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By Robert Rapier on Nov 5, 2010 with 75 responses

The Stroke of a Pen

Dineen-RFA

Bob Dinneen says it's too late to debate the ethanol tax credits and Congress should therefore extend it with "a stroke of the pen, a little bit of Whiteout, just change the date."

Congress still hasn’t taken action to extend the redundant tax credits for compensating oil companies for blending the ethanol that they are required by law to blend, but that hasn’t stopped the ethanol lobby from trying. The argument now is that it is just too late in the year to debate the matter, so it should be simply extended with the “stroke of a pen.” Per an interview with Chief Ethanol Lobbyist Bob Dinneen:

RFA’s Dinneen discusses industry’s mixed response to E15 decision

Monica Trauzzi: Let’s switch gears and talk about tax credits. Right now there’s a tax credit in place that pays $0.45 per gallon to blenders to incorporate ethanol into their fuel. What are your expectations for how that might be addressed during the lame duck?

Bob Dinneen: Well, we think Congress needs to act. Look, the government is not going to shut down. They’re going to get something to the president’s desk in terms of a continuing resolution. It will likely have a tax component. I think there will be an opportunity in a lame duck to address some of these issues. Congress failed to work on the extenders last year, throughout the balance of this year. They’re going to have to get that done and we think it’s critically important that they do so. If, on January 1, Congress has failed to extend these important incentives, plants will shut down, jobs will be lost. I don’t know how many or what, but certainly …

Monica Trauzzi: Will it really be that dramatic though? I mean the ethanol industry is doing OK.

Bob Dinneen: We are right now.

Monica Trauzzi: Particularly with first-generation ethanols.

Bob Dinneen: We are right now, but …

Monica Trauzzi: Why do you guys keep needing tax incentives?

Bob Dinneen: In the absence of the tax incentive discretionary blending evaporates. With more than 2 billion RENs 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. And if that happens, there’s no question that plants, some plants would shut down. Now, will it be as dramatic or as devastating as the failure of Congress to extend the biodiesel tax credit? No, because we do have a stronger underpinning of regulatory support. The RFS is there and there will be ethanol that will continue to be blended. But suddenly the RFS is going to be a cap, not a floor. All the growth opportunities for ethanol aren’t going to be there. If we’re going to continue to grow the ethanol industry and evolve the ethanol industry and have markets there for cellulosic ethanol and other advanced biofuels, without the tax incentive that doesn’t happen. So we are very committed to making sure the industry is able to continue to grow and evolve these marketplaces that are opening up. And that’s why extending the tax incentive needs to occur.

Now, do you want to look at ways to reform it? Absolutely and we’re working with the administration, we’re working with our allies on Capitol Hill, we’re working with other stakeholders to try to determine how you can address the future of the tax policy in a responsible fashion, in a way that provides some confidence that the markets will continue to be there, that will allow the continued evolution of the industry into newer technologies, different feedstocks, all the rest. That’s a healthy conversation to have. 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? How do we commercialize other advanced biofuels? How do we make sure that E85 and other fuel uses for ethanol as a replacement fuel are there? And that’s just going to be a much broader conversation.

That’s fear mongering by Dineen. Might some ethanol plants close down if the tax credit isn’t extended? Doubtful. The tax credit would cost cost nearly $6 billion in 2011 based on the mandate volume of 12.6 billion gallons of corn ethanol (see the RFS Schedule for details on volumes). The volume of mandated corn ethanol for 2011 is 600 million barrels higher than in 2010. So mandated demand for corn ethanol next year will be higher — not lower than this year.

If the ethanol industry builds out capacity in excess of the mandated volumes, then it is possible that some excess capacity may have to be idled. But that should not be the problem of the taxpayer. We should not have to spend $6 billion just to protect people who might have made a bad investment decision to invest in capacity beyond the mandated 12.6 billion gallons. Is it a wise use of tax dollars to spend $6 billion just to incentivize an extra billion gallons or so (Dineen’s “discretionary blending”) beyond the 12.6 billion gallon mandate? Absolutely not! There is enough wasteful spending as it is; stop burdening taxpayers and even worse our children with this redundant subsidy.

As I have argued before, the ethanol industry would be far better served to focus their efforts on the penetration of E85 in the Midwest. If they can’t capture a significant share of that market in their backyard, then this whole thing is indeed a farce and will need to be subsidized forever. There are better ethanol policies that might help make ethanol a viable alternative in some markets. Extending the current redundant subsidies “with the stroke of a pen” is not one of those policies. To be blunt, it would be an idiotic waste of $6 billion.

  1. By Wendell Mercantile on November 5, 2010 at 5:59 pm

    So there’s no question that in the absence of the tax incentive, demand for ethanol will fall.

    Of course ethanol can’t survive without tax incentives — corn ethanol always has been in a state of denial about the immutable laws of thermodynamics.

    …a stroke of the pen, a little bit of Whiteout, just change the date.

    Mr. Dineen, that’s no solution, and you know it. I can’t even believe the high-paid national spokesman for ethanol said something so irresponsible.

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  2. By bioblogger on November 5, 2010 at 7:31 pm

    Pardon my ignorance but the need for a blender’s credit always escaped me. If the oil industry is mandated to use oxygenates in their fuel blend and the EPA specifies ethanol as preferable to MTBE’s, then why is there a need for a credit? Doesn’t it just go to the oil refinery that would have to blend it anyway? How does that help the ethanol producer?

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  3. By Optimist on November 5, 2010 at 8:33 pm

    Doesn’t it just go to the oil refinery that would have to blend it anyway? How does that help the ethanol producer?

    The oil refiner effectively gets a discount on the ethanol he buys. It helps the ethanol producer by making it possible to sell at a higher price than the refiner ends up paying. To put it mathematically:
    Ethanol producer sell price = Oil refiner price (after receiving the credit) + tax credit.

    It becomes apparent from the above why the refiner tends to be agnostic about the credit, while the ethanol producer wails like a baby…

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  4. By paul-n on November 6, 2010 at 12:36 am

    I can’t believe someone as unprofessional as this guy is the spokesman for the ethanol industry.

    I would love the government to give me a tax credit at the stroke of a pen, and use a bit of whiteout on my old debts, and so would everyone else.

    The current government has just taken a “shellacing” at the polls, pertly because people want smaller government, and he is asking for free ride, without debate in congress.

    in a way that provides some confidence that the markets will continue to be there

    I would respectfully suggest that as long as people are driving cars, there is a market there for liquid fuel.  It is up to the ethanol industry to pull their finger out and find a way to compete in said market.

    Worst of all, is this line;

    If, on January 1, Congress has failed to extend these important incentives, plants will shut down, jobs will be lost. I don’t know how many or what,

    So he is asking for a blanket extension of $6bn in subsidies, when he doesn’t even know what will happen if they don’t.  What if only one plant and 50 jobs are lost – is that worth $6bn?

     

    He does put forward one good idea – have a real debate about ethanol.  

    So lets meet him halfway – let the credit expire, and then have the debate next year about whether to reinstate it.  

    Al least then everyone, Bob Dineen included, will know what happens without the credit, and then there can be an intelligent debate about whether it really achieves anything, rather than just doing it because he doesn’t know what will happen if they let it expire.

    I hope the government does not fall for this one – there is a lot that can be done with $6bn.

    That works out to $20 per capita, per year.  Perhaps this should have been put as referendum question at the election, and see which way the people stroke their pens.  

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  5. By bioblogger on November 6, 2010 at 12:44 am

    Thanks for the clarification, Optimist.
    Another question. Not all “ethanol lobbyists” are the same. Growth Energy broke ranks by promoting the Fueling Freedom plan – essentially supporting a gradual reduction of ethanol subsidies in trade for a increase in the number of blender pumps and Flex-fuel cars that can run on different blends of gasoline and ethanol. Granted, it is another form of government support for alternative fuels, it does seem consistent with consumer interest in having more choices at the pump. Such choices have benefited Brazilian consumers and the country’s economic stability. While the multi-national oil corporations don’t like to give up market entry, they aren’t responsible for protecting U.S. national security and economic stability. Aren’t we at a stage of flattening oil supply that could easily result in more destabilizing price spikes from rapidly growing international demand? And how long can oil producers guarantee clean supplies of product given the greater lengths (i.e., deeper off shore resourcing, oil sands, and hydrofracturing) they need to rely on to fulfill production quotas? Assume also that environmentalists concerns will grow, not diminish.

