The more things change, the more they stay the same

A couple of pictures to begin with, the first is a month (and 50 cents) out of date, but it is a good start on telling folk where the price of a gallon goes. (From the EIA)

Continues below the fold...

And the second, which others have put in comments, are the ongoing gasoline stock and production curves.

Well, we're back to being a five-day wonder.  People are again shocked that prices have gone up.  I wonder if this is now going to be an annual ritual, as we progress from winter to summer, and corporate profits are announced.  Unfortunately, as the press release from my colleagues notes, the reason for the price increase is not amenable to the solutions that are now being thrown around.  In which regard, it was interesting to hear the spokeslady from the API actually mention peak oil, in her remarks on the News Hour tonight.

It is difficult to educate the public at this time.  They want something done in a circumstance where there is not that much, in the short term, that will make the situation much better and some things that are coming (such as the Hurricane season) which may likely make it worse.  The tried and true formulae (the "give them cake" suggestions from both parties) only work when this is a short-term problem.  When it becomes, as it increasingly is, an ongoing situation then the paradigm must change.  (As was commented earlier, illustratively, we need to transition from paying the winter fuel bill of the disadvantaged to paying for insulation of their houses).
But to change the attitudes you must first have the public, and their servants, educated.  We are blessed that a small fraction already are, but as yet the rest are still in what Prof G called it last year, the river phase, or Denial (took me a minute!).  As I noted the words peak oil are starting to get more attention, but the true implications are yet to sink in.  

Yes, we have the new encouragement for long-term solutions such as ethanol, but there we need to look at the numbers. Which are, as the President noted:

Last year, America used a record 4 billion gallons of ethanol. There are now 97 ethanol refineries in our country, and nine of those are expanding and 35 more are under construction. The ethanol industry is on the move, and America is better off for it.

Many of these refineries are in the Midwest -- the Midwest because that is where the source -- you know, the feed stock for ethanol comes from.

That happens to be corn.

But what's really interesting, there are new plants springing up in unexpected areas, like the Central Valley of California, or Arizona, or, of course, in the sugar fields of Hawaii. After all, sugar can be used for ethanol. As a matter of fact, it's a very efficient feedstock for ethanol.

However, if we use 20 million barrels of oil a day, and the 4 billion gallons is less than 100 million barrels a year, or 260,000 barrels of ethanol a day - about 1.3% of our gas needs, and thus to get to 5% we would need to treble production - which requires a fair amount more corn. In other parts of the world, which use sugar instead, it is already taking prices to 25-year highs with half of Brazil's sugar crop now going to ethanol. Business week has just reviewed the history of ethanol production and concludes:
The recent price spikes for gasoline have forcibly reminded the people of Chicago and Wisconsin of what happened when ethanol was forced on them during the summer of 2000. Moreover, the promise of energy independence that Brazil has explored through ethanol is widely misunderstood. Recently a Brazilian official, commenting on our third and most recent attempted conversion to ethanol, said that when Brazil tried using agricultural crops for ethanol, it achieved only a 1:1.20 energy conversion rate, too low to be worth the effort.

FINAL BOW?  On the other hand, ethanol from sugar cane delivered 1:8 energy conversion, which met the national mandate. Unfortunately for us, sugar cane isn't a viable crop in the climate of our nation's heartland. But the part of Brazil's quest for energy independence that the media usually overlooks is that ethanol wasn't the only fuel source the country was working on: Its other, more important, thrust was to find more oil. To that end, last week Brazil's P50 offshore oil platform was turned on. Its anticipated daily output is high enough to make Brazil totally oil independent.

More smog, infinitely worse gas mileage, huge problems in distribution, and skyrocketing prices for gasoline. Maybe now that we're witnessing the third act in America's ethanol play, the upcoming epilogue will close this show forever. Even great advertising works only if the product does.

Hydrogen, even if developed as fast as possible, is going to take about 20 years, if it will work at the scale needed even then. (And there are significant doubts, since it has to be created as a secondary use of energy). Other than that we don't have much inspirational creativity as far as new programs go, and those that exist are still getting done away with.  I learned in the last Energy Crisis that to expect energy companies to invest in new ideas when they are getting buried in money using the old ones is not really fruitful. I suspect, adverts in the paper not withstanding that we are in the same condition again today.

Well, wonder what is going to take it off the front pages this year.  Might as well get out the dust cloths and mothball this until next April, when we can bring it out again. After all it's about time for Michael Lynch to start appearing on the talk shows again, together with Saint Daniel de Yergin.

I'm First!!!
Great feeling, isn't it?  Especially on open threads, where it gives you agenda-setting power!
Hello PhilRelig,

Speaking of agenda setting power:  How is it that Lynch & Yergin seem to effortlessly get major MSM airtime, yet Westexas & Khebab cannot get a simple letter published, and no mainstream reporter is knocking at the TOD HQ door asking to interview our vaunted TOD topdog data freaks?

It is pissing me off because the National Agenda is keeping the unwashed masses from knowing the truth, and the MSM is stifling our Peakoil Outreach efforts.  Hell, we get some useless talking head on TV acting like an expert for 15 minutes, yet anything Matt Simmons says the MSM cuts down to a five second soundbite!

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

I have a great deal of respect for everyone here, but I really can't fathom how anyone could expect otherwise.  The press release is great, but that doesn't mean anyone outside the blogosphere and the PO cognoscenti are going to see it.

Lynch, Yergin, and the USGS are both the acknowledged "experts" in the real world and those preaching a message that addicts want to hear: "Lots of oil, if those other people were willing to produce it."  The addicts hear, "no shortage, other people withholding supply to increase profit."  You do see that this is the message people are willing to believe, right?

The PO message will be considered when the "experts" are discredited.  They were "proven right" the last time around, when oil prices dropped in the 80s.  We know what really happened, but the addicts prefer to believe that Reagan frightened OPEC into giving up.

