounds, *perhaps* they would turn out to be aliphatic (not aromatic which refers to delocalized electrons), but there are also vast numbers of benign compound in this group.
As far as the early discussion of benzene in gasoline...I am guilty of thinking that gasoline does have a large fraction of benzene. In fact, I set up an analytical lab back in the early 90s using GC-MS to fingerprint a dozen or so gasoline samples in Tacoma and I distinctly remember seeing lots of benzene. (On a side note, regular leaded gasoline turned out to not have any lead in it at that time, even though the ban didn't really kick in for a couple more years.) I believe there has been a large effort to replace the benzene with more accepted compounds, but I just read that producers have to *average* a low percentage....they can buy benzene credits from outfits that have low levels to allow them to exceed whatever the EPA standard is (1%?). Even at 1% (it that is a relevant number), a 20 gallon tank of gasoline has about 1 quart of pure benzene.
The whole credits system is a fraud allowing BAU while twisting attempts to improve into a slough of despond.
NAOM
Well, it really doesn't matter which is worse (aliphatic/aromatic) - from a soil/groundwater point of view, they are all bad.
it is impossible to put a $ value to it -except that it is large, but not increasing as fast as it used to. What is the cost of a groundwater supply that is contaminated indefinitely, or the people that got leukemia from benzene? Or of urban land, contaminated such that it can't be used for anything except covered over as a plying field (most suburban playing fields are over landfills of some sort).
Clean up costs vary widely, especially depending on the number of lawyers involved., and, thankfully, contaminated sites are not being created at the same rate as they were in the 60's through 80's, so the net amount of contaminated land should be decreasing.
Consider any gas station older than 15 yrs, and the area and groundwater around it, as a contaminated site, and every storage depot refinery, etc, and you quickly get the idea as to the magnitude of the problem.
Robert Rapier -
Military spending to control access to Middle East oil can definitely be viewed as a subsidy, but whether it is a subsidy to the oil companies or to the consumer depends on one's point of view. As such, it is just as valid to say it is a subsidy to the oil companies as it is to say it is a subsidy to the consumer, as you prefer to view it.
However, rather than call such military spending a subsidy, let's just call it what it really is: a cost of continuing to do business. When we do that, I think the question becomes more clear, as it is no longer a question of who gets the subsidy but rather of who bears that cost.
The problem with an increased tax on gasoline to pay for the military cost of providing oil is that it would not be too difficult for the consumer to wind up paying twice: once in his regular tax burden, and the second time through the tax on gasoline. The only way this would not be so is if the increased tax on gasoline were offset by an equivalent across-the-board reduction in personal income tax. However, given the nature of the US Congress, I doubt that would ever happen.
In my view, a far more equitable way would be to charge the oil companies a 'military protection surcharge' on every gallon of imported crude. (It could even be on some sort of a sliding scale.) The oil companies would then pass that increased cost on to the consumer. I think this would accomplish two things: i) make the oil companies openly acknowledge that the taxpayer through defense spending is helping them stay in a highly profitable business, and ii) put downward pressure on gasoline consumption through increased price.
This might strike some as a crackpot scheme, but I think it would distribute the pain more equitably between the consumer and the oil companies. The oil companies get hit up front and then they have to sort of 'bargain' with the consumer to recoup the surcharge. Maybe it's workable and maybe it's not. However, it is all academic because the political power of Big Oil would never permit it to ever see the light of day.
Robert, excellent post, thanks for your work.
Joule;
There are many people in the Middle East that hate the U.S. Some of them hate us enough to sacrifice their life to attack us. If we asked them to draw up a list of the things they hate us for, “Buying our oil and making us rich” would be far down the list if listed at all.
If we asked them to draw up a list of the things we would have to change to make them like us, “stop buying our oil and stop making us rich” would be far down that list if listed at all.
Imagine that tomorrow someone perfected cold fusion such that electricity would be unlimited and almost too cheap to meter. We could start making hydrocarbon fuels from atmospheric CO2 and eliminate all oil imports.
I think that would just make them madder, and we would still need a strong military. So, what exactly is the military subsidy to the oil industry?
I do agree that the known externalities, environmental and health effects of burning all fossil fuel types should be rolled into the final cost.
So they don;t hate you (I say you as I live in Canada) because of buying their oil, but what about the political influence and military presence to ensure the security of said oil? The only other real interest the US has in the middle East is Israel, which is reason enough for them to hate America, but I think it has gone way beyond that seeing a carrier group off your coastline every day is bound to get people worked up, especially when they have nothing else to do.
" The only other real interest the US has in the middle East is Israel, which is reason enough for them to hate America, "
So you think we are wrong to support the only democracy in the Middle East? We should sacrifice Israel in exchange for oil?
" what about the political influence and military presence to ensure the security of said oil?... it has gone way beyond that seeing a carrier group off your coastline every day is bound to get people worked up "
You say the carrier groups are there to protect the oil, but we have no carrier groups off the coast of Canada, Mexico or South America. You live in Canada, we buy your oil; does that incline you to kill Americans?
Why don’t we have carrier groups protecting shipments of cars, TV’s and computers from Japan, China, Taiwan, etc? If terrorists blew up several boatloads of TV’s headed for America would you demand that the TV industry pay for the military? Many countries welcome U.S. military forces to help reduce the risk of war in their region and to reduce their own military expenditures; their people do not blow up our buildings, airplanes and people.
Conflict between east and west has been going on for thousands of years, long before the oil age, and it may continue long after the oil age. We will still have enemies after the oil age and will need a strong military. To claim that oil is the root cause, and therefore oil should pay for it, is illogical.
So the question remains; “What exactly is the military subsidy to the oil industry?”
So you think we are wrong to support the only democracy in the Middle East? We should sacrifice Israel in exchange for oil?
Not at all, and that is not what I was saying - I said that, absent oil, Israel is the US main interest in the ME - I did not pass judgement on whether that is good or bad, or should be continued or not - it is a whole different story outside the context of this discussion about energy.
You say the carrier groups are there to protect the oil, but we have no carrier groups off the coast of Canada, Mexico or South America. You live in Canada, we buy your oil; does that incline you to kill Americans?
Hmm, those are all stable, democratic countries, with no history of antagonism to America (at least, not in the last century), and a strong two-way trade - there is simply no need for military protection of said trade. We are very happy to sell you our oil - the only time we would like to kill Americans is when we face double standards on trade protection (things like softwood lumber, steel, agriculture), but we have just come to expect, and live with, that sort of thing.
Why don’t we have carrier groups protecting shipments of cars, TV’s and computers from Japan, China, Taiwan, etc?
Well, actually, there are US warships right now, off Somalia, doing just that. And quite a few around Taiwan, Japan and S. Korea.
Conflict between east and west has been going on for thousands of years, long before the oil age, and it may continue long after the oil age. We will still have enemies after the oil age and will need a strong military. To claim that oil is the root cause, and therefore oil should pay for it, is illogical.
I did not say the US does not need a strong military, I am merely of the opinion that part of the reason why there is such a large presence in the ME is because of the oil there. Some guy named Carter even said words to that effect 30yrs ago.
Was the Irag invasion merely an exercise in removing a dictator to restore democracy? There are many other such countries (that don;t have oil) that have dictators that the US doesn't bother with.
I like RR's idea of a "military protection surcharge" on imported oil - it does not need to pay the cost of the military, or even all of the costs of the ME deployment, maybe half of it. But it would make everyone realise that when they are buying ME oil (with country of origin labelling), soldiers are putting their lives on the line,every day, to protect it. I can;t think of a better reason to get out of the ME oil business sooner rather than later.
Obviously true, but you are dancing around my point, which is that oil is not the root cause of the problem, and therefore does not deserve to be singled out for punishment.
Oil in the ME is an accident of geology. Money from oil enables them to act more effectively on their hatred of the west. Suppose they had no oil, but they had a huge deposit of rare earths making them wealthy. Would you then recommend a military tax on rare earths? That would penalize industries that use rare earths, like the new generation of windmills, and force people who use more than an average amount of those products to pay a disproportional share of the military budget. Do you support that?
Actually they are risking their lives to protect us from the people who want to kill us and destroy our way of life. People who use little oil have as much at stake as the rest of us.
If we tax ME oil we will pay a premium for non ME oil and other countries will buy the ME oil we would have bought. Why shoot ourselves in the foot?
. Money from oil enables them to act more effectively on their hatred of the west.
This is so unrealistic, I have to say something. We're facing guerrilla warfare from the ME because of our extensive intervention in the ME. It's as simple as that.