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  6. By carbonbridge on November 6, 2010 at 1:47 am

    BioBlogger said:

    Pardon my ignorance but the need for a blender’s credit always escaped me. If the oil industry is mandated to use oxygenates in their fuel blend and the EPA specifies ethanol as preferable to MTBE’s, then why is there a need for a credit? Doesn’t it just go to the oil refinery that would have to blend it anyway? How does that help the ethanol producer?


     

    I’m repeating what I’ve voiced here earlier in this blog and will cut to the chase.  The current 45¢ tax credit on ethanol being provided to blenders is what supports the current wholesale rack price of EtOH.  Take away this tax credit which the blender receives and I think we all will witness the rack price of ethanol drop rather quickly.  And in my own opinion, this subsidy in real terms becomes the actual profit margin of this significant alternative and biodegradable oxygenate fuel.  Yet ethanol is something which currently is inefficiently produced via enzymes and biological yeasts in a four-day batch fermentation process.  Without this taxpayer subsidy, I don’t think we’d see the current volume of ethanol production that we presently do.

    –Mark

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  7. By bioblogger on November 6, 2010 at 12:57 pm

    CarbonBridge said:

    Yet ethanol is something which currently is inefficiently produced via
    enzymes and biological yeasts in a four-day batch fermentation process.

     

     

    I don’t doubt that 1st. Gen. fermentation processes can be improved on. I don’t doubt that corn as a feedstock is not as sustainable as ag residues and other feedstocks. The concern I have is market entry and the ability of enterprises to fund RD&D of alternative technologies that utilize more sustainable feedstocks is probably unattainable without subsidies. Case in point… Frontline Bioenergy closed shop yesterday ( http://bit.ly/dkC5Bz ) not because their technology doesn’t work (gasification of a flexible array of carbonaceous feedstock) but because they don’t have a capital business and market entry model that works in the present competitive environment – articularly when nat. gas prices rise & fall frequently. If the long-term benefit of subsidizing short-term (albeit less efficient) ethanol tech & biz models is worthwhile how can we insure RD&D without subsidies?

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  8. By paul-n on November 6, 2010 at 1:19 pm

    So yet another bioenergy startup with a bright idea, that no one is willing to pay for, goes broke – who knew?

    The concern I have is market entry and the ability of enterprises to fund RD&D of alternative technologies that utilize more sustainable feedstocks is probably unattainable without subsidies.

    That is a legitimate concern, but not necessarily a bad thing.  Look at the recent history of companies chasing subsidies, and how many of them have failed to produce anything of value (Range Fuels, cellulosic ethanol, etc etc).

    Subsidies are like a magnet that attracts all sorts of people/companies, many of which have their primary motivation of getting the subsidy money rather than actually producing something.  I am not saying we do away with r&d support entirely, but the current system is not working that well.

     

    But even worse is subsidising production of fuel from mature technologies, like corn ethanol.  There will be six billion dollars paid out this year for the production of ethanol by a century old process.  That would support a hell of a lot of R&D.

    A better way would be to subsidise only ethanol produced from non starch (or non food) sources, even if that was  $1 or $2/gal subsidy, it would amount to less than 10% of the subsidies being paid today, and might lead to development of new technology.

    Paying for corn ethanol simply leads to a transfer of wealth to an industry that is doing better than most today – there is no need for this sort of corporate welfare.

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  9. By paul-n on November 6, 2010 at 9:54 pm

     given that demand is not going to drop significantly if the subsidy is removed, I fail to see how the price can drop much. What would be the mechanism? If there was no RFS in place, I would agree. But there is.

    Quite so.  In the worst case scenario we could assume that E85 sales, which have no supporting mandate, fall to zero.  But what proportion of total ethanol sales  is E85?  (data on E85 sales volume is conspicuously absent from all the ethanol and energy sites).

    Very few industries get a mandate saying that the people of the coutney must buy X of their product, regardless of price.  The ethanol industry has such mandate, and that is far more than most other industries get.  Hopefully the politicians will see this and conclude that ethanol has enough help already.  At the very least, they should ask that industry come up with it’s own plan of how and when the subsidy will phased out, and their justification etc etc..  That doesn’t mean the government has to accept their plan, but it will force the industry to face the fact they wont be subsidised forever.

     

    @ Biocrude;

    It will take time for C.E. tech to scale up but there will also have to be market demand and infrastructure to handle C.E. once it is produced. Blender pumps (if only in the Midwest for now) and FFV commitments from the car manufacturers will help.

    Exactly what do you mean by “market demand and infrastructure to handle Cellulosic Ethanol”?  The market demand is exactly the same as for regular ethanol, as is all the equipment to handle it.  The only problem is producing it at a competitive price with corn ethanol and gasoline.  That problem has not been solved in a century, and I think is unlikely to be solved now.  What is more likely is that, sooner or later, the price of oil will rise enough that it is competitive.  

    If by creation of a separate “market” for C.E. you mean that it should have a mandate to artificially create a market, just like corn ethanol does, then yes,. but what is the point?  The same even applies to my own suggestion of subsidising C.E. only.

    If it can only be produced with large subsidies, then what is being achieved, other than confirming that it is not cost competitive with gasoline at or near current prices?  

    The R&D programs can continue, hoping for some breakthrough, but other than encouraging r&d what is the point of creating an artificial market for an expensive version of what is already an expensive alternative fuel?

     


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  10. By rrapier on November 6, 2010 at 1:47 pm

    The current 45¢ tax credit on ethanol being provided to blenders is what supports the current wholesale rack price of EtOH.

    Mark, given that demand is not going to drop significantly if the subsidy is removed, I fail to see how the price can drop much. What would be the mechanism? If there was no RFS in place, I would agree. But there is.

    Without this taxpayer subsidy, I don’t think we’d see the current volume of ethanol production that we presently do.

    Again, the RFS says otherwise. I don’t know exactly how much ethanol will be blended this year, but it isn’t going to be substantially higher than the 12.6 billion gallons that are mandated to be blended next year. So why will ethanol production fall? Explain the mechanism by which that takes place. How much will it fall, and what is your basis for thinking that?

    If I look up how much is being produced this year, I would subtract 12.6 billion gallons from that and say that’s all that is at risk. And you will find that it isn’t much relative to $6 billion of subsidy.

    RR

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  11. By bioblogger on November 6, 2010 at 2:55 pm

    Paul N said:

    A better way would be to subsidise only ethanol produced from non starch (or non food) sources, even if that was  $1 or $2/gal subsidy, it would amount to less than 10% of the subsidies being paid today, and might lead to development of new technology.

     

    Perhaps that subsidy could come from the corn subsidy as a response of the EPA for the need to bolster adv. biofuels (i.e., cellulosic ethanol) to meet EISA mandates – currently being discounted to about 4% of the original 250 mg/y for 2011 ). Not sure how that would be implemented by the administration without enabling legislation.

    RR RE: Range Fuels. Clearly a C.E. disappointment that one of my clients has stuck with as a feedstock aggregator in spite of the drop in targeted Phase I capacity. It will take time for C.E. tech to scale up but there will also have to be market demand and infrastructure to handle C.E. once it is produced. Blender pumps (if only in the Midwest for now) and FFV commitments from the car manufacturers will help.

    Scott

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  12. By bioblogger on November 6, 2010 at 11:58 pm

    Exactly what do you mean by “market demand and infrastructure to handle Cellulosic Ethanol”?

    For ethanol of all kinds to be a true alternative fuel it needs to not only be a low percentage volume extender but also capable of replacing gasoline at a variety of blend levels – making it a near drop-in replacement. That requires blender pumps and vehicles that are agnostic about what the particular blend is – like they have in Brazil. I am simply suggesting that corn ethanol provides enough scale to make establishment of infrastructure in the Corn Belt economically sustainable, assuming that the local populace buys Flex-Fuel Vehicles (more a matter of education than economics – because they don’t cost much more that non-FFV vehicles while providing added value). It’s a big part of the chicken or egg dilemma that has barred market entry. I imagine RR would recommend infrastructure development happening in the Midwest first where the alt. fuel choice is and pro-ethanol support is greatest.