I agree completely.  People will believe what they are motivated to believe as long as there is even a reasonable possibility (and sometimes not even then) that it is true.  As long as we have some vocal "expert" voices reassuring people that nothing need change then they will be strongly inclined to believe them.  Our national junkie will not want to check into rehab if he/she can be persuaded that the next fix is in the spoon.
I don't know about Lynch, but Yergin won the Pulitzer Prize in 1992 for his book on the oil industry, The Prize. This gives him automatic credibility as an expert on the topic. I don't know of anyone else in the industry who has such good credentials.
Is Yergin to peak oil, as Linus Pauling was to vitamin C?

Is Yergin to modern oil, as Woodward is to modern scandals?

Julian Darley got to debate Michael Lynch on Democracy Now -- and JD got to say more than ML!
I thought Darley was too obscure.  He said, "Peak oil is essentially quite a simple idea," but he never made it very clear what he meant by, "then you see a decline in that oil."  Does that mean the oil gets worse, or what?  Any Peak Oiler would know, of course, but I wonder how long it took the average viewer to catch on?

Lynch attacked, saying, "Julian and a lot of the people making these arguments are not that familiar with the technical terms in the oil industry."

Darley was far too polite, saying, "So I'm afraid I disagree with both those statements on factual grounds."

Someone posted that Kerry lost the "meta-debate" because he let Bush's people Swift-boat him without fighting back.  I listen to these Peak Oil debates, and the only one willing to mix it up with these guys seems to be Kunstler, who (no offense) seems to have the least scientific background.

>It is pissing me off because the National Agenda is keeping the unwashed masses from knowing the truth, and the MSM is stifling our Peakoil Outreach efforts.

This is a good thing. Did you ever consider the ramifications if Canada, Mexico, and other major oil exporters to the US suddenly stopped selling us oil? Becareful for what you wish for.

Hello TechGuy,

This will inevitably happen if you give credence to Westexas & Khebab's theory as I do-- it is much better for the US to be proactively prepared for this situation by biosolar Powerup.  Detritus entropy dictates that even Canada, Mexico, etc will eventually run out too, but remember the Sun will keep shining for the next few billion years.  Declaring war on Mexico or Canada will be entirely counter-productive because that will set off a massive internal civil war.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

>This will inevitably happen if you give credence to Westexas & Khebab's theory as I do-- it is much better for the US to be proactively prepared for this situation by biosolar Powerup

Sorry, I have to disagree. As soon as the US gov't publically acknowledges Peak Oil virtually all exporting nations will nationalize energy access and virtually stop exporting in order to make their own preparations. Since US domestic production in nearing heavy depletion there would be insufficient resources to make that transistion. Much of the industrialized world would also endure the same suffering. Undoubtedly chaos and perhaps even a collapse of the United states is likely.

The US faced a near crisis during the Oil Embargo when the US only needed to import about 7% of its oil. Today, the US imports about 60% of its oil. We also need to consider Natural Gas imports from Canada, which was not a factor in the 1970's.

The best policy the US can proceed which is to begin a large scale domestic energy development program under the umbrella of "National Security" and "Geopolitical Instablity" as a reason to motivate the US public to ween its self off foriegn oil imports. The rest of the industrialized world could also make prepations without fear of being suddenly cutoff. Unfortunately it may be too late.

Recently, I been concerned that we are already past peak energy production. Increasing we can see that the oil production is increasing only from non-conventional sources of oil (Tar Sands & GTL) and Heavy Crude, which has a lower EROI. If we consider the amount of energy extracted per investment in infrastructure and processing, I believe we might see a decline in over all energy production.

A barrel of Light sweet crude delivers more useable energy to the consumer than a barrel of heavy crude. Even if global production continues to rise, if we include the refining and extraction losses, its quite possible global energy production is already in decline.

> the Sun will keep shining for the next few billion years.

The problem is that the industrial world consumes approximately 400 years of stored sunshine every day (from fossil fuels). In order to reach a sustainable energy consumption the entire globe would need to reduce its energy use by a factor of over a thousand.

In my humble opinion the best course of action is for people to assume responsiblity for their own welfare instead of waiting for gov't to take action. Peak Oil isn't just a gov't problem, it is your problem too. I believe it would be easier to convince the entire world abandon all monotheistic religions and begin worshiping pagan gods again, than it would to convince the population to abandon their energy consumption and lifestyles forever.

Wow, I hadn't even thought of that denial post in a while HO.  You're dropping in the "old school" posts!  

Hey Super G, any idea on all of the strange characters in the "classic" posts?

Great work HO as always.

What do you think is the current energy conversion rate in the US?  A recent story in my home state of New Jersey indirectly implied that the energy used in shipping and processing the materials needed to make ethanol resulted in less energy - although it was still profitable to make, probably because of government subsidies.

Thanks for your fine comments, as usual.

Part of the answer is also that some of the energy inputs are also cheaper per BTU than the output.

Current price of ethanol is ~2.50/gallon, which translates into $29.7/mln.BTU.

If for example the ethanol plant uses natural gas for the destilation process it will pay some ~$7/mln.BTU. And if it uses coal, the cost would be only $1-2/mln.BTU. Even if it uses electricity the cost would be quite lower than the output - $14.50/mln.BTU (for $50 per mgawatt-hour).

I am a little confused about ethanol.   Can a typical internal combustion engine run on ethanol?  Can I grow corn in my backyard to fuel my car after Peak Oil comes? (I have a bit of land).
Most modern engines with computer-controlled fuel-air mixture regulation can run on ethanol (or a mixture of petrol and ethanol).  The main difference is that you'll need about 30% more of it than the petrol, since it contains less energy by volume.

The US Dept of Energy's "Alternative Fuels Data Centre" has a list of E85 Vehicles.