We prop up dictatorships (KSA, Egypt, etc), we help overthrow democracies (Iran, 1954), we invade (Iraq and Afghanistan).
Now, there are a lot more complexities, but at it's heart what we're facing is blowback from our interventions.
Actually, I think oil IS the root cause of the problem, from America's involvement, and does deserve to get singled out - which is why i favour both an import( or the military surcharge) and country of origin labelling.
If they had a big deposit of rare earths, or anything else, that America deemed important enough to have such a huge military presence there, then I would be looking to alternatives to such things. You can build a wind turbine without rare earths - the tried and true induction generator is just iron and copper - it is the permanent magnet types, the current darlings, that use rare earths. When these are expensive enough, they will be replaced with induction generators so the rare earths can be used where they are really needed.
I don;t think it is good for country's economic well being to be tied to something half a world away, and in avery usnatble part of the world at that. We have options other than ME oil, we should use them.
Actually they are risking their lives to protect us from the people who want to kill us and destroy our way of life.
Yes, and the excessive oil, and resource consumption in general, and is the most glaring part of that way of life.
As for the government, it is the constant involvement in other countries affairs, for whatever reason, that creates resentment.
If we tax ME oil we will pay a premium for non ME oil and other countries will buy the ME oil we would have bought. Why shoot ourselves in the foot?
Since when is a tax shooting ourselves in the foot? - there are taxes on all sorts of things. But a tax on something we don;t want to use, will reduce its consumption, either by domestic production or oil alternatives like Ev's etc. At the same, time, give an income tax break (like raising the minimum tax free threshold) of roughly the same amount.
If America could halve its oil use, which is only to Euro per capita levels, it wouldn't need any more than it gets today from domestic +Mexico+Canada, and would make a big difference to the trade deficit.
And then, how much military is needed in the Persian Gulf when there are no "American interests" there?
I often think the first Britain, then America, diverted the ME countries from fighting each other, which they have done since antiquity, and gave them a common cause to unite against. Stop the flow of oil money, and let them go back to their petty squabbles - we, and the military, have got better things to do.
Britain, then America, diverted the ME countries from fighting each other, which they have done since antiquity, and gave them a common cause to unite against.
Yes. Israel does the same thing, and ME countries use it deliberately for that.
By Jove - I believe you have discovered the key to understanding the media, human interactions, and history itself! People like to get worked up!
Bill Hannahan -
Some questions for you:
Do you honestly believe that if there were not a single drop of oil in the Middle East, it would get the attention of the US military to the tune of $1 trillion and still counting? Would we spend even a tiny fraction of that amount 'bringing democracy' to someplace like Upper Volta or Gabon?
Furthermore, do you really think that the US would devote so much money, military might, and political capital advancing Israel's national interests (often to our own detriment) if there wasn't a wealthy, politically powerful pro-Israel lobby calling the shots on US Middle East foreign policy?
And how many terrorist attacks has Sweden, Norway, and Switzerland suffered in the last several decades? Could it be because they mind their own business?
" Do you honestly believe that if there were not a single drop of oil in the Middle East, it would get the attention of the US military to the tune of $1 trillion and still counting? Would we spend even a tiny fraction of that amount 'bringing democracy' to someplace like Upper Volta or Gabon? "
Only if they killed Americans and tried to destroy our way of life.
If all the oil deposits were under the soil of a democratic country like Israel do you honestly believe that it would get the attention of the US military to the tune of $1 trillion and still counting? Would we spend even a tiny fraction of that amount 'bringing democracy' to someplace like Upper Volta or Gabon?
So oil is not the root cause of the problem. I think we should be conducting massive R&D to eliminate the need for imported oil, but I am not naive enough to believe that doing so will end our problems in the Middle East.
" And how many terrorist attacks has Sweden, Norway, and Switzerland suffered in the last several decades? Could it be because they mind their own business?
"
They sit back while we carry their water for them; you admire that?
Furthermore, do you really think that the US would devote so much money, military might, and political capital advancing Israel's national interests (often to our own detriment) if there wasn't a wealthy, politically powerful pro-Israel lobby calling the shots on US Middle East foreign policy?
Actually, some history suggests that part of the historic support by the UK and US of Israel is also related to oil, and the desire to have influence in the region.
Because the energy used to make corn ethanol comes from crude oil, natural gas and coal (and sunlight), corn ethanol is not renewable. Arable land is also diminishing and may reach a crisis within the next hundred years.
R^2, you aren't being a tad inconsistent?
OTOH, you favor a gasoline tax to reduce oil consumption and OTOH you would discontinue a subsidy
which reduces the use of oil.
If you oppose all subsidies on principle what about the subsidies offered to the oil and gas industries?
I understand you aren't arguing the case that ethanol is an environmental disaster but wasn't Macondo a real environmental disaster? Aren't shale gas wells polluting wells with methane and chemicals a real environmental disaster?
Why We Need Higher Gasoline Taxes
Please feel free to hate-rate this comment.
R^2, you aren't being a tad inconsistent?
You answered your own question to show that I am being 100% consistent. Let's agree that oil companies get subsidies. For the most part, they aren't as straightforward as the direct payment for a gallon of ethanol. But they do subsidize the cost of gasoline. So how to rectify that? Make gasoline more expensive so that consumers are paying something toward more fully realized costs. What do you think higher gas taxes do? The same thing that eliminating a redundant subsidy on ethanol does: It reduces the subsidy on driving.
But you don't (won't?) get it. This isn't about the subsidy. It is about the fact that it is redundant. We have a mandate with the RFS. We are deficit spending to support these subsidies, which pay oil companies to meet their mandate. Tell me why that is a good idea.
The REAL shame (sham?) is that low-BTU corn-ethanol is NOT really a BIOFUEL. It takes large amounts of (high-demand)diesel (that we export?) in its manufacture and transpotation. There is always a worldwide glut of(cheaper?)gasoline that we import, putting even more price pressure on ethanol.
And it obscures the biofuel we should be supporting...higher cetane & BTU & value BIODIESEL that can be used in most any diesel, oil furnace, even jets & turbines.
Have you looked at what it takes to make biodiesel, from anything other than oil palms? The energy yield of biodiesel from growing soybeans or rapeseed (canola) is less per acre than corn. In the US, the best an oilseed crop can do is 100gal/ac. (http://en.wikipedia.org/wiki/Biodiesel#Yield), whereas you can get over 500gal/acre of ethanol. Each acre takes about the same on-farm energy to grow, though corn uses more nitrogen fertiliser.
There is not the energy intensive distillation with biodiesel, but that energy is not a liquid fuel, and can even be waste heat. If you look at what is really important - liquid fuel produced compared to liquid fuel used, per acre, corn ethanol is way ahead.
None of this changes the fact that subsidy is redundant, but ethanol, presently, the better bet for an energy crop. Use it to displace gasoline and use the fossil fuel saved for jet fuel.
By the way, ethanol can be used in any diesel engine, furnace and turbine. It is just not energy dense enough for aircraft fuel, but otherwise, if you are burning gasoline, kerosene or diesel, you can displace at least half of it with ethanol (or methanol, or a mixed alcohol fuel), and it ewilllikely burn cleaner, too.
Diesel engines designed to burn 95 % ethanol, 5% diesel can be built to order but apparently cost twenty percent to twenty five more than comparable conventional diesels.I talked to a Scania dealer a while back about this very issue in order to find out about the potential availability of such engines for farm use-they were not as of that date available in the US.
I don't know anything about turbines, but you can take this to the bank-there are extremely few ethanol capable diesel engines or furnaces in existence.
And the cost of modifying them to run on ethanol or a high ethanol blend is generally prohibitive.
So far as I can see, it would be cheaper to buy a new engine and sell the old one than to modify it, considering the questions of reliability, durability , and warranty, given the "one off" aspects of such jobs.There is not a single commercial diesel engine shop anywhere in the US, to the best of my knowledge, offering such conversions as a regular, day to day part of thier business.
Insofar as furnaces running on ethanol, I suppose the burner, fuel tank, lines and so forth could be changed out easily enough;but I doubt if any building code enforcement agency or insurance underwriter would put thier seal of approval on such a furnace unless it were built to a dedicated plan-that is to say, all brand new and proven to meet UL standards, etc.
Hi OFM, good to see you are still around here.
Yes dedicated ethanol compression ignition engines are more expensive, as they are still built as specialty items. Scania doesn't bring them into the US because of the US emissions rules, and Scania does not have a presence here anyway, so they don;t have the support structure in place.
