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By Robert Rapier on Sep 27, 2006 with no responses

Dr. Jeckyll and Mr. Khosla

Note: I am not trying to be disrespectful to Mr. Khosla with this title, nor am I implying that he is a bad guy or a monster. The title is meant to capture his penchant for inconsistent arguments on the same issue, almost as if the issue was being argued by two different people.

Mr. Khosla has been much in the news lately. In the upcoming issue of Wired, he again repeats the claim that it is twice as efficient to produce ethanol as it is to produce gasoline:

“A typical corn ethanol plant produces 1.3 to 1.8 BTUs for every BTU of fossil fuel input, including the energy required to grow the corn. (Gasoline has half the efficiency of corn ethanol, producing 0.8 BTUs for every BTU input).”

However, I have pointed out his error on multiple occasions, on the phone and in print. He is comparing an EROEI for ethanol to an efficiency of production for gasoline. To this, he says “energy balance is a silly question to ask”, or it is “the wrong question.” So, it is a legitimate issue if he is claiming that it is more efficient to produce ethanol, but silly when someone points out that this isn’t accurate.

Then, last night a reader sent me a copy of an article in WSJ. I don’t have a link, but here are some excerpts:

Venture Firms Ignite Bitter Fight With Push for California Oil Tax

Oil companies “are ripping us off,” says Mr. Khosla, who earned much of his wealth as a Kleiner Perkins partner and now runs Khosla Ventures. “There are cheaper alternatives to oil that they don’t want us to have.”

Right. Cheaper alternatives that they don’t want us to have. That must explain why Shell is funding cellulosic ethanol producer Iogen, and almost all oil companies have alternative fuel ventures. Furthermore, as I have pointed out before, if ethanol is cheaper to make as Khosla has claimed, and yet the price is consistently higher than for gasoline, just who is ripping off whom here? Since ethanol producers are earning much fatter margins, it seems that they are doing more ripping off in this case. I also wonder if it is possible to become a billionaire, as Mr. Khosla is, without “ripping some people off”, based on the definition he is using. Those billions came out of a lot of pockets.

Opponents argue that the measure would choke off oil companies’ interest in developing new California fields, which could reduce property-tax revenue and lead to greater U.S. dependence on foreign oil. Mr. Khosla calls such arguments “scare-mongering.” He says the tax, which will last a maximum of 10 years, likely wouldn’t be in effect long enough to affect long-term production plans.

There is one thing you can say about Mr. Khosla. He doesn’t let facts get in the way of his claims. I recently asked Ana Unruh Cohen, who helped write the legislation, the following two questions:

What happens if the proposition doesn’t raise as much money as anticipated? Who pays the difference, and how?

She responded:

The royalty stays in place until the 4 billion is raised. The authority can borrow against that 4 billion to start funding programs immediately.

So, “a maximum of 10 years”, eh? It would appear not. Of course this wouldn’t be the first time Mr. Khosla has been guilty of exaggerating claims in order to argue his point.

I want to make it clear that I harbor no personal animosity toward Mr. Khosla. I even support a number of his ideas. I just want to push him toward a more fact-based debate. I am very concerned about our energy policy, and making false or exaggerated claims in order to push a certain agenda is not my idea of how we should get to the root of which policies we should pursue.