Well it depends on how good a hillbilly you are (grin) since ethanol is a grain alcohol, and you would need to know how to run a still.  Incidentally I was talking to one of those in the trade the other day, and he commented that if the government was serious about lowering costs, then they could lower it fifteen cents a gallon by just removing the requirement for the additive that denatures the ethanol so that folk can't drink it. The additive has no value as far as the fuel side of the use goes, but is required lest we become a nation of addicts (oh, but the President said that we already were, silly me!)

In regard to running it in an engine, the usual mix is in the 5 - 15% range, in which case it is already in a lot of the gasoline that is bought at the pump.  It is only when it is put into cars at the 85 - 100% level that the engine needs to be modified, and while one can buy cars that can run either on this or regular gasoline, there is not that much call for them yet, since folks still prefer to drink their moonshine, rather than pour it in the tank.

Thanks for the post, HO!

I wonder about what seems to me to be "intentional ignorance" which is sustained by media, the political establishment, and corporate culture.

Even witt denial still dominant, are we at a cultural tipping point where suddenly "peak oil" gets mentioned as a real issue to deal with here and now -- along with global climate change?

I do note bits of comprehension as I talk with people from day to day.  This is encouraging.

And yet the local political establishment where I live is still focused on how to raise public money to pay half-billion-dollars each for three sports stadiums: one for the MN Twins, one for the Vikings, and one for the U of MN football team.

I ache for public discourse to focus on strategies for addressing peak oil and global climate change, but there is still this huge disconnect between public discourse and reality.

Perhaps if we get things like the TOD editorial out -- and the Peak Oil Poster and such -- we can bring aboput the much-needed tipping point all the sooner.

Reality-based public discourse -- what a wonderful dream!

(BTW -- I did link to the TOd editorial in a local Minneapolis e-democracy discussion list, and e-mailed the link to our Mayor and some state legislators as well.)

I wonder what will happen next year when we see even higher prices of oil and gas.  Right now, there's finger-pointing between the left and right and the vast majority of Americans still think that gas will be going back down.  We TODers know better.  What will the average Joe think of next year when we still have higher prices even after all of the "cookies & candy" promised by politicians have been handed out?  More blaming or will people finally realize this is a much, much bigger issue?

And BTW - what is up with natural gas?  11-month lows?  How much lower can it go?

Re: natural gas, stockpiles are ridiculously high right now, which accounts for the majority of the pricing.  I think this shoulder season has been gentle and the '05-'06 winter much more so, with some demand destruction occurring in the industrial parts of the economy in response to prices.  Yeah, that part of the U.S. economy that actually cares about pricing.

I do expect a scorching summer leading into another mellow winter(global warming).  Put it this way -- I'm hovering and waiting for a few more weeks of bearish inventory data, and I'd be surprised to see anything below $6.000 at any point from now on.

Corn, grown in a massive monoculture as we see through much of the plains and Midwest, is a soil raping plant unlike most other plants grown for food or forage.  It needs large inputs of nitrogen to thrive, and most typically, said nitrogen is provided through synthetic fertilizers derived from natural gas feedstock.  The resulting pollution of ground water from excessive nitrogen fertilization, and continued eutrophication of existing freshwater habitats as the aquatic flora are fertilized from excessive runoff, is disastrous to large portions of the Platte River Valley among others in the dry western plains. Because the demand will increase for corn production, we are likely to see less rotation of crops, which clearly sets up hundreds of thousands of acres (maybe millions) for a host of harmful insect and fungal outbreaks.  Add to that, the Genetically modified strains of corn grown in so many places now, with the ability to withstand direct applications of Roundup herbicide, we are absolutely insane to depend on such a fuel as corn-derived ethanol. We are already seeing resistant strains of common weeds. So then we need larger inputs of herbicide. What happens as the prices of pesticides and herbicides continue to increase as the petroleum bases for these products become increasingly expensive and scarce? This doesn't even take into account the massive amounts of irrigation water in the drier parts of the country needed to feed this rapacious Zea mays (sorry non-botanical types- it's just corn).  IMHO, ethanol from corn is a losing proposition, not just based on EROEI, but the incredible damage to the soils and waters of millions of acres of America's best farmland. We got to try smarter, not harder. Corn ain't smart.
excellent point.  for more on the ecological and sociological horrors of domesticated crops (i.e. corn, wheat and rice) try this Harper's article by Richard Manning.  

" Domestication was also a radical change in the distribution of wealth within the plant world. Plants can spend their solar income in several ways. The dominant and prudent strategy is to allocate most of it to building roots, stem, bark--a conservative portfolio of investments that allows the plant to better gather energy and survive the downturn years. Further, by living in diverse stands (a given chunk of native prairie contains maybe 200 species of plants), these perennials provide services for one another, such as retaining water, protecting one another from wind, and fixing free nitrogen from the air to use as fertilizer. Diversity allows a system to "sponsor its own fertility," to use visionary agronomist Wes Jackson's phrase. This is the plant world's norm.

There is a very narrow group of annuals, however, that grow in patches of a single species and store almost all of their income as seed, a tight bundle of carbohydrates easily exploited by seed eaters such as ourselves. Under normal circumstances, this eggs-in-one-basket strategy is a dumb idea for a plant. But not during catastrophes such as floods, fires, and volcanic eruptions. Such catastrophes strip established plant communities and create opportunities for wind-scattered entrepreneurial seed bearers. It is no accident that no matter where agriculture sprouted on the globe, it always happened near rivers. You might assume, as many have, that this is because the plants needed the water or nutrients. Mostly this is not true. They needed the power of flooding, which scoured landscapes and stripped out competitors. Nor is it an accident, I think, that agriculture arose independently and simultaneously around the globe just as the last ice age ended, a time of enormous upheaval when glacial melt let loose sea-size lakes to create tidal waves of erosion. It was a time of catastrophe.