But my point is that you can replace up to half the diesel (actually up to 80%) by fumigation (vaporising the ethanol, or methanol, or even gasoline, into the inlet air), with minimal modifications.
There have been many studies on this, most showing improvements in thermal efficiency, and reductions in NOx emissions. Here is an abstract for one, from the American Society of Agricultural and Biological Engineers;
http://asae.frymulti.com/abstract.asp?aid=30448&t=2
For diesel PU's there are many companies that offer water/methanol injection kits (they use methanol as it works even better than ethanol), mainly aimed at in creased power, but can be tuned for increased efficiency, and reduction in diesel use.
Water methanol is decades old, and well known by the military. A good, factual write up is here;
http://www.labontemotorsports.com/ontrack/DIS_WP.pdf
These sorts of kits run less than $1k for PU sized engines.
My brother did a poor man's version of this on his combine in Australia, which harvests wheat in temperatures around 90-100F. An old timer told of using moistened towels in the air intake, though this is a very rough system. My brother used two 12V washer pumps, in series, and sprayed water onto an air conditioning filter element placed in front of the main air cleaner. Engine operating and exhaust temperatures were lower, and fuel consumption seemed lower. I hope to try this with methanol/water when i am back there in Dec.
Converting to direct injection of ethanol is a whole different story, for all the reasons you outline, and no one is doing that, and that is not what i am proposing.
For a furnace etc, you need to change the burners, re jet, etc, and yes, there is no UL listing for commercial alcohol furnaces, but that is simply because the question has not been asked. The real question to be answered here is why is any furnace using a liquid fuel in the first place.
As you know, being a farmer too, just because it isn't warrantied or certified, doesn't mean it can;t be done, and even done well.
This is where an honest-to-goodness side-by-side chart, preferably converted to METRIC measure would be most helpful. The most yield Ive been able to find for corn is 320-420gls/acre. Realize ethanol has about half the BTUs as diesel or biodiesel.
To the main point...diesel, the "diesel pool", whatever, is in HUGE demand worldwide. Gasoline and its not cheap substitute, ethanol is only in weak demand in the US.
My main concern is all this trans-shipment all over the planet. Biodiesel and diesel can and do co-exist well. Ethanol has so far proven to be a PIA...not pipelineable, lots of empty tankers with NO backhaul.
Blume suggests that while ethanol has less BTU's it burns more completely, and with a higher compression engine you can actually get better mileage than with gas. Also your engines run cooler, and the exhaust is not nearly as toxic.
Just my 10 cents worth, as I'm a layman and suck at math.
Of course, nothing will be our salvation at our current liquid fuel use, except serious severe immediate radical conservation.
Bottom line : the US not increasing its gas tax by a serious amount just shows that it is fully commited to pursue total economic suicide, that's about it, the rest is details.
A news item about gasoline taxes from the May 8, 1996 Los Angeles Times was included in the first issue of the Hubbert Center Newsletter. There was concern about a movement to 'lower' gasoline taxes.
http://hubbert.mines.edu/news/Ivanhoe_96-1.pdf
Very interesting and "symbolic" in a way, for a first issue, thanks a lot for the ref, and truly suprising that the subject of raising the gas tax in the US is really nowhere to be seen these days, it seems ...
I've documented, with mostly peer-reviewed citations, why biofuels are a bad idea. They harm ecology, deplete water, topsoil and other resources. Plus we still don't know how to store the massive amounts of plant matter needed to keep a biorefinery of any sort going year-round. Stockpiles will either compost, freeze solid, or spontaneously combust -- that's why you see logging mills spraying logs with water.
And it's obvious that the EROI is break-even at the very best, even the non-peer reviewed, National Corn Grower Association funded research is barely is able to come up with an insignificant EROEI.
These aren't hard arguments to understand. No way could anyone think ethanol is going to prolong life-as-we-know-it. Obviously it will do the opposite -- create more of a die-off and steepen the down-slope of the exponential population and energy growth curve.
I hope future historians will devote several chapters to Greed after the die-off occurs.
But more likely things will be so awful that religious explanations blaming human sin will prevail.
On the other hand, if stupid policies bring on a die-off quickly, that may help prevent us from going extinct as in Peter Ward's "Under a Green Sky" or crossing the "nine planetary boundaries" http://www.stockholmresilience.org/research/researchnews/tippingtowardst...
In that case, "Greed is good"...
"Peak Soil: Why cellulosic ethanol, biofuels are unsustainable and a threat to America"
http://www.culturechange.org/cms/content/view/107/1/
Shorter versions :
Jacqueline Langwith, ed. 2008. “Opposing Viewpoints: Renewable Energy, vol. 2.” Greenhaven Press.
Sheila Newman, ed. 2008. "The Final Energy Crisis". Pluto Press.
Bio-fuel makes about as much sense as a bio-airplane using a flock of geese tied to a basket would - it's a stupid idea.
A much better idea would be to start with seawater and use a GTL process to directly synthesize fuel. I really don't see why someone isn't just going ahead and doing this - It could be powered with nukes - or a solar thermal plant could be used.
Not even counting all the fuel, water, and soil needed for bio-fuels just looking at the land needed - which system would produce more fuel per acre of land needed? I'd bet an acre of solar panels could make more fuel from seawater then an acre of corm or even sugar cane.
http://en.wikipedia.org/wiki/Fischer-Tropsch_process
Sea water is 6% CO2??
To answer your question: synthetic fuels are too expensive to be competitive with biofuels. I'd guess about $10 per gallon for something that started with seawater and electricity.
A lot of the power used by the process is heating the gasses up to 300-400C this heat could be directly generated by solar thermal or nukes - which would cost less then doing it all with electricity. Yes, the capital costs are very high but with interest rates so low... Operational costs would be no where near $10/gallon.
Well, let's say we start with windpower electricity at $.07 per kWh. If we want a gallon of gasoline equivalent, we'll need about 35kWh. If the electrolysis of water to H2 is 60% efficient, and the conversion of H2 to liquid fuel is 60% efficient, then we have a net efficiency of 36%. 35 x $.07 / .36 = about $7 per gallon.
And that's just for the energy costs for the H2 part - it doesn't include energy for the CO2 recovery part, or capex or labor.
EVs are, of course, much more efficient: electricity to hydrogen(25%loss), hydrogen to methanol(say 25%loss), methanol ICE 75%-80% loss; only about 12% of energy recovered. Compare this with an EV 80-90% of electric energy into useful motion.
Solar Thermal plants claim to generate electricity at costs that compete with coal - I think that's less then 0.07/Kwh and even if that's right what is the cost of bio-fuels without subsidiaries? Also, using the heat directly instead of electricity should lower that cost. A plant like this http://www.ausra.com/products/processes.html
So 5Kwh per m^2 per day is 20,000 Kwh per day per arce. If it takes 60Kwh per gallon that's 333 gallons per day per acre. How much bio-fuel could I grow on that acre of land?
Maybe it is something like $4 to $10 per gallon but that might be a bargain in a few years. It certainly could be used to supply chemical feed stocks for plastics, etc. I agree electric vehicles are needed (I'd like to see a wireless charging system added to the freeways) but bio-fuels are a real bad idea.
For corn ethanol it's 2.5 gallons of ethanol per bushel of corn and about 140 bushels per acre. So that's 350 gallons per acre per YEAR versus 333 gallons per acre per DAY for a solar thermal plant making fuel.
You do know that Ausra hasn't actually built anything yet, right?
And they are in Australia (very sunny place) where retail electricity prices are $0.20/kWh, and they still haven't built a commercial plant.
The amount of fuel per acre is irrelevant. There is so much "free" land to be had in deserts in Australia, US, Africa that it is simply not an issue. what IS an issue is making the stuff, economically.
Fuel is the equivalent of $5/gal in Australia, so this would be an ideal place for a scheme like this, ad they don;t even have a bench scale or pilot plant going.
Finally, to make fuel at 55% energy recovery (60 kWh to make 33kWh) would be better than the best GtL process, and what it your feedstock?
I am not saying this can;t be done, just that it isn't being done, and isn't even being piloted (though it may be bench tested somewhere.
With solar thermal to electricity struggling to make reality, this has an even bigger hill to climb.
Solar thermal plants are now being built. Here is a huge one - they just broke ground on the project 392 megawatts!
http://ivanpahsolar.com/
Yes, there is a lot of "free" land in deserts - but you can't use it for bio-fuel. That's the point - all it needs is seawater and sunlight and we are no where near peak seawater...
