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By Robert Rapier on Jul 19, 2006 with no responses

Response to E-mail

I tend to get a wide variety of e-mails, a fair number of which detail issues that I seem to have overlooked. I received the e-mail below about a week ago after a brief exchange with the author, and I asked his permission to address it in a blog entry. He granted permission today, but wishes to remain anonymous. The reason for addressing this in a blog entry is that there are a number of issues here that come up fairly frequently in e-mails, so I wanted to address them publicly.

First, his e-mail, modified to remove his identity:

Robert,

As history has shown, the more instability in the Middle East, the more unstable oil prices become. We have spent and are spending billions of U.S. tax dollars in that region. I understand the U.S. has more than one interest there, reducing the threat of terrorism, spreading democracy, protecting human rights, and securing an adequate oil supply for the U.S. that requires the least amount of drilling on U.S. land or waters. Gas prices in the U.S. are half that of the rest of the world. It would be naive to think that years of U.S. diplomatic and military efforts had no effect on years of favorable gas prices. Therefore the U.S. is spending tax dollars there so all of us can pay a cheaper price for gas at the pump = Subsidy. Bottom line, our country is far too dependent and we use to much oil. We would not be talking about fixing anything if the U.S. would have spent equal time and effort to advance a balanced use of alternative fuels.

A balanced use of alternative fuels will be the proper way to meet our future fuel needs. Advances have been made in solar, wind, geothermal, bio-diesel, ethanol and others. All have the potential to take the stress off the over consumption of oil. Production technology advances with use. No one will gain if we shelf an alternative like wind, solar, or ethanol.

The production of ethanol has a positive fuel gain. When corn is used as the feed stock ethanol fuel is only one of many end products. Ethanol can be produced from a variety of feed stocks, switch grass, potatoes, bio-mass to name a few. For details visit National Ethanol Vehicle Coalition www.e85.com101/faq.php

Manufacturers currently produce spark and compression ignition engines that operate on alternative fuels such as E85, E95, natural gas, and bio-diesel. Some farmers are already taking advantage of operating their equipment on alternatives.

The environmental benefits of using alternatives are proven. The more we use alternative fuels, the cheaper they will become. Remember the first 1000 gallons of crude oil pumped off a new oil well in the gulf had an astronomical price, only with volume does the well become an asset.

Sincerely,

XXXXX

In response, I will pull out specific excerpts. There are certain statements that I agree with in the e-mail, and certain statements to which I am ambivalent. But here are the portions that I think warrant a response:

Gas prices in the U.S. are half that of the rest of the world. It would be naive to think that years of U.S. diplomatic and military efforts had no effect on years of favorable gas prices.

I think this confuses two issues. Gas prices are not lower in the U.S. than they are in other places because of diplomatic and military efforts. They are lower because foreign governments have chosen to stiffly tax fossil fuels (as the U.S. should have done, in my opinion). We pay the same price for crude oil that they do in The Netherlands, where gasoline is currently $7 a gallon.
Now, it certainly may be the case that without military intervention in the Middle East, oil prices might be higher than they are now. But just considering recent history, our incursion into Iraq has taken supply offline, and caused oil prices to climb. In the long-term, maybe we will see stability and lower prices. Right now I see no evidence that we are paying lower prices due to our military efforts.

Therefore the U.S. is spending tax dollars there so all of us can pay a cheaper price for gas at the pump = Subsidy.

A point that I often make when people argue that oil companies receive certain subsidies is that ethanol producers are highly dependent upon fossil fuels for ethanol manufacture. Where does the diesel come from to fuel the tractors? How about the natural gas to produce the fertilizer and distill the ethanol? These fossil fuels come mostly from oil companies. So, any subsidies that benefit oil companies are also benefiting ethanol producers.

We would not be talking about fixing anything if the U.S. would have spent equal time and effort to advance a balanced use of alternative fuels.

The problem, and one that many people don’t seem to appreciate, is that alternative fuels simply can’t fill more than a small fraction of U.S. fuel demands. In order for the U.S. to use alternative fuels in a sustainable fashion, we are going to have to drastically cut our energy demand. There is no other way.

A balanced use of alternative fuels will be the proper way to meet our future fuel needs.

Agreed. It is going to take many different sources to meet our needs. But I again emphasize that the “need” is going to have to go down before even all of the alternatives together can fill it.

The production of ethanol has a positive fuel gain.

That is always situation dependent. Recently, an operator at an ethanol facility in Illinois supplied me with actual energy consumption figures for their facility. The energy return was about 1.6, if I recall correctly. However, that is the energy return for locally grown corn and locally sold ethanol. Also, Illinois, along with a few bordering states, sits on top of the best possible location in the U.S. for producing ethanol. Just as soon as you get away from these states, into areas in which the yields are lower, you have to irrigate the corn, or you have to ship either corn to produce the ethanol, or finished ethanol to market, the energy balance goes down rapidly.

Nebraska ethanol, for example, is already very marginal due to the need to irrigate the corn. Now, take that finished ethanol and ship it to California, and you have accomplished nothing more than recycle fossil fuels into ethanol, with absolutely no positive fuel gain. Ethanol may provide a marginal solution in some Midwest states. Rolling it out for the entire country is insane energy policy. It makes about as much sense as a mandate that we grow mangoes in Alaska.

Ethanol can be produced from a variety of feed stocks, switch grass, potatoes, bio-mass to name a few.

Sure, but can it be produced economically, on a large scale, and in a sustainable manner? And are there other options that make more sense? Those questions have not been answered.

The environmental benefits of using alternatives are proven. The more we use alternative fuels, the cheaper they will become.

Not when they are primarily recycled fossil fuels. As fossil fuels become scarce, alternatives like grain ethanol will become more expensive to produce. And the environmental benefits of grain ethanol are very slim. A recent DOE study reported that grain ethanol results in a 4% decrease in GHG emissions. That’s next to nothing, and does not consider the environmental impact of large-scale farming operations.

RR