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By Robert Rapier on Mar 19, 2007 with no responses

Ethanol in the News

There were several ethanol stories in the news today. It was a mixed bag. From BusinessWeek:

Ethanol’s Growing List of Enemies

Paul Hitch has spent his entire life raising cattle and hogs on a stretch of the Oklahoma panhandle he says is “flat as a billiard table.” But he worries that they’ll face mounting pressures in the industry, particularly because of the soaring price for corn, which the business depends on to feed the livestock. In the past year, corn prices have doubled as demand from ethanol producers has surged.

“This ethanol binge is insane,” says Hitch, who’s president-elect of the National Cattlemen’s Beef Assn. (NCBA). “This talk about energy independence and wrapping yourself in the flag and singing God Bless America — all that’s going to come at a severe cost to another part of the economy.”

“The government thinks it can pick a winner, but they should allow consumers to pick their own,” says Demian Moore, senior analyst for the nonprofit Taxpayers for Common Sense. “Corn ethanol has failed to prove itself as a reliable alternative that can exist without huge subsidies.”

Seems cattlemen in general are not too happy about the ethanol situation. The prosperity of the corn farmer is coming at their expense:

Energy Interdependence

A frightening number was released by the labor department on March 15. February prices for “crude foodstuffs and feedstuffs” were 22.73% higher than a year ago. Wholesale consumer food prices were 6.8% above last year, too. Even more frightening, the February number was 29.25% higher than it was in May, its lowest point of 2006. It has all the potential of being worse and longer lasting than the consistent double digit increases we saw from mid-2003 to mid-2004.

Most of the increase we saw in February is the price we’re paying for trying to buy energy independence with our corn crop. It’s a double whammy, a perfect storm of a too-quick demand on American agricultural resources to pay for decades of unbridled energy consumption and a need by elected officials to prove they’re doing something to end our dependence on tenuous Middle Eastern sources of oil.

This was an interesting read:

Paying the Price for Biofuels

You can hardly open up a major newspaper without encountering the latest hype about biofuels: they’re going to save oil, reduce pollution and prevent climate change.

Bill Gates, Sun Microsystems’ Vinod Khosla, and other major venture capitalists are investing millions in new biofuel production, whether in the form of ethanol (mainly derived from corn in the U.S. today), or biodiesel (mainly from soybeans and canola seed).

Several well-respected analysts have raised serious concerns about the rapid diversion of food crops toward the production of fuel for automobiles.

WorldWatch Institute founder Lester Brown, long concerned about the sustainability of world food supplies, warns that “Cars, not people, will claim most of the increase in grain production this year.” The grain required to make enough ethanol to fill an SUV tank is enough to feed a person for a whole year.

One study, originating from the University of Minnesota, is moderately hopeful in the first two areas, but offers a strong caution about land use.

This paper, published in the July 25, 2006 edition of the Proceedings of the National Academy of Sciences, concluded that ethanol production and use offers a modest net energy gain of 25 percent over oil, resulting in 12 percent less greenhouse gases than an equivalent amount of gasoline. The numbers for biodiesel are more promising, with a 93 percent net energy gain and a 41 percent reduction in greenhouse gases.

I don’t even know where to begin on this one:

Science shows ethanol good for America

Suddenly in America, a multitude of so-called experts have become vocal in their attacks on renewable fuels – fuels that just might break the stranglehold that oil-producing countries have on us.

Using a weighted balance of 1, ethanol has an energy balance of 1.3 to 1.8 while gasoline has an energy balance of .8. The same rules were applied to both sources by comparing transportation, refinery costs and handling.

With the wise use and advancement of ethanol production, a 90 percent reduction in the use of gasoline is possible.

Therefore, the cost of extracting a gallon of ethanol is significantly lower than extracting a gallon of gasoline from crude oil.

Somebody needs to dispel the myth that there won’t be enough land to produce this source of alternate fuel.

And finally, Vinod Khosla makes an ethanol investment that I think will actually be viable long-term:

Ethanol Company Starts Brazil Operations

Brazilian Renewable Energy Company Ltd.’s founding shareholders include venture capitalist Vinod Khosla, American supermarket magnate Ron Burkle, America Online founder Steve Case, former World Bank President James Wolfensohn and film producer Steven Bing, the company said in a statement.

The United States is the world’s largest ethanol producer; Brazil is No. 2, but is the biggest exporter and has ample land available to boost production.

Brazilian ethanol is made from sugar, which is significantly cheaper than production of the fuel from corn, the raw material in the United States.