Corn, rice, and wheat are especially adapted to catastrophe. It is their niche. In the natural scheme of things, a catastrophe would create a blank slate, bare soil, that was good for them. Then, under normal circumstances, succession would quickly close that niche. The annuals would colonize. Their roots would stabilize the soil, accumulate organic matter, provide cover. Eventually the catastrophic niche would close. Farming is the process of ripping that niche open again and again. It is an annual artificial catastrophe, and it requires the equivalent of three or four tons of TNT per acre for a modern American farm. Iowa's fields require the energy of 4,000 Nagasaki bombs every year.

Iowa is almost all fields now. Little prairie remains, and if you can find what Iowans call a "postage stamp" remnant of some, it most likely will abut a cornfield. This allows an observation. Walk from the prairie to the field, and you probably will step down about six feet, as if the land had been stolen from beneath you. Settlers' accounts of the prairie conquest mention a sound, a series of pops, like pistol shots, the sound of stout grass roots breaking before a moldboard plow. A robbery was in progress.


Focusing on pesticide pollution, though, misses the worst of the pollutants. Forget the polysyllabic organics. It is nitrogen--the wellspring of fertility relied upon by every Eden-obsessed backyard gardener and suburban groundskeeper--that we should fear most.

When farmers dump nitrogen on a crop, much is wasted. It runs into the water and soil, where it either reacts chemically with its surroundings to form new compounds or flows off to fertilize something else, somewhere else.

That chemical reaction, called acidification, is noxious and contributes significantly to acid rain. One of the compounds produced by acidification is nitrous oxide, which aggravates the greenhouse effect. Green growing things normally offset global warming by sucking up carbon dioxide, but nitrogen on farm fields plus methane from decomposing vegetation make every farmed acre, like every acre of Los Angeles freeway, a net contributor to global warming. Fertilization is equally worrisome. Rainfall and irrigation water inevitably washes the nitrogen from fields to creeks and streams, which flows into rivers, which floods into the ocean. This explains why the Mississippi River, which drains the nation's Corn Belt, is an environmental catastrophe. The nitrogen fertilizes artificially large blooms of algae that in growing suck all the oxygen from the water, a condition biologists call anoxia, which means "oxygen-depleted." Here there's no need to calculate long-term effects, because life in such places has no long term: everything dies immediately. The Mississippi River's heavily fertilized effluvia has created a dead zone in the Gulf of Mexico the size of New Jersey. "

It seems misleading to mention hydrogen at all in the oil price discussion, even though you correctly qualify it with the explanation that it's secondary. It takes energy to produce hydrogen, quite a lot of energy. As you suggest, it's not an alternative energy source any more than "batteries" or "electricity" are alternative energy sources.

Hydrogen, in principle, might offer energy for transportation without CO2 production. As Kunstler discusses, there are a lot of problems other than strict scale in using hydrogen, however produced.

So, as crude accounts for only 55% of the cost of 'gas', is that why the price of crude has risen almost 400% in the last 3 years, while the price of unleaded has risen only 200%?

If so, then it would seem that no-one in the distribution line is making more money now than they were 3 years ago.

I think that is true but it also raises an interesting point. If you merely split the cost of gasoline at the pump between "Crude" and "Other" it explains why the noise about the price rise is greater in US than Europe. The high tax rates are part of "Other" thus the same % increase in "Crude" produces a far smaller % increase at the pump. Aren't we lucky to be so "protected" by our high tax rates :-)
This is incorrect.In the last three years crude is up about 120% and wholesale gasoline is up between 110-130% depending on your dates.

At the beginning of 2003, crude oil was about $30/barrel, for it to be up 400% percent would make it $150/barrel - clearly not the case.

Hmmm.  But if you follow my instructions in my post the other day then the graph of 'Crude-IPE' starts just above $20 and finishes just below $80. I did say 'almost'. OK, so let's say the graph starts at $25 and ends at $75.  That's still a 200% increase (the price now is 300% of the April 2003 price).

Sorry, I just re-read my original comment and I said that the price had risen by almost 400%.  That is, as you say, incorrect.  I meant to say that the price now is almost 400% (almost four times) the April 2003 price (just eye-balling the graph.

Similarily, the price of Unleaded has indeed only risen by approx 100% or is now twice (200% of) it's April 2003 price.

Anyway, my point was that the fluctuations in the price of crude do not directly match the changes in price for unleaded, percent for percent.  Which appears to be related to the fact that the cost of crude only accounts for 50-odd percent of the cost of unleaded.

That's right. I'm actually working on some correlation graphs for the two which I will post hopefully in the near future. Aside from some temporary political, and hurricane-related anomalies, they match fairly well.

To give you a preview, this is what my model suggests for what  gasoline prices should be at different crude levels. Remember there is a lot of play in these numbers. So I would allow for as much as a +/-25% range around what I list here.

$120 crude equates to $3.67 gasoline
$150 - $4.36
$200 - $5.52

These are all in 2006 Dollars and "market factors", so if it takes awhile to reach these levels of crude prices, other dynamics may change the equation and therefore the price.

I'g glad to see I'm not the only one who has done the math on ethanol.  If every bushel of corn in America went to ethanol production, we could still only produce a fraction of the liquid fuel we currently use.  

This is a huge perception problem (at least here in the corn belt where I live).  The public is generally led to believe that ethanol will someday seamlessly replace gasoline, so they think there is no need to adjust to a lower energy lifestyle.  The myth is that we can just keep burning gasoline the way we always have, because soon we'll have unlimited ethanol to replace it.

Whooa...  hey now!  Lets not get outta hand here with our facts on ethanol.

First off - ethanol is pennies a glass when to comes to the price of gasoline.

Second - ethanol fermented from corn is  an entirely  different animal than that of cellulosic ethanol derived from biomass.

Third - celluslosic ethanol is already in production both north and south of the 49th parallel.

Fourth - the DOE has confirmed that 1 bilion tons of biomass can be produced in the U.S. p/a algae notwithstanding.