I think Bio-fuel will NEVER really work and should be abandoned. The basic problem is that chlorophyll is only about 3% efficient to start with and the plants need some of that for leaves and stems. The EROEI is always going to be very low - you just can't run a modern civilization on that. Good farm land needs to be used for food.
Sure would be a sweet process to have for the NAVY, you can see why they are working on it. The system on an aircraft carrier so that while they are just parked out at sea they could be making their own jet fuel would be cool. Their nuke most likely costs more like 0.01/KWhr, so the fuel would only be $2 or so - besides it's just sitting there mostly idle when they aren't moving.
Yes, I know this isn't being done yet, but it's a better idea then bio-fuel.
Yes, a 390 MW plant, that needs $1.3bn loan guarantee... This system works out about $550 per daily kWh, compared to about $250 for nuclear/hydro, $200 for wind and $40 for CCGT. So how efficient, in terms of human resources, is it?
Now, I wish these folks well, and I hope they can get their costs down to something reasonable, so that more get built with less subsidy - though this has not yet happened in over 30yrs of solar thermal plants.
Biofuels make sense - where they make sense. Humanity got by on biofuels for millennia - they are very useful. And they still can be - there is much land unsuitable for farming that can grow trees. In fact, some farmland is better suited to trees. There are many parts of the world where trees can grow that solar PV or thermal simply won;t work. In fact, if trees are growing in an area naturally, it's a fair bet that place is not ideal for CSP
Ultimately, all energy sources need to pay their way, neither biofuels nor solar (nor oil) should get a free ride. If someone can make biofuels work in their situation, power to them. Any successful energy systems should be encouraged - we do not need to choose only one.
Removing all the subsidies, like the ethanol one, will greatly assist in observing which ones are successful and which are not.
Okay, lets see 1.3billion dollars for 390MW.
The US has spent 1T dollars on the war in IRAQ, that will net the US what? Maybe 5 million barrels per day of oil? For $1T we could of built 770,000 of those 390MW plants. Even if it's 100KWhr per gallon to synthesize - that works out to 70 million barrels per hour (is that right, someone check my math). If that's correct, we could replace all of IRAQ for about 100billion in solar - and no one gets tortured? So how efficient in terms of human resources is war over oil?
Bio-fuels are the best choice for bio-engines like horses. Trees, wood chips have better uses then being converted to fuel - it;'s that 3% problem with chlorophyll they just will not grow back fast enough. Plus, we need forests more then we need desert land. BUT, we may be using a lot more horses in the future, so bio-fuel may be picking up....
I am not saying the war in Iraq is great value - I am saying that solar is not, at least not at present, and does not seem to be for the near future - there are better, more reliable ways to make electricity
Chlorophyll at 3% is just fine - trees are free standing, self replicating, self tracking, automatic storage units of solar energy. The CSP system does not even store anything! As soon as you do, your efficiency drops further and costs increase further.
Now lets look at your numbers...
For $1T you will get 770 of those 390MW plants, not 770,000. So you then have 75,000 effective MW (24hr basis), which represents 8.9% of current US capacity (1100GW -according to EIA http://www.eia.doe.gov/cneaf/electricity/epa/epat1p2.html)
At that point, you will be 4x existing wind, about equal to hydro, and just 25% of coal and 20% of NG capacity.
In fact, you will have to spend almost $80bn, just to equal what is currently produced from biofuels (7.7GW). Are you beginning to see the scale issue here?
To produce liquid fuels, we get 1.8 billion kWh per day from the 770 plants. We turn that into liquid fuels at 100kWh = 1gal (33%efficiency) and have 18million gal of fuel, and at 44gal/barrel, is 410,000 barrels per day. This is actually less than the amount of ethanol being produced today!
By the way, this has not included the cost of the plant to turn electricity into fuel - which would probably double the cost. And we need carbon feedstock to do it - not much of that in the desert.
So a trillion on this, to net even get to where ethanol is already - just how bad are those biofuels?
Thanks, I thought I had the numbers wrong someplace.
If we were building 100's of these plants they wouldn't be 1.6 billion each. The CTL guys were saying something like 70% efficiency for their process, so we could likely do better then the 33% efficiency even if the carbon was from the CO2 in seawater. Overall, maybe $1T could get us 1 million barrels per day for 30 years. I'd still prefer that investment over war. IRAQ may not even produce that much more oil then that, plus we are spending 100 billion every year in IRAQ.
The 3% is still a problem, it's the reason EROEI is so low for ethanol - it is right on about 1.0 - that means a huge amount of energy is needed for it's production also - plus the good land, water, etc.
Even with that correction, look at your process. We have a solar electricity plant, in the desert. We now need to get seawater there (more energy), extract the CO2 (more energy) and send the water back (more energy still).
And we have the enormous cost of the GtL plant plus two seawater pipelines and the CO2 extraction
That is a lot of equipment!
Lets invest in oil alternatives, for sure, but this looks about the most expensive way to do it.
The 3% for photosynthesis is not a big problem, and is certainly not the reason for the low EROEI on ethanol.
if the plants were 10% efficient, then we can assume we would get 3x the yield. So the farmer gets 3x the grain for the same amount of ploughing, seeding and harvesting. But these are very minimal energy inputs to ethanol.
He will need 3x the nitrogen fertiliser, so same energy per unit there, and three times the water, if irrigating
And once the corn gets to the distillery, the energy per gallon ethanol is the same, and that is where 80+% of the energy inputs to ethanol are.
So more photosynthetic efficiency could mean more from the same land, but the energy input, per unit product, will change very little, as most of that happens after the harvest.
once the corn gets to the distillery, the energy per gallon ethanol is the same, and that is where 80+% of the energy inputs to ethanol are.
Paul, IIRC I've heard claims of improving distillation efficiency. Have you heard anything?
Distillation is a very mature technology. It is not surprising at all that as the ethanol industry developed, they would optimize their distillation for their specific needs. At the size of the industry today, gains will be incremental at best, and likely flat.
Beware of people claiming a breakthrough in distillation technology. It is a very well-understood science and has been practiced by thousands of companies for a hundred years.
Robert,
I believe that some ethanol advocates have argued that some of the studies of ethanol E-ROI were performed before the ethanol industry had completed that process of optimizing distillation (or other processes) for their specific needs.
Do you think there's any substance to this?
I think their stuff is pretty up to date - they have been under the microscope on EROEI
There are only two things that can really be done to reduce the energy input;
1) Not dry the residuals, the distillers grains. Presently, the feedlot owners want dried grains, and I don;t know under what conditions they would accept wet stuff.
2) Use a source of waste heat (like a thermal power station) for the distillation process.
If you have lots of 2 then 1 is irrelevant. I am not aware of any distilleries that use waste heat, though that certainly does not mean there aren't any, but the vast majority are not.
if you have waste heat for the input, the EROEI goes up to 8 or so, the brazilian level, as they use the waste bagasse for heat. Mind you, if they weren't using the bagasse for heat, they could be using it for power, so even though it is a renewable fuel, I consider it an energy input, as it could be being used for something else. Waste heat, on the other hand, is just wasted, unless you use it. All the coal/NG/nuclear power plants in the midwest could provide enough heat for all the distilleries. A bit more energy for grain transport, perhaps, but overall, a big improvement
Alternatively, you could take an NG CHP to the distilleries, and then use the waste heat from that, and some are doing that, I think.
Yes, I would think that CHP would make all the sense in the world: use or sell the power and use the waste heat for drying.
I should think that all large operations would go to that eventually, and that would effectively reduce the energy input by roughly 50%, doubling the E-ROI. Does that make sense?
The onsite CHP route actually makes a lot of sense. There are already gas and electric connections to the distillery, and there is already all the other infrastructure there for grain handling etc.
You can get some very efficient NG engines, like this one from GE Jenbacher, that gets 48.7% electric efficiency;(http://ge-J920gasengine.com/).
if they use this in CHP mode, and assuming 6c/kWh, and $5/mmbtu for gas, this engine will use 60mmbtu/hr ($300), produce 8.55MW of electricity ($513) and provide 25MMbtu/hr of heat, which is now "free", and before would have cost $125/hr.
According to the 2008 USDA Report (see below), the distillery uses 0.76kWh and 29,400ntu per gallon of ethanol produced.