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  13. By carbonbridge on November 7, 2010 at 1:23 am

    Robert Rapier said:

    CarbonBridge said: The current 45¢ tax credit on ethanol being provided to blenders is what supports the current wholesale rack price of EtOH.
     

    Mark, given that demand is not going to drop significantly if the subsidy is removed, I fail to see how the price can drop much. What would be the mechanism? If there was no RFS in place, I would agree. But there is.

    Without this taxpayer subsidy, I don’t think we’d see the current volume of ethanol production that we presently do.

    Again, the RFS says otherwise.

    RR:  Please don’t confuse price with volumes.  I’m aware that the RFS is mandating far greater volumes of renewable, alternative fuels than those volumes of ‘biofuels?’ which are now being produced.

    Ethanol has had a blender’s tax credit attached to it for approximately three decades.  This tax credit has come close to being eliminated many times and typically gets re-approved by Congress in 11th hr. deals.  Lets see IF this tax credit gets re-approved OR eliminated in less than two months from now. 

    I will not comment on the pressures and politics therein.  This tax credit IS scheduled to expire.  Most of us know this and quite a bit of background discussion has ensued on this blog on this very subject.

    If I had to make a bet, I’d say this particular ethanol blender’s tax credit will stay.  I’m also inferring that this tax credit to the downstream ethanol blender is what directly props up the present wholesale rack price of ethanol.  This particular subsidy has always supported a higher price paid to the EtOH fermenter.

    Now, IF this tax credit were to expire year-end, THEN simply watch and see what happens in the next three to six months. 

    Therein I’d anticipate that we’ll witness the wholesale rack price for ethanol fall significantly.  And because this will effect the profit margin for fermented ethanol on a very direct, one-to-one type basis, you might notice some corn ethanol producers shutting their doors irrespective of any RFS mandate to produce more volumes.  Produce what?  At a loss?  Nope.

    –Mark

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  14. By perry on November 7, 2010 at 6:43 am

    Maybe they should cut the subsidy again and see what impact it has. The cut from 51 cents to 45 didn’t seem to slow production. Congress is considering 36 cents per gallon this time around.

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  15. By paul-n on November 7, 2010 at 12:46 pm

    What’s the point of  5c/gallon change?  After 30 yrs, it is time for a real decision on the principle of whether it is subsidised, or not

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  16. By rrapier on November 7, 2010 at 1:36 pm

    RR: Please don’t confuse price with volumes.

    Mark, price is related to volumes. The only way the price falls is if demand falls; i.e. the volume being demanded is reduced (or the volume supplies is much greater than demand). I can’t see either scenario being true, hence I think what will happen is simply the refiners pay more for the ethanol than they have been paying.

    Therein I’d anticipate that we’ll witness the wholesale rack price for ethanol fall significantly.

    Might fall for a short period of time due to the excess RINs. But companies won’t close their doors. Cheaper to operate at a loss for some period of time than to shut doors and try to restart later.

    My prediction: No significant change. Perhaps a plant shuts down. Is it worth $6 billion to save it? No.

    RR

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  17. By perry on November 7, 2010 at 2:21 pm

    Robert Rapier said:

    hence I think what will happen is simply the refiners pay more for the ethanol than they have been paying.

     Is it worth $6 billion to save it? No.


     

    We aren’t really saving $6 billion if refiners pay more, because they’ll pass those higher costs onto consumers. The 880,000 bpd of ethanol is about 600,000 bpd of oil equivalent. That much oil would cost consumers $20 billion per year. It would mean another $20 billion annually for the Wahhabi’s, since KSA is the only country with surplus capacity. That would mean more money for Al Qaida, which would require a larger budget for Homeland Security.

     

    We should put that $6 billion into context. It gets us 600,000 bpd of oil equivalent. At that rate, $120 billion annually would give us 12M bpd, and energy independence. We could cut $300 billion from the defense budget. We could let France defend the Straight of Hormuz for a change. I’m not saying we couldn’t cut the subsidy. Just don’t screw this up. It took 30 years to get this far. We don’t have 30 more years to waste.

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  18. By paul-n on November 7, 2010 at 3:33 pm

    We aren’t really saving $6 billion if refiners pay more, because they’ll pass those higher costs onto consumers.

    Exactly – only those consumers who consume gasoline will pay for it.  Right now, all taxpayers are paying for it.  The person who works from home, rides the bike or train, or drives a CNG vehicle, is still paying for it, even though they are not using it.  In other words, those who have gone to gasoline alternatives are subsidising those who still use gasoline.  

    Let the price they pay for gasoline+ethanol reflect the true cost of it. 

    That much oil would cost consumers $20 billion per year.

    That is true, but since it is a federal mandate to produce this much ethanol, regardless of price, it can’t be replaced by oil, so this argument is irrelevant.

    At that rate, $120 billion annually would give us 12M bpd, and energy independence.

    C’mon Perry, even Rufus wouldn’t say that.  A 20-fold increase in ethanol – just where is all that corn (or other biomass) going to be grown?

    The $6bn is not buying anything.  Look at the history – the blenders credit has been around, one way or another, for thirty years, and for the first 20 it made no difference.  It was only when the Fed came out with a policy to mandate the use of ethanol that ethanol production really increased.  If we really want to produce and use more ethanol, we don;t need a credit, we just a mandate for more. 

    If we want to increase ethanol without an increase in mandate, then it will take much more than a 45c/gal tax credit to do so.

    Of all the tools in the ethanol production box, the tax credit is the one that achieves the least, if anything.

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  19. By perry on November 7, 2010 at 4:22 pm

    Paul N said:

    C’mon Perry, even Rufus wouldn’t say that.  A 20-fold increase in ethanol – just where is all that corn (or other biomass) going to be grown?


     

    If $120 billion would be an acceptable price to pay for energy independence, then 5% of that should be acceptable to cut our dependence 5%.

     

    I personally believe we should use 100% of the corn crop for ethanol. That would give us 2M bpd of oil equivalent btu’s, and leave plenty of feed for those cows. Then, we make all the cellulosic fuel possible, while going electric as quickly as possible with our automobiles. If we acted quickly, we MIGHT be able to survive peak oil somewhat intact. Probably not, but worth a shot anyway. As things stand now, we’re screwed. We’re gonna come apart at the seams.

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  20. By Rufus on November 7, 2010 at 6:04 pm

    Between $6.00 Corn, and China coming into the market very heavily for the first time in many years ethanol is selling very dear (about $2.30/gal on forward futures contract, Fri.) Add on taxes, and transportation, and, w/o the credit, ethanol is as, or more, expensive than gasoline.

    A dozen, or so, of the more inefficient producers will probably have to shut down for awhile. Barring another disastrous planting season the spread, and thus, demand, should start reappearing in the late Spring. A lot will depend, as always, on the price of gasoline.

    Old Chinese curse: May you live in interesting times.

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  21. By Wendell Mercantile on November 7, 2010 at 6:33 pm

    As things stand now, we’re screwed.

    We may be screwed with respect to corn and cellulosic ethanol, but there is still all that coal and natural gas from which to make methanol. Plus, we can also make methanol from the methane coming our of landfills and the biomass gasifiers we could quickly build.

    Of course, no one in a position of influence or authority has yet seen the promise of methanol. There is no highly-paid advocate for the methanol industry such as Bob Dinneen who can say, “The solution just need s bit of pencil-whipping and some white out.”

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  22. By perry on November 7, 2010 at 6:49 pm

    Wendell Mercantile said:

    We may be screwed with respect to corn and cellulosic ethanol, but there is still all that coal and natural gas from which to make methanol. Plus, we can also make methanol from the methane coming our of landfills and the biomass gasifiers we could quickly build.


     

    Can methanol make a dent in the next 6-36 months Wendell? Because that’s how long we have before peak oil bites us on the butt. Heck, it would take years and years to design cars that can use more than 3% methanol. Manufacturers won’t warranty any blend above that. After all these years, barely 3% of cars on the road can handle E85. We’re not ready for peak oil. Not even close. We’re about to have the entire economy come down around our ears, and we’re arguing over a $6 billion subsidy. Heck, we give more than that to Egypt and Israel every year, just so they won’t shoot at each other. Nuts…..