Fifth - Chrylser, Toyota, GM and Ford have all committed to building flex-fuel vehicles in large quantities by 08'.

And for those of you getting their shit in a not over Cali...

Pacific Ethanol is opening 4 ethanol plants primarily focused on the W.C.

So chill Team Defcon! CHILL!

Third - celluslosic ethanol is already in production both north and south of the 49th parallel.

I wonder if you could quote some production numbers and who is actually producing cellulosic ethanol?? For everything I have read, many problem still exist concerning cellulosic ethanol and that massive production is still out of the equation..

I've seen the chart on where the gas $ goes a few times now. BUT WHERE'S THE PROFIT? The big integrated oil companies make their huge profits from many sources and not just the end product, but does anyone know the profit margin on gas so this can be figured in?

By the way, Business Week has an interview with T. Boone Pickens, and there are links to some alt fuels article in Popular Mechanics, etc here

There must be lots of profit in crude, for most suppliers, at the price of crude. The highest cost oil wells in current use are presumably breaking even, roughly speaking, at the current price. But lots of lower cost wells are still in operation. So there is a lot of money to be made just pumping oil from those low cost wells and selling it at the current price.
But the part of Brazil's quest for energy independence that the media usually overlooks is that ethanol wasn't the only fuel source the country was working on: Its other, more important, thrust was to find more oil. To that end, last week Brazil's P50 offshore oil platform was turned on. Its anticipated daily output is high enough to make Brazil totally oil independent.

I've been reading the energyresources listserve since y2000. Two or three years ago Milton Maciel from Brazil started posting regular erudite comments regarding Brazil's ethanol development that began to systematically call in question list readers' common assumption that Pimental's corn ethanol net energy results also would apply to cane ethanol. Thus far I have found Maciel credible about cane ethanol in Brazil.

Recently he responded to the "Learning From Brazil" article in Mother Jones. His comments are fairly extensive, so I replicated them on my website for your consideration.

We don't use 20 million barrels of gasoline a day, we use 20 million barrels of OIL.  We consume 9,105,000 barrels of gasoline per day... or 382.4 million gallons..

So, Ethanol is already providing more than twice the percentage that you calculated... it doesn't look like that 5% will be much of a problem.

By the way the Business week article you cite was a commentary from a Dallas radio talk-show host.

One more item on Ethanol production:

"But the renewable fuels mandate coupled with the phase-out of MTBE and state fuel requirements is expected to produce a need for about 395,000 barrels of ethanol a day, or 6.1 billion gallons in 2006, according to the Energy Department." ;siteid=google

If we really do produce this much ethanol this year then ethanol production will be about 4.2% of gasoline producion on a gallon for gallon basis. 5% is starting to sound really easy!

As to whether 1 gallon of ethanol provides the same utility as 1 gallon of gasoline that is a whole other debate.

As to whether 1 gallon of ethanol provides the same utility as 1 gallon of gasoline that is a whole other debate.

In the USA, flex-fuel vehicles seem to get 70 - 75% of the gas mileage using E85 (EPA numbers). A wikipedia article says  new Brazilian flex-fuel cars get 85%. And there's even a rumor that Saab's Biopower 9-3 can get 115%!

The BTU content of E85 is less than gasoline but its octane rating is higher; engines can be tuned (on the fly, in the case of the Saab) to take advantage of this.

From the same wikipedia article:
"Some of the newest model FFV's get only about 7% less mileage per gallon of fuel of E85 compared to their gasoline fuel mileage."

So does it work out that we end up needing to use more oil when we use E85 since we will have to fill up our tanks more often due to the lower mpg?
yup. reality trumps again.
As to whether 1 gallon of ethanol provides the same utility as 1 gallon of gasoline that is a whole other debate.

I'd expect a non-linear relationship between engine performance and ethanol concentration.  Obviously at high concentrations (nearly pure gasoline compared to nearly pure ethanol) we'd see the classic %60 or %70 (whatever) power difference.  More interesting to me, as we start to see ethanol as an oxygenate, is how our cars will respond to low concentrations.

I'd love to know (A) what fraction of ethanol we are actually getting in our fuel, and (B) how MPG changes with those small fractions.

From what I've seen, most MTBE/Ethanol rules are written as "up to X percent ethanol" rather than a definition of how much will really be used.

According to the EIA  Jan ethanol production 288,000 bpd, Feb 302,000 bpd. At 14,Kbpd increase per month for 10 more months would average out to 358,000 bpd for the year 2006.
358 over 9105 =3.16% for the year.
Also 358,000 times 9 will provide 3,222 Kbpd of E-10.  
3222 over 9105 = 35.4% of Gas needs.  
358K * 365 *  42 = to about 5.5 billion.  
5.5 over 2.6 gallons per bushel = 21% of annual corn crop.
Some gas blends may use less than 10% ethanol. Due to the shortage and increasing price of ethanol, CBOT has been up to $2.75 pG,  E-85 may be outlawed before the end of summer, my WAG. 819mhilt.pdf
You are, of course correct, nad I apologize for the error.
1st Quarter GDP number due out at 8:30 AM EST. The "official" expectation is around 5%. Talk on CNBC right now seems to confirm this as the mainstream consensus. Anybody care to comment?
GDP came in at 4.8%.  Doesn't seem like expensive oil is doing much damage yet, does it?  Core inflation dropped to 2%, from 2.4% last quarter.  Wages and benefits rose .6% in the first quarter.  Even employment and retail sales are doing well.  Hard to spot any impacts there.

OTOH, the personal savings rate dropped from -.2% to -.5%.  It looks as though the costs just went onto credit cards.  How long can people keep that up?