So this engine provides enough heat for 850 gal/hr, and will use 650kWe, leaving 7900kW to export. 850 gal/hr is 7.5mgal/yr
So, before, the distillery was using 26.6 mmbtu/hr, at a cost of $133, (29.4/94%eff=31.3kbtu/gal) to mae 850gal/hr. costing 15.6c/gal
Now it is using $300 of NG per hour, selling $474 of electricity, and making the ethanol at a heat cost of zero. Allocating the electricity profit to the ethanol, it adds 56c profit to each gallon produced - more than the cherished VEETC!
There is some extra capital to be paid off (about $7m) but I think they will do that pretty quickly.
Clearly, there is lots of room for ethanol producers to get creative on their energy sources!
You had asked before about updated numbers for ethanol energy inputs- RR wrote about this back in June, including a link to the official USDA numbers, which we discussed at some length on his blog, which is , of course, the first place to go to for energy stuff;
http://www.consumerenergyreport.com/boards/r-squared-blog-posts/fun-with...
I agree with you Paul. I read your link to Robert's comments on EROEI of ethanol as well as Nathan's comments and as a corn producer from Ks.. my thoughts.. First off.. the 770 solar plants would cover..
http://ffggippsland.blogspot.com/2010/08/solar-power-plant-plans-move-ah...
"41,000 acres to generate 4,500 MW" = 9.11 acres per MW x 390 = 3,553 acres per plant x 770 = 2.736 mln acres or about 65 square miles.
That's not an insignificant area.. Also you would need transmission as well as a demand.. which would be dependent upon reliability.. daylight only.. and an alternate supply when solar was "offline."
An equivalent area in Iowa would yield about 180 bu corn or just under 500 mln bushels.. which is about what we raise here in Ks.. (USDA has Ks @ 598 mln bu as of Nov 11, 2010 report) 500 mln bushels would convert to.. 1.35 Billion gallons of ethanol as well as 4.5 mln tons of DDGS
Currently my state has about 580 mln gallons of ethanol production capacity.. Most of these plants use sorghum as their main feedstock which at 75% sorghum 25% corn (the mix varies dependent upon price) would take "about" 165 mln bushels of sorghum (produced 172 mln bu in this year) and about 55 mln bushels of corn. Thus given the states Feed grain output of 598 corn + 172 sorghum = 770 mln bushels we could utilize about 30% of the crop... of which about a third comes back as a protein source.. so net 20% is diverted to someone's fuel tank.
You are correct to think of ethanol as a "process" with co-products. The DDGS have great value as a protein source.. which can also be utilized as Wet DDGS. I'm told that we could utilize more WDGS then we are currently cranking out.. Things to consider about the WDGS is that it is about 65 to 75% water.. which is one factor why it is cheaper than DDGS which is around 10% moisture content... you are "buying water" with WDGS.. which is basically a cost by the time you haul it.
I pass trucks every day running from the ethanol plants to the feedlots hauling WDGS. The DDGS takes a respectable amount of energy to dry but can be shipped to China.. which is a protein black hole.. we have not reached "peak DDGS demand." The WDGS have a shorter shelf life so you need daily demand.. which is ramping up along with the ethanol industy. You can utilize WDGS (as well as DDGS) on roughages fed to growing cattle such as bermuda grass, low quality fescue hay or crop residues.. it is equivalent to putting sugar on your children's Cherrio's.. and expands the over all feed supply.. thus expands the amount of "food" available.. to you and I.
I understand this sites concern for energy.. but given the demand for food..and through livestock "feed".. W/DDGS is an important component to the ethanol story. As was mentioned.. China consumes a growing amount of protein every year as they bring 800 mln peasant farmers into the 21st Century. China imposes tariffs on corn imports so as not to flood their markets and impoverish their own producers.. but currently allows DDGS to come.. it's somewhat a "niche" market that is growing.
As far as infrastructure and this site's obsession with EROEI.. Ks has about 20 mln acres.. which was settled.. mostly about 150 years ago.. As the railroads laid tracks.. more ground could be broken out for farmland and shipped to "market" be that the coasts.. or Europe back then.. or Asia today.. while the rest was grazed. Over time we have built storage structures and made improvements to the land.
I don't have any idea how you figure the energy costs of a concrete elevator built for the storage of wheat 40 years ago.. that is paid for and storing corn or sorghum for an ethanol plant today.. which could have another 50 to 100 year life.. if properly maintained.
Over my lifetime yields have improved steadily.. I remember while in High School helping bring in a corn crop that made about 125 bu per acre on irrigated ground.. today we would consider that a crop failure.. as some fields do almost twice that level.. Our best this year went 211. Also we are making great strides on the dryland (non-irrigated) side of the ledger.. last year we had a field do 184.
Dryland sorghum yields are mostly.. 85 to 125'ish. All yields are trending upwards about 2 to 3% per year but bumpy dependent upon the weather. Kansas has about doubled production over the last ten years or so.. and could probably double it again if need be.. We have a significant amount of land in "reserve."
We need to add more storage in order to do this.. most of the "elevators" were constructed in the 1950's through government programs for the storage of wheat. The wheat market is mature and except for production shortfalls overseas (like this year) demand is waning and I expect more acres to switch over to feed grain production over time. My local elevator had a storage capacity of about 700 k bushels.. and added a 400 k bin a couple of years ago.. bringing capacity to about 1.1 mln bushels.
This time last fall everything was full with about 700 k of grain piled on the ground.. they added another 400 k bin this spring.. which is full and again we have "almost" as much on the ground this year as last.
So as you see we are still "ramping up" infrastructure to handle the ethanol boom. Probably if the gov't pulled the VEETC.. two things would happen.. part of the costs would get passed along to the consumer.. and/or I would accept less for my grain production.. I don't believe it would materially affect ethanol output very much as RR notes above..
A couple years ago in 2005 we raised more then enough grain when the market price was below $2.00 per bushel.. that would convert to about $1.25 ethanol.. which given $80+ crude should "work." I hope we don't see prices that low.. but "been there done that.." probably will again.. We need about $3.++ to pay the bills.. if it fell below that we probably would lower inputs.. today we're offered about $5.00.. so there's some room.
Whether the government incentivises the whole process which in our case comes down to more storage for feed grains to ethanol to DDGS to China.. or just storage for Wheat/Soybeans to China.. It doesn't really make much difference as we are expanding the capacity to produce more Food and Fuel for growing markets.. no matter their local.. or what they are.
I hope this helps. Happy Thanksgiving.. and don't stuff yourself too much today.. although I'm sure there will be "plenty."
Cheers.
Jon, welcome to the OIl Drum, and thanks for taking the time to read the links. It is also good to get the perspective form a real live ethanol feedstock producer.
The land area comparison for solar is interesting. Solar farms are a great use for desert land, and even in marginal (sunny farmland), but real farmland, with real water, can produce much more than just energy, and the energy form is storable.
Another way to look at it is the economic comparison. That 4500MW of solar, will produce 6hrs a day, and at a real electricity rate of 10c/kWh, will produce $985m of income per year. Your farmland alternative (1.35bn gal _4.5mt DDGS) would be worth about $3.1bn per year, and employ many more people, and is actually producing some food.
Interesting that there is so much sorghum being used - you don't hear about that. I presume that is sorghum grain, rather than sorghum plants?
I had read somewhere (can;t find it now) about sweet forage sorghum being used for ethanol production - with the stuff being processed in the same way as sugar cane. Sounds like a good way to maximise sugar yield, but the tradeoff being you must process as soon as you harvest the biomass - you can't really store it .
While I agree with RR that subsidy is redundant, the mandate (the RFS) has clearly been very successful in creating the ethanol market, and it will be there for some time. And it is good to see that the co products are getting beneficial use, and will continue to do so. I had thought that wet DDGs could be used, but clearly transport is an issue.
I think/hope we will see more innovation for the ethanol industry - the RFS has given it a "floor" so that it won't "fail" but how much it "succeeds" is up to the industry, not subsidies or mandates.
Following on from my CHP example, the next logical step would be to co-locate a distillery with a feedlot. Then you can use the continuous supply of wet DDG's for feed, so a substantial energy saving there. The low grade waste heat from the distillery can be used for winter heat of the animal barns. And the manure collected can be anaerobic digested, and added to the fuel supply for the CHP plant. Finally, the digestion residue can then be used locally as a soil amendment/fertiliser.
So with this enterprise you have three, high value end products - electricity, ethanol, and beef/pork.