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  23. By carbonbridge on November 7, 2010 at 8:13 pm

    Robert Rapier said:

    ……….hence I think what will happen is simply the refiners pay more for the ethanol than they have been paying.
    My prediction: No significant change. Perhaps a plant shuts down. Is it worth $6 billion to save it? No.

    RR


     

    RR:  Different strokes for different folks.  All any of us can do is to predict the future.  And until this tax credit actually expires, — nobody knows exactly what will happen.  I simply maintain that this tax credit provided to ethanol blenders is what has been the PRIMARY PROFIT MARGIN of the EtOH fermenters.  This tax credit directly supports a higher price paid to corn ethanol fermenters for wholesale product at the rack.

    Again, I’d chance a bet that some 11th hour manuevering will save this tax credit and once again extend it.  If its valuation were to be trimmed by another nickle, so what?  What we need to see is the last extention of taxpayer subsidy created by Congress to actually become the last extention herein — and let this subsidy finally slip away at year’s end.  Three decades of taxpayer help to kick-start a new biofuel industry is 3x too long.  If the corn fermentation industry can’t profitably produce fuel-grade ethanol on its own after this much time, then so be it.  Together, many of us have discussed the inefficiencies of this batch fermentation process in considerable detail here…

    Others herein voice distinct valuations and reasoning to keep this tax subsidy flowing. 

    Perhaps everybody is partially right?

    –Mark

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  24. By paul-n on November 7, 2010 at 8:44 pm

    Can methanol make a dent in the next 6-36 months Wendell? Because that’s how long we have before peak oil bites us on the butt.

    Perry, have you overdosed on doomer pills? (or ethanol)

    Peak oil does not mean no oil, it will just mean expensive oil (if we want to outbid other countries)

    Keep in mind the US still produces over 5mbd of the stuff, Canada produces over 2mbd, and could produce much more, at the right price.  If oil is expensive enough there is oil shale, CNG etc.  It is not the end of the world – just the end of cheap oil.

    As for fueling vehicles on methanol, that is an easy conversion – they had that sorted in the 70′s.  (Google “vehicle methanol conversion popular science” for an article that explains how they did it) It would require replacing some fuel system components, and possibly a separate fuel tank and using a throttle body carburettor for vaporised methanol (similar to propane and CNG conversions) but that is no big deal.  Motorsports mechanics have been doing methanol conversions for decades, it’s just that there has been no need top do it for road going vehicles.

    It would not be too hard to set up the one vehicle to be able to run on any of gasoline, ethanol, methanol, kerosene, propane, CNG

    In WW2 Ford did testing and issued factory specifications for running their vehicles on wood gasifiers!  If they could do that, then, they can work it out for methanol, now, if need be.  Same goes for CNG.

    Yes, it will mean some inconvenience, and, maybe, some loss of driving performance, but if the alternative is not driving at all, many people will opt for the conversion.

     

    You are underestimating American ingenuity – if it needs to be done, it will be done, and when the decision is finally made to do it, it will be done surprisingly quickly.  It is just that right now, not everyone agrees that anything needs to be done,  so nothing is getting done.  It almost always takes a crisis before everyone agrees on the need for major change to anything, and that would appear to be the situation today.

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  25. By Rufus on November 7, 2010 at 9:57 pm

    That might be the silliest thing I’ve ever read on this blog.

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  26. By OD on November 7, 2010 at 10:30 pm

    That might be the silliest thing I’ve ever read on this blog

    Can you be more vague?

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  27. By Wendell Mercantile on November 7, 2010 at 10:39 pm

    …it would take years and years to design cars that can use more than 3% methanol.

    Perry~

    It wouldn’t take “years and years.” You underestimate the ability of people to get things done — in spite of the bureaucracy — during a true crisis.

    In WW II Germans very quickly started modifying cars and trucks to run on wood and charcoal as soon as it became apparent the flow of oil was not sufficient to keep both the war effort and the economy going. They weren’t stylish, fashionable, or convenient, but they moved.

    As Paul said, a true crisis can be a mighty catalyst for innovation and change. We have lots of coal and natural gas just waiting to be transformed into methanol. In a true crisis, it would happen, despite the objections of bureaucrats and the wailing of environmentalists.

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  28. By OD on November 7, 2010 at 10:56 pm

     

    Keep in mind the US still produces over 5mbd of the stuff

     

    Yeah, and closer to 7.5 mbd in total liquid fuels, which is far more than what is needed to keep agriculture & the military supplied. I agree with Robert’s long recession scenario, which will not be a walk in the park, but will be far from ‘we’re screwed’ as well.

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  29. By perry on November 8, 2010 at 1:39 am

    Wendell Mercantile said:

    In WW II Germans very quickly started modifying cars and trucks to run on wood and charcoal as soon as it became apparent the flow of oil was not sufficient to keep both the war effort and the economy going. They weren’t stylish, fashionable, or convenient, but they moved.


     

    Germany consumed 50 million barrels of oil annually in those days. We burn through that every 60 hours. The “long recession” theory of Robert’s makes sense on one level. Economies can’t grow with constrained energy supplies. Only, we’re not just talking constriction. We’re talking ever-shrinking supplies. A long depression is much more likely. The worst of the ’08-’09 recession only saw a dip of 2.5m bpd in world oil consumption. Peak oil will mean supply shortfalls of that amount and more each and every year.

    In order to conserve 3m bpd by going electric or propane, or whatever, the world will need to convert or junk 75,000,000 cars and trucks that average 25 MPG. And we’ll have to do that each and every year. That’s if peak oil is kind to us and depletion rates are only 3% or so. In the meantime, the high cost of oil will wreak havoc on the economy in a myriad number of ways. Light transportation is only 40% of oil consumption. It’s the other 60% that will give us the most hell.

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  30. By paul-n on November 8, 2010 at 2:38 am

    @Rufus – it is kinda like “Who’s on First”  When it comes to oil alternatives, I’m sure you will agree, that not everyone can agree!

     

    @Perry  We are going in circles here, too bad we can;t use any of this energy for transportation.

    Economies can’t grow with constrained energy supplies.

    Sure they can, they just need to reduce energy(i.e. oil) intensity faster than economic growth, that’s all.  And that can be done, if we really want to.

    In order to conserve 3m bpd by going electric or propane, or whatever, the world will need to convert or junk 75,000,000 cars and trucks that average 25 MPG.

    Well, that is one way to conserve. It could equally (and probably easier) be achieved by all vehicles driving 10% less, or the smaller vehicles driving more than the larger ones, etc.

    The US share of that is 0.7mbd.  This could also be achieved by eliminating heating oil usage, and converting railways to CNG, and eliminating the use of oil for grid electricity generation.

    It could also be achieved by switching 1/3rd of the truck ton-miles to railroad.

    And, as you point out, we can still, for a price, convert cars to run on anything other than oil.

    In the meantime, the high cost of oil will wreak havoc on the economy in a myriad number of ways.

    Well, this may even be true, but so what?  We have had the stock crash in ’29, the depression and dustbowl of the ’30′s, WW2 in the 40′s, stagflation and OPEC crises in the 70′s, the stock bubble in 87, the dot com bubble of 2000, the subprime bubble of 2007, the bank failures/bailouts of 2008.  Compared to that, what are higher oil prices in the 2010′s?  There are always things happening that can wreak havoc on the economy- that is what makes it interesting.  How could the speculators (i.e  your pension fund) possibly make a profit if everything was perfectly safe?

    There are so many way to reduce oil consumption for light vehicles, and everything else, that it is not funny.  They are  just not the easiest/cheapest/most convenient ways – if they were, we would be doing them already.

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  31. By OD on November 8, 2010 at 11:22 am

    If you are that concerned Perry, you could do what Hirsch has done to prepare for peak oil and buy Prius.

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  32. By perry on November 8, 2010 at 11:58 am

    Paul N said:

    The US share of that is 0.7mbd.  This could also be achieved by eliminating heating oil usage, and converting railways to CNG, and eliminating the use of oil for grid electricity generation.