Something of a bounce after Q4 05, no?  US energy prices in Q1 fell significantly due primarily to the exceptionally mild winter, which also promoted more economic activity.  VMT was higher than last year.  We'll see what happens this quarter now oil prices have gone high enough to annoy everyone again.  However, my general feeling is that as long as oil supply is just flat (not sharply negative) some economic growth should be possible out of efficiency gains.
If something cannot go on indefinitely, then it won't.

I'm sticking to my prediction of a recession beginning (according to official statistics) within nine months.


  1. Limited ability of consumers to increase spending based on borrowing ever more
  2. Bottlenecks such as shortages of huge tires for mining trucks, lack of petroleum and chemical engineers
  3. Record high inventories of unsold houses that put downward pressure on house prices. If housing prices fall substantially, then there will be a "poverty effect" (the reverse of the "wealth effect" caused by rising home values), and likely results include not only decreased consumption spending but also a falling stock market.
Don, you might add to your data point #3 that significantly increasing mortgage defaults will exacerbate pressure on housing and on spending.
Dear TODDERS, here are some data from Danish production of Bioethanol.

The discussion on EROEI on biofuel is raging in the Danish Engineer society's weekly paper the

April 24th the following data was presented by  Niclas Scott Bentsen and Claus Felby from "Kongens Veterinaer and Landbohoejskole" and Karen Hvid Ipsen from Elsam Engineering, for conversion of Danish grown winter wheat to ethanol.
Unfortunately the discussion is in Danish- so I have taken the liberty to translate the key numbers here:  (members only, I think)

Danish production of bioethanol.

Energy balance per hectare= (10.000m2 = 2.47 acre) , winter wheat

Input: 66.000 MJ.
- of which approx 14.500 MJ for growing and
50.300 MJ for process

Output: 134.000 MJ distributed on:
2.987 kg bioethanol - svarende til 80.000 MJ ethanol fuel
2.510 kg protein containing fodder- corresponding  to 13.891 MJ
561 kg C 5 molasses fodder
plus 1.674 kg biomass for district heat combustion
- corresponding to  29.285 MJ

So that seems to be 1.2 MJ Ethanol produced for 1 MJ spent - and including  fodder and district heating
2.03 MJ produced for 1 MJ spent.
The data are criticised for not including other options for biomass use, but seems quite reasonable at a glance.
Please note that the calculations are based on Danish conditions, where a quite integrated energy supply system exists.  A large portion of straw / waste from annual farm crops and wood chip waste is burned for district heat- as well as some 85% of municipal waste. Additionally there is ample possibility to utilize protein for meat production.

At an energy return of approx. 2 it seems worthwhile to produce bioethanol from crops. But I think that the time is ripe for an integrated view of using our scarce energy resources that is Energy system analysis. By system analyses on society level we can find the year- to year optimal use of resources.
For instance it could well be more efficient to use fossil products for transport as long as they are available- and reserve biomass for heat- district- or private.  Some years I did an LCA on my own farm and came up with a rough figure of  4-5.5 MJ out for 1 MJ spent ( fertilizer, spray, machinery, harvesting, drying crops storing etc.).
By direct burning wheat you can today gat furnaces for private households with up to 90% heat utilization- and that is far better than the bio ethanol production efficiency.  From Danish studies we know, that we in the future can produce some 35-40 % of the present energy use by sustainable sources primarily biomass, bio fuel and windmills. So conservation- or scaling down the energy use is the problem to be solved for us.

This leads me to a few words on Conservation. The possibilities are enormous. A number of studies in the EU have shown that saving energy is far cheaper than building new power plant capacity. But off course the politicians in the EU as politicians everywhere would rather add new capacity than ask their voters to conserve.
Another thing to address is the energy use in our buildings.  Some 40 % of the energy spent in the EU (+400 million people) is spent for heating buildings and hot water. Approx 30-32 % for heating buildings and some 8 % for hot water.
The average annual energy use (heating and water) per m2 floor space is 140-160 kWh (or 14-16 litre heating oil).
But  the new Danish building regulations ask for below 55 kWh/m2/year and at the moment some 5-7000 buildings the so called "Passive houses" ( Passivhaus) mainly in Germany and  Austria has been build for less than 15 kWh/m2/year. Almost the same result (ca. 25 kWh/m2/year) can be achieved by retrofitting old buildings. This is with present technology- present building materials and no rocket science you can reduce heating energy use to 1/10 in the EU. Same comfort, same everything, but 1/10 energy use. Info in English can be found here:
On the net the energy use results and key data can be found for at least 500 of these houses (in German mostly- but a few in English). The costs for this are between 5-15% on top of the cost for an ordinary family home.
By tightening the building regulations gradually this could be applied to all EU buildings within some 30-35 years. This should also be possible in the US.
Another point is building size.
The average EU family home is 120 m2, in the US the average size is approx. 230 m2.....

So we are back to square 1, it is my and your energy use that matters.

UPS -  instead of : "for the average annual energy use (heating and water) per m2 floor space is 140-160 kWh (or 14-16 litre heating oil)"   please read instead.

The average annual energy use (heating only) per m2 floor space is 140-160 kWh (or 14-16 litre heating oil).

The tried and true formulae (the "give them cake" suggestions from both parties) only work when this is a short-term problem.

The problem is that a lot of politicians see this as a short-term problem. It is only a real problem for them until their election in November.


Just returned from 10 days up in the corn country. Been talking to a lot of ethanol advocates, seems that the corn farmers up there are not the ethanol advocates, as they are not the ones to be receiving any wind fall from their crops as yet. They mostly still have hope. When I talked to the advocates I usually say you know it takes 2.5 barrels of oil to produce 4 barrels of ethanol, while that same 2.5 barrels of oil could be providing 2 barrels of gas and distillate. They say, well it seems 4 barrels of ethanol is a lot better than 2 barrels of gas and distillate.  Then I say, Ya well when you start using 3 barrels of ethanol instead of 2.5 barrels of oil to produce your 4 barrels of ethanol you end up with only 1 barrel of ethanol, however the 2.5 barrels of oil provides 2 barrels of gas and distillate. So you are wasting away more than 1 barrel of oil for each barrel of ethanol that is produced. Then they come back with, you don't understand the system, or why don't you go back to Houston and pump oil. I say ya, when you have to start pumping it, the well is about dry, and most all the wells in this country are busy pumping. Just keep making ethanol and wasting oil and you will surely be up the creek at an earlier date.
I'm just mulling over an insight that's been growing on me these past few days. Let's see if it makes sense.