Just looking at the energy side alone, by not drying the DDG,s the "heat consumption" has been halved, so my CHP example, will now enable a production of 1700gal/hr (15m gpy). With 15,000 btu to process a gallon of ethanol (76,000btu) the process energy efficiency is now 5.4:1
So for each btu of nat gas in, you get half a btu of electricity out, and 5.5 btu of liquid ethanol fuel, and some (wet) DDGs. That is the best gas to liquids conversion we are ever likely to see! Another way to look at it is that oneMMBTU of gas, has been leveraged not only to create 6btu of output energy, but the $5 of gas has yielded $7.5 of electricity, and $56 of ethanol (28gal at $2/gal), and $9 of (wet) DDGs for $72 money return on energy cost - ratio of 15:1 !
Compare to the standard ethanol mill in the USDA report and you have about 33000 btu input per gallon, for a 2:1 energy return, and the money return, of $2/for one gal ethanol, is 12:1 on the energy input.
So we have trebled the EROEI, are creating two energy products, and make a feedlot operation more efficient, while using its primary waste product.
I would much rather see the ethanol industry put is effort into finding improvements like that, than arguing for the VEETC.
A healthy industry is one that does not need gov support, and ethanol can become that (actually is already) , they just need to look for every and any synergy/coproduct opportunity there is. That also has the side benefit of diversifying against commodity price swings.
So with this enterprise you have three, high value end products - electricity, ethanol, and beef/pork.
Just looking at the energy side alone, by not drying the DDG,s the "heat consumption" has been halved, so my CHP example, will now enable a production of 1700gal/hr (15m gpy). With 15,000 btu to process a gallon of ethanol (76,000btu) the process energy efficiency is now 5.4:1
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Yes obviously there is plenty of room for improvement in energy efficiency by ethanol producers and farmers.
But the question is this -> Why do you expect this sector of the economy to become energy efficient while the rest is not?
For example, if a farmer is confronted with a choice of expending 10 hours of labor or expending 10 gallons of fuel, the farmer like any other businessman is going to choose to expend the fuel rather than the labor. The same sort of analysis occurs when there is a choice between expending energy and capital or energy and any other competing business expense.
If or when the cost of energy changes, the energy efficiency of many processes throughout the economy will be altered. But until then it aint going to happen.
-jim
Jinn (Jim),
The reason I expect (hope) the ethanol industry to become more efficient is that it makes them more profitable, and diversifies risk.
Having grown up on a farm myself, I will agree, that 10gal will beat 10hrs any day - and for most farms, most replacements of labour, with energy, have already been made.
You will note than none of what I proposed, requires anything different of the corn farmers, it is a change in distillation practice. If you view ethanol production (not corn production) purely as an energy business, and carefully look at maximising value for all your inputs, and outputs, then you end up with things like what I propose - where nothing is wasted. But (most) farmers have been operating like that since they have been operating - nothing gets wasted.
The ethanol distilleries set up the way they did to minimise capex, and sometime you have to do that. Now, there is opportunity to improve the distillery, with CHP, to improve the profitability of each gallon. With corn prices rising, and possibly tax credits dissappearing, this is a good time for things like this.
Someone will do it (if they haven't already), and then others will follow, but probably slowly.
And, if they don;t want to do it, they can always partner with someone else who is in the electricity business, and just buy/take the heat.
Losing the tax credit will get them focused - they will have to look after themselves since gov will not do it for them.
My point was that ethanol is priced where it is because producers have minimized costs (like labor and capital costs). Cutting energy costs isn't necessarily going to produce a cheaper product.
This is no different than any other business. Most businesses could be a lot more energy efficient, but there is little incentive when the price of energy is so cheap.
As far as allowing ethanol to be taxed the same as gasoline. that isn't going to hurt ethanol much. It will mean an increase in price at the pump, which in turn will mean some reduction in purchasing fuel. So demand will go down a little. Remember every penny of the tax on transportation fuel is used to build infrastructure that is designed for the sole purpose of encouraging and facilitating the consumption of that fuel. In the long run the improved infrastructure that encourages the use of their product will benefit the ethanol industry just like it benefits the oil industry.
IMO the ethanol industry should concentrate their lobbying efforts on getting the EPA to use ethanol blended fuel in government fuel economy tests. If the CAFE standards were based on fleets with engines that were designed for maximum efficiency when using ethanol blends that would compel the automakers to design engines that run more efficiently on ethanol blends. Currently engines are designed to run most efficiently on straight gasoline, because that is what is used for the economy tests. And remember that even if a an engine designer would make an engine that gets better mileage with ethanol blend it is a against the law for a manufacturer to represent that the engine gets better mileage than the EPA tests state it does. Right now the incentive is to make engines run best when no ethanol is in the tank.
At this point in time, the government is the main obstacle in the path of ethanol producers. The government forces automakers to design engines that don't run as well on gasohol and the government puts an upper limit on how much ethanol is allowed to be incorporated into the nation's transportation fuel. When those obstacles are removed (and they eventually will be) then the ethanol industry will grow.
Why do you expect this sector of the economy to become energy efficient while the rest is not...If or when the cost of energy changes
Actually, oil prices did change dramatically in the last 5 years. It will take a little while for business and consumers to decide they're here to stay, and make the investments to become more efficient.
The price of petroleum fuels when adjusted for inflation are about the same as they were in the 1950's
That was 55 years ago. Energy got much cheaper between then and now, and the various tradeoffs and energy efficiency savings opportunities have changed dramatically since then.
As technology and engineering change every few years, we find new opportunities for low hanging fruit.
A few examples of areas that have seen dramatic change and improvement since 1955: wind power; nuclear power; solar power; NG power; heat pumps; batteries; power electronics; lighting; EVs and EREVS;, etc, etc.
"I presume that is sorghum grain, rather than sorghum plants?"
Correct. We have upward sloping yields in our favor..
http://www.agmanager.info/livestock/marketing/graphs/Crops/Corn/USCornYi...
as well as a shift in US farmland from Wheat production.. near 80 million acres in 1980 to roughly less than 60 million today... also enabled by upward sloping yields. The great thing about grain based ethanol is that it utilizes existing infrastructure.. The existing concrete storage facilities that were built in the 1950's to hold wheat are seeing double duty today.. Wheat harvest here in Ks in June.. ship to market.. then refill with the fall harvest of corn/sorghum.
I would also respond to your co-location of feedlot/ethanol plant.. Remember that harvest occurs across the production belt.. the optimum yield for corn is around... hmmm.. 17% moisture.. it must be dried to around 15.5% which is where we want to hit from the field.. below that level it costs yields.. A real life example is that we didn't get a break this fall in corn harvest.. no rain.. by the time we got to the last field it was testing 13.5% moisture.. 2% below allowable moisture or a loss of 3% (2 x 1.5% shrink per point of moisture) loss of weight.. which turned a 190 bu per acre yield into 184.. that 6 bu times todays $5.00 cost us $30/acre.. therefore you can understand how CRITICAL a timely harvest is.. not to mention field losses as well as weather damage.. which can really reduce yield.
Therefore it is MORE CRITICAL to bring the crop in.. as quickly as possible than to deliver it at one central location. In many respects the feedlots draw as much local corn as they can.. the rest is trucked in later.
My county.. which is about 30 miles by 30 miles has about 500,000 acres of farmable ground.. We have two large feedlots, a flour mill and about 7 country storage facilities.. all told they can take in...??? hmmm.. probably about 15 mln bushels. During this past wheat harvest all but one filled. Then a decent chunk was shipped out and we filled them again by this fall.. with "piles on the ground."
This site does a good job at looking at the engineering and the EROEI of how things "should be".. just don't forget about the work involved and the processes on how things "are."
The country elevator site that I worked at when I was younger had a receiveing leg capacity of about 7500 bu per hour.. to fill about 650,000 of room... thus it would take about 90 hours to fill or about 8 to 10 working days.. (some could be shipped out during this time also..and we usually still had about 5 to 10% carryover from the previous harvest..)
This facility was built in the 1950's when yields were lower and combine capacities were smaller. We probably would have about 20/25 farmers bringing us crops during harvest.. given today's massive combine capacity.. One machine can roll through 250 bu corn at the rate of near 4500 bu per hour.. knocking out almost 20 acres per hour.. which would take.. probably 4 or 5 semi's to keep going..
Given that everyone wants to be done in about 2 weeks.. you are talking about a tremendous receiving capactiy.. which then sits mostly idle the other 50 weeks of the year.
Is this good EROEI??