     

    Sounds like a good plan for year one of peak oil. What’s your plan for years two, three, and four? Eliminate plastics in year two perhaps? The problem here is that we’re looking at this from different angles. I’ve no doubt that we can physically adjust to less oil. It’s not like we’ll have a choice. You can’t burn what isn’t there. I’m thinking about the massive economic toll peak oil will take. The US has never had hyper-inflation. There’s no way around it with peak oil. Not just here, but globally. Food prices are highly dependent on fossil fuel prices. Every time energy inputs double, food prices jump 40%. How many years of that can the world take? Instead of sending $400 billion overseas for oil, the US will end up sending trillions a year. How long can we do that before we’re a third world basket case? A few years, at most.

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  33. By perry on November 8, 2010 at 12:02 pm

    OD said:

    If you are that concerned Perry, you could do what Hirsch has done to prepare for peak oil and buy Prius.


     

    Sounds like a nice, comfy place to watch the world fall to pieces OD. Getting from point A to point B will be the least of our concerns.

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  34. By Wendell Mercantile on November 8, 2010 at 1:21 pm

    watch the world fall to pieces

    What exactly are you talking about? Back in the 19th century people got along quite nicely without burning any oil at all (except from whales). Certainly, their lifestyle was different than ours, but it wasn’t particularly unpleasant.

    Most people never went more than 50 miles or so from their homes during their lives; they had no television, radio, or social media connections; and many had to use outdoor toilets and took only one bath a month; but their lives weren’t unpleasant.

    There may have to be radical changes, but that doesn’t mean the world will “fall to pieces.” In fact, a substantial percentage of the world’s population already live similar to the way people lived in the 19th century. I’m not particularly anxious to join them (I’m sure you’re not either), but if we have to start living like them, it wouldn’t mean the world had fallen to pieces.

    Even without the advantages of abundant and cheap energy, we would still have the advantages of the knowledge we’ve gained through advances in science and technology since the 19th century.

    The only real problem we face is too many people. If the earth had only one billion people in it, we wouldn’t even be discussing the issue of Peak Oil.

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  35. By perry on November 8, 2010 at 1:56 pm

    Wendell Mercantile said:

    What exactly are you talking about? Back in the 19th century people got along quite nicely without burning any oil at all (except from whales). Certainly, their lifestyle was different than ours, but it wasn’t particularly unpleasant.


     

    We can’t return to the 19th century Wendell. There isn’t enough land to feed all the horses that would be required. Horses eat 24/7, whether you need to go anywhere or not. With luck, we can enjoy a 15th century lifestyle. OR, we can grow our way out of this mess. Vegetable oils can be made into plastics and many other products now made from oil. Palm oil can be turned into biodiesel, so we can get those products to market. Biomass can be burned to transport our fat asses to work in EV’s. Problem is, after 30 years of effort, we’re getting less than a million barrels per day oil equivalent from biofuels today. How long will it take to double that, another 30 years?

    We need to quadruple biofuel production in the first year of peak oil. Unless that happens, and we add an additional 3M bpd on an annual basis, the price of oil goes through the roof and just continues higher and higher. The economic fallout will make the Great Depression look like a cakewalk. We should have done more to prepare. It’s not like we didn’t know it was coming.

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  36. By OD on November 8, 2010 at 3:29 pm

    Perry,
    So it is your belief that biofuel is the ONLY thing that can mitigate peak oil? Coal, natural gas, nuclear will play no role at all? That seems highly unlikely. You also seem to be fixated on a BAU scenario and that if we don’t maintin it we are doomed. No wonder you are so doomy.

    You should read the IEA’s pdf Saving Oil In A Hurry, to see what some more reasonable responses would be.

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  37. By perry on November 8, 2010 at 3:47 pm

    OD said:

    Perry,
    So it is your belief that biofuel is the ONLY thing that can mitigate peak oil? Coal, natural gas, nuclear will play no role at all?


     Makes no difference to me whether synfuels or biofuels make up the shortfall OD. World production of synfuels is 250,000 bpd. Can that be increased 1200% in a year? Can we do that every year? Unless we can add some combination of 3M bpd of synfuels and biofuels to the mix annually, crude oil prices spiral continually higher. So does the price of biofuel and synfuel. Food prices follow. Ditto for anything made from fossil fuels, as well as anything needing transport to market. In a few short years, paper currencies will be trashed. Perhaps the Saudi’s will take gold and silver instead. Once that’s gone, we can offer them women and children. Then what?

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  38. By OD on November 8, 2010 at 4:00 pm

    Once that’s gone, we can offer them women and children. Then what?

    I think you have entirely lost touch with reality…..

    You keep harping on about supply side only. What about the demand side? What about the fact that when oil hits the $150 range, prices then plummet because the economy and demand collapses. I think Colin Campbell has it right(I assume you know who that is?), prices can not go to the moon, because no one could afford it! You’ve only had just a tiny glimpse of this. I’m sure we’ll have many more bust & boom cycles in the near future to reinforce this notion.

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  39. By OD on November 8, 2010 at 4:07 pm

    To reinfoce the fact that, at leas the US, there is a ton of fat to cut, according to the Hirsch report 67 percent of personal automobile travel, and 50 percent of airplane travel are discretionary. But nah, we’re not going to cut down on any of that, we’re going to go straight from BAU to 15 century living.

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  40. By perry on November 8, 2010 at 4:23 pm

    OD said:

    What about the fact that when oil hits the $150 range, prices then plummet because the economy and demand collapses.


     Economic collapse seems to be the only thing we can agree on. Governments will also collapse. Just one consequence of starving populations. Another will be resource wars. Those who can’t buy will do what they can to take. And who guards the oil? The good ole USA, that’s who. Oil is 400% higher than it was a decade ago. And peak oil hasn’t even happened yet. There were food riots in many developing countries when oil went over $100 a barrel. What can we expect with $200 oil? How about $300?

     

    And no, we shouldn’t expect demand to ever again undercut supply after peak oil hits. That’s just wishful thinking.

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  41. By perry on November 8, 2010 at 4:57 pm

    Nov. 8 (Bloomberg) — Oil edged up to its highest level since October 2008, carried by advances in other commodities including gold and silver.

    Futures rose for a sixth day as gold prices rallied to a record and silver reached a 30-year high. Oil and precious metals strengthened as traders lost confidence in holding currencies as an investment.

     

    The world will “have to live with current oil prices,” Qatari Oil Minister Abdullah al-Attiyah said today in Doha.

     

    http://www.businessweek.com/ne…..ecord.html

     

    No word from Doha on whether women and children will be accepted in lieu of gold and silver.

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  42. By Wendell Mercantile on November 8, 2010 at 5:21 pm

    Once that’s gone, we can offer them women and children.

    Why would they want our women and children? They’d just have to feed and clothe them. And think how cranky an American woman would be if she was forced to wear a veil and wasn’t allowed to drive.

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  43. By jcsr on November 8, 2010 at 9:23 pm

    Wendell Mercantile says. There were many homes who didn’t have indoors toilets and only bathed once a month.
    Let me tell you. I was born in the early twentieth century (1929) in a house with no indoor toilet or central heating. Most of us bathed in intervals less than a month. .More in the summer when we could jump in the swimming hole with a bar of soap. All of the above was damned unpleasant.
    With the price of oil predicted to be priced out of the reach of many low wage or no wage people we will learn how to live without central heat I.E. space heaters. It happened before when oil went up over $100 per barrel. Unpleasentness is coming to your town if it hasn’t already.

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  44. By Kit P on November 9, 2010 at 9:02 am

    “With the price of
    oil predicted to be priced out of the reach of many low wage or no
    wage people we will learn how to live without central heat I.E. space
    heaters. It happened before when oil went up over $100 per barrel.
    Unpleasentness is coming to your town if it hasn’t already.”

     

    Enough already! I
    live in an all electric house. It is clean, quite and cheap. Less
    than a $1/day/person for the energy to live like a king, a frugal
    king anyway.

     

    My electricity comes
    from coal and nuclear power, not oil. Clean water and sewage
    treatment is also powered electricity. The air is clean, the water
    is clean, life is good.

     

    Poverty is not what
    it used to be. The did a survey and the amenities that people living
    below the poverty line. A big frig full of food, dishwasher,
    microwave, big color TV on cable, and AC.