With oil price rises, huge windfall profits are being made by energy producers of all sorts (where I live, firewood is pretty much indexed on the price of fuel oil. The windfall is for the land owners I suppose).

Some oil producers are taking those profits and recycling them through investments in the US, Europe, and elsewhere, thereby fuelling economic growth, and apparently more than compensating the economic downturn that one might naively expect from higher oil prices (speaking for myself here).

So, if this explains the paradox of affordable oil price rises, it depends on the fact that the windfall (the difference between the cost of production and the selling price) is large.

Non-OPEC oil companies seem to systematically reinvest this windfall on developing new production. Whether this is smart or not, doesn't seem to occur to them. That's all they know how to do, it seems.

So, with the law of diminishing returns, they are going to devote increasingly huge quantities of money (and energy) into developing marginally profitable fields. This is windfall money that could have been generating sustainable economic growth all over the world (e.g. in developing RENEWABLE energy resources), and they are going to pour it down a black hole in the ground. This must be stopped.

Is that it, in a nutshell, O Wise Ones?

Non-OPEC oil companies seem to systematically reinvest this windfall on developing new production.

I don't believe this is entirely true, at least not in the U.S. and especially not for ExxonMobil. New York Times business columnist Floyd Norris wrote a column titled High Profits, Sluggish Investments (paid TimesSelect subscription required) on Februrary 3, 2006. Here are some excerpts from that article:

As oil company earnings soar, there is talk of excess profits and a new windfall profits tax. The real issue, though, is not how much the oil companies are making, but what they are doing with the money. In too many cases, they seem to have only a limited interest in investing it in projects that might help prevent or ameliorate a new energy crisis.

Exxon Mobil, the world's most valuable company, reported this week that it earned $36 billion in 2005. But it was only able to find ways to invest less than half that amount. Instead, Exxon Mobil's chief executive, Rex W. Tillerson, bragged that it had distributed $23.2 billion to shareholders, "an increase of 56 percent, or $8.3 billion, from 2004."

I checked back to 1976, and found that until 1997, Exxon always invested more than it made. Now it invests less than half of profits.

One way to monitor what Exxon Mobil does with its money is to compare the amount it distributes to shareholders, via share repurchases and dividends, with the amount it invests in capital spending, exploration and research and development.

A decade ago, Exxon invested more than $2 for every dollar it distributed to shareholders. Last year the figure was 70 cents.

In 2005, it reduced the number of shares outstanding by 4 percent.

There is a phrase for that strategy: gradual liquidation. It is an excellent strategy for a company in a declining industry with few investment opportunities. Let us hope that is not the case here.

A recent article in the Economist titled Texan sangfroid (free reading instructions) explains ExxonMobil's philosophy. CEO Rex Tillerson explains that ExxonMobil pursues only projects that will turn a profit even in the leanest years.  In other words, they are assuming a relatively low oil price when making investment decisions.

Now, ExxonMobil is certainly free to invest part of its windfall in alternative energy; BP is doing this and has redefined its acronym to mean "Beyond Petroleum."  But ExxonMobil prefers to stick to its knitting, so it is correctly returning money to its shareholders rather than invest it in projects that don't meet shareholder return requirements.

I was sent an interesting story this morning from the Baton Rouge Advocate. It said in part:

It's no secret that the world is running out of oil, or that the United States and other industrialized countries will have to find a way to move to alternative fuel sources, a U.S. Department of Energy official said Wednesday.

It seems to me that it is a pretty well-kept secret. If people understood that we are running out of oil, I don't think they would be so quick to complain about the price of gas. I think the politicians would be taking very aggressive steps to preserve the oil we do have left. Instead, we get a lot of finger-pointing.


It's like watching peak oil history unfold when observing the  political reaction to gas prices and the short sighted solutions and lack of the big picture. As our complex society matures so much of our political time is spent on  short term solutions that don't address the problems and so much of our economic power is devoted to maintaining the unsustainable status quo and aging infrastructure. The  incapability to deal with long term problems is oddly enough going to lead us towared a powered down society since throwing time and resources at unsustainable solutions only increases the ineffeciency of our system.
As we (the peak oil aware) continue to sound the alarm we also have to now wait until sustained high fuel prices really start creating a mass of fall out from failed businesses and unemployment and mortgage foreclosures. It will take this to snap the illusion that our politicians have things somehow under control and for a larger segment of the population to finally get it. It's starting already. Maybe then from a weaker position economically we collectively will start having a stronger position to face reality. We are actually witnessing peak oil history unfold in these first clumsy attempts at our politicians confronting head on the unyielding reality of our unsustainable energy consumption. You can almost feel the pressure collapsing toward truth even at the same time the screams of denial seem the most shrill.  
It's like watching peak oil history unfold when observing the  political reaction to gas prices and the short sighted solutions and lack of the big picture.

I wrote an essay on my blog on exactly that. Even if we are still several years from peak, what you are seeing right now is a sneak preview of things to come. The only thing is, this sneak preview (or Peak Preview) will probably not end before we do peak.

The Michael Lynch's of the world who would make the case that there is plenty of oil and that we won't peak for decades are ignoring one very important factor: Even if he was right, we can't get it out of the ground and processed fast enough to supply the demand. That has effectively the same consequences as a peak (except for the level of panic that will accompany the peak).


The Michael Lynch's of the world will fade into oblivian like all those global warming nay sayers.  
Re: "Even if he was right, we can't get it out of the ground and processed fast enough to supply the demand."