No.. that is why you will see multiple smaller receiving locations that then in turn feed a larger one.. again a typical country elevator here is a little over 1.3 mln bushels.. A typical Feedlot will consume.. 2.5 to 3 mln bushels per year.. a typical ethanol plant will consume.. about 20 mln bushels per year.. with some twice that much or more. With some Terminal locations turning in excess of 20 to 100 mln bushels per year.
I live in the central part of the state.. near a busy highway. I can look out my window at any moment during the day and count.. a number of trucks along about a 3 mile stretch.. at any moment during a normal business day I would count.. 3 to 5 trucks moving. about half will be grain trailers.. hauling wheat from Western Ks to flour mills and rail loading facilities to my east.. which then turn around and haul a "backhaul" of feedgrains to the feedlots/ethanol plants out west.
Sometimes this site gets a little carried away on the whole EROEI thing.. it assumes that we in ag are at maximum EROEI now.. which may not be the case.. and therefore assumes that if things are designed differently it won't work.. when in fact as we have transitioned to more feedgrain production.. we now have "backhauls" where the trucks can return loaded.. vs empty.. which would be an improvement in the overall EROEI.. as I have now just illustrated.
This is just one of many examples of the "how and why" grain ethanol makes sense.. We are continuing to incorporate these new efficiencies into the overall system.. aka the growth of WDGS.. "which came first.. the feeder or the feed?" as well as your CHG design.. which is also good.. this is why EROEI will continue to increase over time in grain ethanol. The location of these grain ethanol plants plays a big piece of the puzzel. Many are strategically located here to maximize return hauls.. we could also add cellulosic ethanol as a source stock in the future.. already have the distillation, and end product storage/transportation/market. Just need another "front end"
supply.. Same story.. 2nd verse..
hope this helps.
There is plenty of seawater near deserts and we already accounted for the energy to strip the O2 from the Co2 and H2O - that's where the energy goes - once you have that it's at least 70% efficient to convert to liquid fuel. The CTL guys say that any refinery can basically take coal mixed with NGL and make fuel - it's not a huge amount of equipment compared to a standard refinery, so this can't be all that much harder.
We now use 30% of our corm crop to make 3% of our fuel. There isn't enough good land to scale that up - that's the issue with the 3% - and that's even before you get to the distillery (as you pointed out). ERORI is only 1.0 for corn ethanol, so starting with seawater instead of corn starch, is only 2 or 3 times more energy, maybe not even that.
CTL is most likely going to be cheaper, so I guess we will do that first - and the environment be dammed... Bio-fuel may have already peaked (I hope)
As you see this is being pursued primarily by the navy. Their main concern is to cut
the logistic chain needed to supply jet fuel for aircraft carriers. Cost is
probably of secondary concern, they want independence from the logistics chain, and
us taxpayers will pay the bill. Even putting cost into the equation, the cost per gallon at the end of that logistic chain is probably pretty high compared to typical land based fuel terminals.
In one sense, the very high cost of fuel, especially in a contested war theater far from the ocean (like Afghanistan) is driving a great deal of military interest
in portable reneables solutions.
If ethanol subsidies go there are other forms of rural pork barrelling that could take its place. One discussed for Australia is called 'carbon farming'
http://www.alp.org.au/agenda/more---policies/carbon-farming-initiative/
The idea seems to be if the farmer has slightly less flatulent livestock or they plant a few trees they can get carbon credits. Mandate that coal fired power stations have to buy these credits and you get a forced wealth transfer to farmers.
I don't see how this system can be monitored or that agribusiness won't reap the rewards at the expense of family farms. Anyway it's an alternative to ethanol as thinly disguised welfare for farmers.
Another ridiculous scheme to garner the rural vote. Paying farmers to plant trees - and what happens when the trees are cut down - used for lumber, some of it is sequestered, as lumber, but a good % of it is not. If there is a fire that destroys the trees, does the farmer get the credits back?
They should not get paid anything until the carbon is actually sequestered - the tree is just a holding tank, it is what happens next that matters. The only intelligent part of that policy is paying a credit for biochar. And that will never happen, because any farmer will realise the biochar has greater value as a carbon neutral fuel, to replace coal. Burn the biochar, and leave the coal in the ground is a better way.
But really, poking around with little schemes like this when massive amounts of coal are being used and exported does nothing to reduce GHG's, it is, as you said, a very thinly disguised transfer of wealth scheme.
Not necessarily so. It depends upon the details of soil cheistry/metabolism. Used correctly, and in the right soil types, biochar can cause the soil to retain more organic carbon as well. Of course the opposite effect is also possible, a ton of charcoal in the soil may result in less than a ton sequestered. I don't know if we can finetune our credit system, so the biochar is used where it synergistically helps biology to increase soil carbon, and isn't wasted in places where it won't.
I wouldn't call this scheme ridiculous. The problems that you mention are not fundamental, and are actually being adressed, if you would take the trouble to read a bit more about it.
Environmental responsible behaviour is very seldomly rewarded. There is no "free market" for environmental services, so you have to make up some scheme to stimulate people to adapt their behaviour. Top soil loss, reduction of soil biodiversity, dimunition of soil organic matter, depletion of ground water are things that happen not overnight, but in two, three generations, to show their effects. Tough competition and lack of (inter)national environmental rules make the farmer to choose against environmental sensible behaviour.
Now you have a pretty exact and efficient tools and methodologies, recently developed (booming science), to analyse soil organic matter (SOM).
You work with long term contracts, like in forestry. You get paid once in a few years. If you leave the scheme, and SOM is lower than you started you have to actually pay.
Actually, planting trees on crop land is a very good idea. But this is a bit long to explain.
It has to do with the lignine rich organic matter that they produce (twigs, leafs, roots) that decomposes much slower than crop residues do. Stable humus can last for hundreds of years. Not as long as biochar, but on the other hand it has other advantages that biochar doesn't has.
To produce biochar you need to burn 70% of the wood of which biochar is made. This 70% is obviously released to the atmosphere directly, while leaving wood decomposing it takes several years to reduce it to 30% stable humus, in the mean time slowly releasing nutrients to the soil. The 70% ashes of the biocharwood could in theory be used as fertiliser, but the risk that is washes or drains away is very big.
Trees are a nutrient pump for crops. They manage to get nutrients from greater depths than crops can, and return it for "top soil digestion" in the form of dead leafs and twigs (if you trim them regularly). If you limit the amount of (trimmed) trees to 50 per hectare there are normally ways to avoid light competition with crops for each climate region of the world.
So yes: trees back to the land! (and how else you expect farmers could pay for that)
I can give you a whole list of references if you wish...
Hi Rebel,
I have no argument about the value of trees on farms - we have grown them on my family farm in Australia for years. they keep the saline groundwater down, and indeed bring nutrients up - a very good system.
Yes, the lignin is long lived - under the right circumstances, for millions of years, to become lignite coal.
One regular here, Treeman, makes a living by farming trees instead of crops, and I hope to be doing the same soon with biomass to energy here in British Columbia. For my family's farm in Australia, trees as biofuel will be more profitable than any food crop, and much more reliable and easier to manage, so that is the direction we are moving, no credits required.
But for the scheme, as proposed, here are my problems with it;
The land, before farming, was growing stuff, and sequestering carbon, by the methods you describe. while being farmed, the same is happening, though to a lesser extent, and shallower depth.
So, why can a farmer claim credits for something that is already happening, and has always happened? You should only be able to claim credits for man made sequestration, which means demonstrated, measurable (not just "estimated"), long lived sequestration, faster than nature was doing it.
this scheme does not describe this situation.
For farmers, environmentally responsible behaviour is absolutely rewarded - those that are good stewards of their land maintain fertility and reduce/eliminate/reverse soil erosion. We do not need a "scheme" to encourage them to do what they should already be doing - those that don't will go out of business soon enough (though will inevitably ask for "assistance"). We may need a scheme to penalise for off farm emissions, like contamination of ground and surface water (especially from feedlots)..
Being able to measure SOM is great, but how permanent is the increase? if it is something that an easily be reversed, or will decline if not maintained, is the carbon really "sequestered" or merely in 'temporary storage"
To have integrity, the system must be measurable and verifiable, and be storing carbon faster than Nature does-anything less is indeed a "scheme"
And, of course, those extracting, and exporting, carbon, should be paying credits accordingly, but no matter what the Aust farmers do, they can't match the rate of coal extraction, let alone be selling credits overseas.