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  45. By perry on November 9, 2010 at 12:12 pm

    I don’t know what to make of the IEA’s World Energy Report for 2010. They say conventional crude output peaked in ’06 at 70m bpd and won’t return to those levels. They project an “undulating plateau” of 68-69 mpd for 2020. That doesn’t square with Hubbert’s curve, which would put production in the area of 50m bpd. Their forecast relies on big production gains in the Caspian region, Iraq, and Saudi Arabia. Some experts claim KSA peaked already. The IEA forecasts a 50% increase in production for KSA.

    They also forecast non-conventional sources to grow from 2.3m bpd to 9.5m bpd, mostly from Canada and Venezuela. Apparently, they think Chavez will be dead by then. Biofuels are supposed to grow from 1m bpd to all of 4.4m bpd. That’s assuming $65 billion in government support.

    All in all, a pretty rosy report. No peak till 2035 or thereabouts. All is well. Go back to sleep.

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  46. By paul-n on November 9, 2010 at 1:01 pm

    Who cares what the IEA says about oil?  They are not an oil company, that actually decides where they will drill.  They do not know, really, how much oil Saudi Arabia has, they are just guessing like everyone else.   

    And they predict a plateau in production and steadily rising prices?  We have had a plateau in production and steadily rising prices for the last five years – how is it news to predict more of the same for the future?

    As oil gets more expensive, we will just use less, and use more electricity and NG.  The price of electricity has nothing to do with oil (except in Hawaii), and the US is self sufficient in NG and has huge, and growing, reserves of it.

    A high oil price will not mean collapse, it will mean inconvenience, it may limit economic growth, and then end of cheap air travel and holidays to the Caribbean, but it won’t mean starvation and collapse

     

    Now, can we get back to the subject at hand  - the egregious subsidies for ethanol.

     

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  47. By perry on November 9, 2010 at 1:23 pm

    Paul N said:

    the egregious subsidies for ethanol.

     


     

    Americans will spend over $600 billion on oil this year. The $6 billion ethanol subsidy is a virtual rounding error in comparison. If you want to talk egregious, let’s talk about the $200 billion plus we’ll spend squatting over the Middle East like a mother hen. That money buys us nothing but contempt. At least with the ethanol subsidy we get 600k bpd of oil equivalent.

     

     

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  48. By Rufus on November 9, 2010 at 1:25 pm

    They won’t be egregious for long, Paul. About 50 more days?

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  49. By perry on November 9, 2010 at 2:20 pm

    The Energy Independence and Security Act(EISA) mandated the use of one billion gallons of biodiesel by 2012. As far as I know, that’s still the law. The expiration of the biodiesel tax credit killed production however. Some are claiming there’s no need for an ethanol tax credit, since there’s a mandate in place. Whatever makes them think the ethanol industry can’t go the way of the dodo bird, like biodiesel did, is beyond me.

     

    The lack of biodiesel production this year did zilch for soybean prices btw. Prices are at two year highs, despite a record harvest.

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  50. By Wendell Mercantile on November 9, 2010 at 2:50 pm

    We can’t return to the 19th century

    Perry~

    Never said we would have to. Only said that life back then wasn’t all that bad, and that if we had to, it wouldn’t mean the end of the world.

    We also have an accumulated base of technology, engineering skill, and science that didn’t exist in the 19th century and that would serve us well if a crisis comes.

    In a true crisis, many things would be technically possible that are now either politically or environmentally unacceptable. For example: Nuclear reactors. For the last 55 years we’ve had the know how to safely put a nuclear reactor inside a 300 ft long steel tube and have it sail tens of thousands of miles under the oceans. There is no reason that every mid-size city in America couldn’t own and operate its own small nuclear reactor.

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  51. By perry on November 9, 2010 at 3:10 pm

    Wendell Mercantile said:

     There is no reason that every mid-size city in America couldn’t own and operate its own small nuclear reactor.


     

    I don’t think peak electricity will be a concern for decades to come Wendell. Maybe centuries. But, unless we use those nuclear reactors to make biofuels (which is technically possible btw), they won’t help much with peak oil. If it were so easy to avoid the downsides of peak oil, the time to jump into action would’ve been when prices hit $140 a barrel. None of the quick and easy solutions being touted here came about. Instead, we just paid at the pump, like always. When gasoline hits $5, then $10, a gallon, we’ll do what we’ve always done. Grumble and pay.

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  52. By Wendell Mercantile on November 9, 2010 at 3:59 pm

    I don’t think peak electricity will be a concern for decades to come

    Using more nukes for electricity would free up all that coal and natural gas we now burn making electricity to use making a useful liquid transportation fuel — methanol.

    And of course we are rapidly heading towards a time when many people will be jumping into some kind of electric car for commuting and running short-range errands around town. Most people could make about 80% of their current auto trips with an electric. I predict that for many people, their liquid fuel cars will be kept in reserve for use on long trips, weekends, and vacations, with the electric being the primary car they use most of the time.

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  53. By Wendell Mercantile on November 9, 2010 at 4:01 pm

    I should have also added that within as short a period as five to seven years, it will seem odd to see a liquid-fuel car on the streets of a city.

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  54. By paul-n on November 9, 2010 at 5:32 pm

    I don’t think peak electricity will be a concern for decades to come Wendell. Maybe centuries.

    Finally, the doomer clouds have cleared from Perry’s view.

    But, unless we use those nuclear reactors to make biofuels (which is technically possible btw), they won’t help much with peak oil.

    And then they closed in again!

    What will help with peak oil is, quite simply to use less oil.

    But how much less can we use, without a drastic decrease in living standards, before we even start substituting alternatives like biofuels, CNG, CtL, etc?

    This graph tells an interesting story.

     

     

    So if you halve the average transport energy use of the US cities, you get to the level of the Australian ones – hardly a decrease in living standards (and an improvement in the beer!)

    Halve that again, and you get to the level of the Euro cities (and the beer is better still)

    Halve that again, now 1/8th, and we are at the level of the Asian cities, but the beer is not as good – so clearly that has reached the point where there is an unacceptable decrease in living standards.

    But, halving transport energy to get from the level of LA to Sydney – that is a goal worth shooting for, and one that is achievable, with the tools at hand today.

    Then there is some energy left over for the good things in life – like a beer.  

     

     

     

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  55. By Benny BND Cole on November 9, 2010 at 6:52 pm

    The price mechanism is a wonderful idea, and will ease transition to a post-fossil era. If fossil fuels become too expensive (and remember we have natural/shale gas up the ying-yang), we will reduce consumption while ramping up alternatives (biofuels, PHEVs).

    The good news is that the really expensive part of the build-out for CNGs and PHEVs is already done–we already have gasoline statiosn at the best locations, that CNG stations can be grafted onto. As for PHEVs, most apartments, homes have 220v (for washer/.dryers etc), and even if they don’t, the build-out is minor, compared to building a whole new national grid.

    Any doomer scenario relies on the price signal being mute.

    BTW, RR has calculated that at $4 a gallon, a lot of biofuel becomes viable. Sheesh, you know the kind of cars Americans drive. We can easily adapt to higher MPG cars and be better off on $4 a gallon biofuels.

    I see a better and cleaner future ahead. I look forward to it. Maybe oil will sell for $120 a barrel, in the loing run. If I get cleaner urban air in exchange, and my car gets 45 mpg, and we spent on our $ in the USA and not in some thug state oil exporter, I see a big plus…..

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  56. By Kit P on November 9, 2010 at 7:34 pm

    “There is no
    reason that every mid-size city in America couldn’t own and operate
    its own small nuclear reactor.”

     

    Do you mean like Big
    Rock Point?

     

    http://en.wikipedia.org/wiki/B…..ower_Plant

     

    Of course there are
    many reason Wendell. The primary reason is economy of scale. For
    example, a senior reactor must have the same level of understanding
    of reactor physics for a 67 MWe as a 1500 MWe power plant.

     

    If it makes you feel
    any better Wendell, all reactors and steam turbines are relatively
    small.