I wish this point was more widely understood and appreciated. I have tried to make that case many times here at TOD. Arguments that say that the Earth has no shortage of hydrocarbons are just so much blowing smoke. The daily flow rate may plateau for a while--it apparently has--and promises like those of CERA that everything will be fine & dandy in 2010 are also obscuring the facts. It's like fusion. This year, it's 30 years away. Next year, it will still be 30 years away. Ad infinitum.

By the way, Robert, I'm glad you joined the site and I always enjoy you comments.

Thanks for the compliment Dave.


Ya well, when you're on some farms in Brazil or India, ya don't have to use NO fossil fuel input to get your ethanol.

Seems like we better figure out how THAT's done in a hurry.  Here's how: Get off the corn crop, move to energy crops (88 percent of corn grown goes to animal feed), use the ddgs as fertilizer or feed or use yeast as partial feed, switch to all organic farming.

Only way ethanol can work.  The permaculture way.  The wonders of mycorhyzzall fungi.  Plant til we drop.  Use the co-products productively.

Farmers just need a little direction.

The problem with ethanol as it is now produced is that as the mixture comes from the fermenter it it is over 90% water. Water has a higher specific heat than any other substance I know about. This water needs to be heated to over 173F for the ethanol to separate. there are more energy efficient ways to do the job using sulphur or vegetable oil but I am unaware of any one who uses either of these processes. The art of distilling is derived from the production of whiskey, gin, vodka, etc where the EROEI is a non factor. This is how the "experts" who now direct fuel ethanol programs learned how to do it. The investors want experienced people running these operations so they hire the old dogs who can't (or won't)learn new tricks.
I  have been crunching the numbers on ethanol for a Power Point Presentation I am doing. Does anyone see any numbers way off? If not, then ethanol is a dead horse. Period.

US produces 4 billion gallons per year of ethanol from corn using 15% of the US corn crop. U.S. ethanol production is projected to reach 8 billion gallons annually by 2012.

US consumes 144 billion gallons of gasoline per year (2005) with a 1.5% growth/yr.

In 2012, at 1.5% growth, the US will consume 157 billion gallons/year.

8 billion gallons of ethanol is equal to 1.2 billion gallons of gasoline (6.8 to 1 net energy production ratio) or 5% of projected consumption in 2012. But only .8% of the actual auto fuel "energy" demand.

"One acre of corn can produce 300 gallons of ethanol. To replace the 200 billion gallons of gasoline and diesel, we would need to dedicate 675 million acres, or 71 percent of the nation's 938 million acres of farmland, to growing feedstock."

USDA data ~ EROEI = 1.34 to 1 ─ So you must make 3.8 gal to produce 1 gal net. (Some new revisions say 1.67, but I don't think their math holds up...makes little or no difference anyway)

Ethanol has less energy (energy density) per gallon, so you must produce 1.8 gallons of ethanol to replace the energy in 1 gallon of gas.

Energy density:  Gasoline = 45 MJ/kg    Ethanol = 25 MJ/kg       45/25= 1.8

So to replace a gallon of gas, you must produce  6.8 gallons (3.8×1.8) of ethanol to replace the energy in 1 gallon of gasoline.

Growing corn and producing ethanol are both subsidized, so replacing 1 gallon of gas costs all the subsidies on 6.8 gallons of ethanol.

Government subsidies on ethanol are about 51¢/gallon, subsidies for corn are $0.375/bushel. Corn to ethanol is 2.7 gal/bushel = 14¢/gal, thus, the cost of taxpayer ethanol/corn subsidies to replace 1 gallon of gas = 6.8 x $.65 =$4.42.

Wholesale ethanol is $2.75/gallon  $2.75 + $4.42 ethanol/corn subsidy = $6.92/gallon for ethanol.

Plus...a $.54/gallon tariff on imported ethanol from Brazil that restricts supply.

E85 = 30% less mileage than gasoline, thus a vehicle that gets 20mpg on gasoline will only achieve around 14mpg on E85 ethanol.

Popular Mechanics ran the numbers to drive a Honda Civic from New York to California.

Gas = 90.9 gal @ $2.34/gal, 33mpg, $212.70

E85 Ethanol = 176 gal @ $2.41/gal, 17 mpg, $425.00

Economic viability demands that E85 cost at least 30% less than the price of an equivalent gallon of gas. Even with tax subsidies, E85 struggles to compete against the availability, efficiency and price of good old gas.

Ethanol is a dog that will not hunt.

Monte, this post is lingering at the bottom of this thread. It's too good to leave here. Why don't you start a thread here with it? Ibon
Many say we will see $3.50/gal this summer.  If you factor in Iran, who knows how high it could go. Everyone knows America MUST get off the oil.  After September 11, 2001 I expected our President to call on Americans to GET OFF THE OIL.  I was expecting a speech like the one JFK gave that motivated us to reach for the moon. As you know, this never happened.  Eventually I realized that the only way this is going to happen is for us to do it ourselves.  To that end I created this idea and have been trying to make it a reality..

The EPA is offering a research grant opportunity that I believe is a perfect fit for this idea.  I have sent an e-mail to a hand picked list of university professors who have experience with government research projects.  I'm looking to form a research team to apply for the EPA grant, conduct a social-economic experiment and surveys to determine to what extent the American public will support it, project the economic potential of WPH, and identify logistical, social and political obstacles as well as opportunities.

All government grants are awarded based on merit of the proposed research.  I believe WPH has merit but your help is needed to verify it. You can help by posting your feedback.  Let the professors and the EPA know what you think about WPH.  Do you think this idea is worth pursuing? We need to know if Americans will support a plan like this.

Do you have any ideas to improve the plan?

Share any and all of your thoughts.

Tell your friends and family about this Blog post and ask them to post their thoughts on WPH

Thank you