Hi Paul,
Interesting discussion: yes I agree that environmental responsible behaviour is rewarded, but not on the short term. The fact of the matter is that more than 95% of the present crop land degrades, perhaps not all meadows, but surely crop land. The trend is, still, towards upscaling and monocultures. Regular ploughing and leaving soil uncovered, reduces the organic matter. Research in Europe shows that practically all cropland has SOM levels that reflects just the stable humus. Under French soil-climate conditions this means about 2% of the weight of the topsoil. Before deep ploughing introduced this used to be around 4%. In the East European podzols (SOM from peat), it used to be around 6%. You see what I am getting at? "Modern" agriculture brought SOM levels back from one balance to another one. It will take a few generations before also the stable humus is burned.
Now, suppose I am a responsible steward type of farmer who inherited cropland from his parents, who did traditional modern farming. What will it cost me to bring back humus and soil life to the pre-indiustrial levels? I can tell you: only in terms of education and risk taking (no-till farming is not yet totally ready to be adopted just like that) it will make me a lonely pioneer, with lots of mistakes that will put me in a financially insecure position.
Am I only responsible for that. Should I be the one to secure future food production for many, without being compensated for that? I see the introduction of a CO2 scheme more as educational tool than as wealth redistribution. It might be just the trigger for many farmers to rethink their farming system.
By the way: a small calculation. With sufficient woody material you can bring back SOM from 2 to 3% in about ten years. This process will sequester about 10 tons of CO2 per year/per hectare. That gives farmers hopefully enough time to be convinced of the benefits to keep the SOM at that level. Basically one Australian person could compensate its yearly CO2 production by adopting one hectare of cropland "in conversion" to a climate resilient production for 250 dollars per year....
This might be an interesting document for you:
http://www.hydrogeochem.qc.ca/brf/ramial_chipped_wood_2007_11_27.pdf
Good luck with your treefarm!
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My perspective is that I ride my bike and save fuel. I should not pay taxes to subsidize other drivers that are not trying to conserve fuel via the ethanol freebie.
Food is more important and Farmers should make food.
Gas prices should rise and I wouldnt mind.
Problem is that the Senate will not budge and the ETOH subsidy will remain in place -- protected by special interests.
See we Americans talk about debts and financial issues -- belt tightening -- but we binge on waste and abuse the Treasury. We talk about earmarks instead of subsidies and entitlements and the military budget.
Since you ride your bike, you will probably get a kick out of this article - you are going faster (distance travelled over time spent traveling AND paying for travel) than most drivers;
http://www.notechmagazine.com/2010/04/the-industrialization-of-traffic-w...
Of course, you are still paying taxes to support the drivers, but, like death, you can't avoid (all) taxes
I need to get rid of the 2nd car. Car insurance is worse.
I can ride to work faster than driving in traffic, parking and walking to my office.
BUT I am sweaty as hell and need to change my clothes when I get there -- so I break even in the end with the pit stop clothes change.
I used to do a commute like that to work too. Get to work and have a shower, etc No time advantage, but a cost one, and a health one, (as long as you don;t get hit by a car).
The real problem with bike commuting, if you don't have separated cycleways, is that you are battling traffic, and that is only for the young and/or confident.
Of course, get rid of the cars, and it is a totally different story...
http://www.lowtechmagazine.com/2009/10/get-rid-of-cars-ride-a-bicycle.html
We have a nice well-lit bike trail -- now with led lighting (ohh awww).
parking pass cost me $1000 per year. gasoline another $2000 per year in gasoline @$3 per gal.
$3k per year and no exercise.
Yes, it was a great way to save cash to pay for the house the Greenspan built.
Of course, the very first freeways to be built in California were for - bicycles!
(Pasadena, circa 1900).
What would we give for a network of such today?
Oil is tremendously subsidized. From a blog I wrote last year at http://krementz.blogspot.com/2009/12/oil-is-subsidized.html
Some people like to claim that oil is not subsidized, unlike alternative energies. A recent article supporting this is http://seekingalpha.com/article/178787-you-say-fossil-fuels-i-say-future...
Ridiculous.
The externalities of oil production are not paid for by the consumer, but by the taxpayers. One could argue that half the Defense budget is spent on keeping "peace" in the Middle East trying to protect oil. The pollution effects of petroleum internal combustion engines are "paid for" by everybody in terms of higher disease rates. The noise pollution degrades our lives (electric chainsaws are much quieter than gas).
The US used about 290 billion gallons of petroleum last year. The defense budget was about $600 billion. If half the Defense budget is because of wars in Iraq and Afghanistan and patrolling the Middle East, it adds a dollar a gallon to the cost of gasoline. AAA (see http://money.cnn.com/2008/03/05/news/economy/AAA_study/ ) claims that auto accidents cost $164 billion, or over 50 cents per gallon. MIT estimated in 2005 that US pollution costs about $250 billion (see http://tinyurl.com/yejjd6a). While not all pollution is from petroleum, of course, one could rationally add 10 to 40 cents per gallon just on pollution effects.
Most of the roads in this country are NOT financed by gas taxes - all the city streets and county roads are paid by property taxes. Probably 25-50% of our local law enforcement costs are for traffic enforcement, and are paid by local taxes, not fuel taxes. A significant portion our medical expenses in this country are from auto accidents, paid by everybody's insurance, not just drivers.
In summary, the more I drive, the more it costs my neighbors to pay for the street, clients of my health care plan for their premiums, the taxpayers for law enforcement and traffic control in every town I drive in, and everybody within earshot and "lungshot" of the highways who get to hear and breathe my pollution. If I bike and walk instead, none of these costs go down for me, only for third parties.
So petroleum, a very useful substance, creates huge amounts of pollution, soot, noise, deaths, and medical costs, without any obligations or costs.
I estimate the indirect subsidies for oil is about $3 a gallon. This does not include direct subsidies, such as depletion allowances, or "soft" costs, such as global warming, loss of personal freedoms, Patriot Act, etc. I am only including hard costs, such as road construction and maintenance, police and traffic control, health care (including pedestrian hit by vehicles), and the like.
The defense budget was about $600 billion.
Does that include all of the costs of the Iraq and Afghan deployments, including "emergency" budgets? I had the impression that direct DOD costs were about 800B now.
Other possible costs:
VA for the portion of veterans who could be allocated to oil-related defense
Interest on the money borrowed to pay for oil-related defense costs
protection against ME guerilla warfare:
TSA
costs to UPS and Fedex to protect against bombs in packages
Private security, for office buildings, etc
...something over a trillion: Pentagon budget, nuke arsenal under DOE budget, off-budget war expenses, veteran's benefits (education, medical and disability), foreign military aid, etc...
nuke arsenal under DOE budget...foreign military aid
Can we allocate some of these to the ME, or oil security?
Tax is theft.
How is that ?
One thing for sure, subsidies are higly prone to mistakes on defining what is "good" and to other cheats of all kind.
Tax is the revenue part of the government budget, how is that theft ?
And again, if the US has a minimal chance of getting out of this mess, it is only through increasing its totally ridiculous tax level on gas (comparable only to net exporting countires and some third world ones), the target should be at least $2 a gallon new tax within 3 years, at least !
Benefits : lower fiscal deficit, lower trade balance, price signal towards buying much more efficient cars (not necessarily EV or hybrid, just much more efficient, like 50% less consumption, easy considering current US cars fleet), or even price signal to stop over sprawl by adding sacro sanct "single family homes" one next to the other with a few walmarts in between .
But obviously the US currently highly prefers to pursue its economic suicidal path ... Sad !
Use of government services and government-built infrastructure is theft.
No taxes=no government; no government=no rule of law; no rule of law=you own nothing but what you can keep people from stealing, including your life.
In practice, some group deciding to have a small limited government that required little and offered little would quickly have its stuff and citizenry "stolen" by a more effectively organized group. Look at world history from the perspective of the tax free cultures, typically having a state of organization with little wealth or technology, but an admirable level of freedom - 99% of those have been swallowed up and digested.
Assertions are mindless.
RR-no quarrel with idea that we ought not subsidize a mandated activity. Since you have posted and are hanging around, I wondered if you could give us a thumbnail update on butanol. I see some some activity on a bio-butanol site and wonder what your take is on current production processes, economic viability and such.
ditto
In a nutshell, I still don't view the bio route as economical. However, I am supposed to interview one of Cobalt's executives in the near future, and we can see whether they have anything new to report.
Does ethanol get a subsidy or is it taxed at a lower rate than gasoline from crude oil?
This is an important distinction and a strong case can be made for taxing ethanol at a lower rate than gasoline.
Further, we can have a farm run purely by actual horsepower producing ethanol. Wouldn't this farm clearly be a net energy producer?