     

    “And of course we
    are rapidly heading towards a time when many people will be jumping
    into some kind of electric car for commuting and running short-range
    errands around town. Most people could make about 80% of their
    current auto trips with an electric. I predict that for many people,
    their liquid fuel cars will be kept in reserve for use on long trips,
    weekends, and vacations, with the electric being the primary car they
    use most of the time.”

     

    If by rapid Wendell
    means dead slow then that would describe the current auto industry
    public relations campaign. To be fair, Wendell is not the only one
    to talk about what ‘most people’ will in the future based what he
    could have done all his life but never has.

     

    “Then there is
    some energy left over for the good things in life – like a beer.”

     

    Paul you can keep
    both Houston and Hong Kong. I would consider SF if I could live in
    Speaker of the House Pelosi’s house. Notice that rich liberals do
    not practice what they preach.

     

    Paul fails to
    recognize that rich people use lots of energy. Paul’s utopia per
    capita model based is on a huge number of poor people living in
    crowed tenements.

     

    “that is a goal
    worth shooting for, and one that is achievable, with the tools at
    hand today.”

     

    No Paul, mass
    poverty is not worth shooting for but it sure is achievable.

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  57. By paul-n on November 9, 2010 at 8:15 pm

    Kit, that is the worst misquoting I have seen from you yet.  I specifically said “Halving transport energy to get from the level of LA to Sydney’” is a goal worth shooting for, and that the level of the Asian cities is not.

    My point is that if you are going to have cities at all, which by definition are high concentrations of people, then it is worth going to some effort to have efficient transportation in those cities.  And since cities have been around for 6000 years, and all of them have put some amount of effort into their transportation systems, I think there is reasonable evidence to support that.

    Have you been to Sydney, the city I am suggesting as the benchmark?  It certainly does not have mass poverty.

    There is no more poverty in the Australian cities than the American ones, and compared to some parts of LA, I’d say there is much less.

    If you are implying that cities, in and of themselves, are recipes for mass poverty, then say that – that certainly is not what I am saying.

    If you want disagree with what I am saying that is fine, but do not try to imply I am saying things that I am not.

     

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  58. By OD on November 9, 2010 at 8:19 pm

    That doesn’t square with Hubbert’s curve, which would put production in the area of 50m bpd

    You should really read Robert’s work on Hubbert’s linearization.

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  59. By OD on November 9, 2010 at 8:28 pm

    As oil gets more expensive, we will just use less, and use more electricity and NG.

    Absolutely! The CEO of Shell gave an interview in which he stated their output of NG will be MORE than their output of oil by 2012, if memory serves, because of the substantial rise in demand for natural gas.

    How ironinc, the news is showing a new natural gas vehicle research facility being opened in my state, as I type this post.

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  60. By Wendell Mercantile on November 9, 2010 at 10:38 pm

    Do you mean like Big Rock Point?

    I had a tour of the reactor site at Big Rock Point in 1961 when it was under construction. We were on a family vacation around Lake Michigan, and my Dad followed the signs inviting people to see the construction site. They were proud to show it off. That would never happen now.

    But Big Rock Point is what I’m talking about, or the small nuclear reactor at Genoa, WI. Dairyland Power Cooperative ~ Genoa

    Both have been decommissioned because of economic reasons, but what I’m talking about is a time of crisis. A time when we’ve run out of other options.

    We could start pumping out modular reactors such as those on nuclear submarines in short order, ship them to cities, and have them up and running. Of course the political posturing and environmental complaints would be huge. But I’m not talking about normal times. I’m talking about extreme times that require extreme measures and action-oriented leaders with vision.

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  61. By Kit P on November 9, 2010 at 10:54 pm

    Sorry for misquoting
    you but you neither made yourself clear or said this.

     

    “then it is worth
    going to some effort to have efficient transportation in those
    cities.”

     

    Or so you are
    talking about some sort of mass transit.

     

    “I think there is
    reasonable evidence to support that.”

     

    Are you actually
    going to present some evidence? I not sure what city your are
    talking about 6000 years ago. The Roman used CNG buses that were
    only possible after they invented the arch for bridges could bear the
    weight.

     

    “If you want
    disagree with what I am saying that is fine, but do not try to imply
    I am saying things that I am not.”

     

    Paul you are not
    saying anything. However, if you look at the ratio of rich people
    that can afford to drive and poor people who can not; I suspect that
    that is the controlling metric. If you are saying that LA is a
    example of poor planning, I would not disagree. If you are saying
    Sydney, should be a benchmark maybe should tell why.

     

    As for your source,
    I am still find some reason to find it credible I traced it back to
    some nut case site.

     

    “Well, I hope that
    gave you some ideas of alternatives to wandering around in Suburban
    Hell for your whole life:”

     

    I suppose that you
    could could compare a new drab subdivision to the filth of Europe. I
    pretty sure if you take some pictures of the fall collage of my
    neighborhood near the Blue Ridge Parkway it would put the filth of
    the EU to shame.

     

    “Below is a
    shopping district in Amsterdam:”

     

    Been to Amsterdam.
    Went for a walk an ended up someplace where the graffiti is in sand
    script. Afew block off the shopping area is some places you do not want to go. 

     

    Anyway Paul, your
    theory, what ever it might, appears to completely devoid of any
    careful analysis.

     

    It also appears to
    border on anti-American propaganda. Just what I conclude when you
    write for Pravda and compare a strip mall tire store in the 70s to
    the district in Amsterdam.

     

     

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  62. By carbonbridge on November 9, 2010 at 11:19 pm

    Wendell Mercantile said:

    Do you mean like Big Rock Point?

    Or Kit:  I am still find some reason to find it credible I traced it back to

    some nut case site.


     

    Well now.  Since we’ve gone so far away from Bob Dineen’s little bit of white out and an automatic extention of the ethanol blender’s tax credit – I just thought I’d toss this in.

    No nukes.  Period. 

    Inhale just one atom of man-made plutonium and you will get lung cancer. 

    However, this fissionable material is only hot for a half-life of 500,000 years. 

    Not too bad.  Goodnight!

    -Mark

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  63. By paul-n on November 10, 2010 at 1:18 am

    KIt, 

    Most of the ancient cities developed grid style road systems, be it Teotihuacan in central America, to Indus Valley Cities, ancient Babylon etc – the pattern is repeated across the world, through the ages.  Once any city grew large enough, they started to bulid proper road systems for the orderly movement of people, goods and military – this tradition continues to this day.  

    But building roads, and transporting goods and people, when the energy is from human or animal power, is expensive, so they made the roads as efficient as they could, in terms of layout and paved surface.  Then, like now, rich people could afford more energy for transport, that was one way of controlling vehicle traffic, to limit it to important people.

    The Romans, of course, took it to a whole new level.  But they still designed their cities to minimise transport.  The overiding principle is that people generally lived close to where they worked, even in ancient Rome (which had no public transport – if you couldn’t afford a horse, you walked)  That is where the modern cities have deviated, and the American ones more so than others, as indicated by transport energy or passenger miles. 

    I do not have an anti-American agenda – my agenda is for the efficient use of energy.  If America is to use less oil, which is a central theme of this blog, (and the American government)  then making the cities more transport, and thus oil efficient, is one option that moves the country in that direction.  A good place to start is to compare to other cities that are already oil efficient, and to see what they have done that can and can’t be used here.

    I would agree LA is bad example of city planning – the funny thing is that it is a planned city, and many older cities, that seem to work better, are not.  

    Where Sydney differs (from LA) in transport terms is that it has a better public transportation system and a better system of satellite urban centres, which, of course, grew as nodes on the train system, as is the pattern in many cities.  So more trips can be made on transit, but more importantly, the average commute length is shorter.  The 20th century development of many cities, but particularly places like LA (though also Australia’s capital, Canberra, where I grew up) are designed around car transport, and as the cities have grown dramatically in size, that model means the car miles also increase.  This is not a problem in itself, as long as cars are the desired, and affordable form of transport.  And (even today) cars have been the most desired, and affordable, in the US compared to anywhere else, so of course cities have grown up car centric.  That is fine, as long as the fuel for the cars is available and affordable.  

    Now, if we are seeking to decrease fuel usage, then these cities are less than ideal, places like Atlanta and Houston being the worst, but, on average, they all use more vehicle transport than other cites, like in Australia.

    The landmark study by Newman and Kenworthy in 1989 was the first of it’s kind – I remember being  shown this in 1990 while studying Traffic Flow Theory (yes that is a real subject) while doing my civil engineering degree in Sydney. ( I got the graph from the New World Economics site as that was the first place i found it).  Traffic flow theory really is quite fascinating, if you are into that sort of systems modelling, and is very similar to flow of water in open channel systems, and some traffic modelling equations are derived from this.

    Anyway, a slightly more recent update of their work is here, from which these extracts are taken;

    If we use your theory that it is rich people who are responsible for the energy use, then Atlanta must be, by far, the richest city in the country.

    Leaving Atlanta and Houston as outliers, even the rest of the American cities, as a group, use significantly more energy than the Canadian or Australian ones – but I will argue there is not a significant difference in living standards between them.  

    Here is the data from which they make this graph (ANZ = Aust +NZ, WEU = Western Europe, HIA = High Income Asian (Japan, Singapore));

     

    So the Australian cities manage to use less energy per passenger km, in all modes of transport, Sydney has achieved this by having well utilised public transit, including transit accesible industrial areas, and by driving higher mileage vehicles.

    But the Aust cities also need less km per person – the commutes are generally shorter.  This has been achieved by a good system of satellite urban centres, and desirable urban living (who wants to live in downtown LA?), allowing people more options for living closer to where they work.

    All of which adds up to cities that need, on average, half the transport energy.

    We can debate other reasons about which cities are better to live in and why, or why it is better to not live in the city at all (my preference), but the objective here is about reducing oil usage, without reducing living standards.  These numbers show that the Australian cities have achieved that.  The Euro ones have gone further, and the Asians further still, but at the expense of greater density, which is not everyone;s cup of tea.

    The alternative to reduce transport oil usage is to substiute other fuels, be it ethanol, biodiesel or EV’s, and this is clearly the American preference.  It certainly seems easier to produce alternate fuels than to restructure cities and transport systems.  

    Long term, I think more efficient urban transport, and less people miles, are the better way to go.  Doesn’t mean you have to do only one or the other, but clearly, lower energy use for transport, without living on top of each other, can be done.

     

     


     

     



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  64. By Rufus on November 10, 2010 at 2:15 am

    Jeez, don’t you guys ever pay attention to what’s going on around you? The decision’s already been made. The CAFE Standards are taking us up to 35 mpg in only a few short years (did anyone notice that the 2012 Focus is Flexfuel, and gets 40 mpg,) and the RFS is taking us up to 36 Billion Gallons/yr of Ethanol.

    Half of all Detroit cars will be flexfuel in 2012, and all Vilsack wants to talk about is “Blender” Pumps.

    And, Warren Buffet’s buying Trains. Any questions?

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  65. By Duracomm on November 10, 2010 at 9:11 am

    Here is the latest example of the stupidty of connecting fuel production to crop production.

    I suppose the ethanol booster think more world hunger is a small price to pay as long as ADM and the other ethanol welfare recipients keep getting that sweet, sweet, taxpayer money.

    Food price fears as US warns on crop yields

    The spectre of inflation loomed over agricultural markets after the US slashed key crop forecasts and warned of shortfalls in grains. The FAO food price index is nearing the highs set in mid-2008.

    The agriculture department on Tuesday cut estimates of US corn yields for a third successive month… At 827m bushels, stocks left over from this year’s harvest would be the lowest in 15 years.

    Record US ethanol production has added to demand.

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  66. By Wendell Mercantile on November 10, 2010 at 9:46 am

    Inhale just one atom of man-made plutonium and you will get lung cancer.

    That’s not true at all. I could use a chunk of Pu as a paperweight on my desktop and not have to be afraid of it. The toxicity of Pu has been the subject of much hyperbole, mostly because Ralph Nader once said a pound of Pu could cause eight billion cases of cancers. You would be foolish to grind up Pu and swallow or breath the dust, but Pu is no more dangerous than many other things we deal with everyday.

    I generally don’t like to refer to Wikipedia, but their article on Pu has a nice summary:

    Isotopes and compounds of plutonium are dangerous due to their radioactivity. Contamination by plutonium oxide (spontaneously oxidized plutonium) has resulted from a number of military nuclear accidents where nuclear weapons have burned. However, based on chemical toxicity alone, the element is less dangerous than arsenic or cyanide and about the same as caffeine.

    The alpha radiation plutonium emits does not penetrate the skin but can irradiate internal organs when plutonium is inhaled or ingested. The skeleton, where plutonium is absorbed by the bone surface, and the liver, where it collects and becomes concentrated, are at risk. Plutonium is not absorbed into the body efficiently when ingested; only 0.04% of plutonium oxide is absorbed after ingestion.What plutonium is absorbed into the body is excreted very slowly, with a biological half-life of 200 years. Plutonium passes only slowly through cell membranes and intestinal boundaries, so absorption by ingestion and incorporation into bone structure proceeds very slowly.

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  67. By Kit P on November 10, 2010 at 10:18 am

     

    “Now, if we are seeking to decrease fuel usage

     

    Only if you are energy OCD.  Increasing energy usage is generally associated with a high standard of living and lower environmental impact of living.  

     

    “but I will argue there is not a significant difference in living standards between them.”

     

    I would argue that a mass daily exodus from urban centers is evidence that the quality of living is not very good.  Those who can afford to get out or isolate themselves from the poverty.  

     

    If you are spending lots of time burning oil to commute, I would suggest that finding a more efficient way to burn oil will not be a very effective solution.  Again, it is a case of trying to engineer a solutions for personal choices.   

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  68. By Kit P on November 10, 2010 at 10:56 am

    “Inhale just one atom of man-made plutonium and you will get lung cancer.

     

    That’s not true at all.”

     

    Thank you Wendell!  Wendell, Rufus and I have all been exposed to plutonium growing up when nuke weapons were tested in the atmosphere.  We do not have lung cancer.

     

    For those concerned with lung cancer, not smoking is the best advice.  Lung cancer is very rare among non-smokers.  Unfortunately, I still see school kids smoking.  Nicotine is also more toxic than plutonium.

     

    “No nukes.  Period”

     

    Currently, there are 104 nuke reactors providing 20% of the electricity in the US.  Zero is the exposure to plutonium from this activity.  In fact no one has been harmed (including workers) from radiation from any US commercial nuke (or any in the world designed to US standards).  Both radiation safety and industrial safety programs are very effective in the electricity generating industry.

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  69. By carbonbridge on November 10, 2010 at 12:00 pm

    Kit P said:

    Currently, there are 104 nuke reactors providing 20% of the electricity in the US.  Zero is the exposure to plutonium from this activity.  In fact no one has been harmed (including workers) from radiation from any US commercial nuke (or any in the world designed to US standards).  Both radiation safety and industrial safety programs are very effective in the electricity generating industry.


     

    Many faces of decay for nuclear supporters! 

    Simply google CHERNOBYL or THREE MILE ISLAND and you can spend a whole day reading and reviewing special photographs.

    http://www.mapsorama.com/maps/…..tion96.jpg

    http://timmsuess.com/chernobyl…..l-the-map/

    It has been suggested that the Chernobyl disaster released as much as 400 times the radioactive contamination of the Atomic bombings of Hiroshima and Nagasaki. The isotopes released at Chernobyl tended to be longer-lived than those released by a bomb detonation, producing radioactivity curves that vary in shape as well as size.

    There exists room for new threads here where we can debate nuclear fission against the efficiencies of grain ethanol fermentation if the discussion of ethanol tax credit expirations has run its course.  Have a great hump day.

    –Mark

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  70. By Kit P on November 10, 2010 at 12:35 pm

    Mark you are aware that Chernobyl was in the USSR and no one was harmed at TMI?

     

    I can understand why people would not want to be exposed to plutonium.  It has been the subject of lots of fear mongering.  So Mark if you want to engage in fear mongering, I will respond to you.

     

    Mark since you do want to be exposed to plutonium, the polite response to being told you are not being exposed to plutonium is thank you.  For my small part in not exposing you, you are welcome.  

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  71. By perry on November 10, 2010 at 1:17 pm

    Rufus said:

    The decision’s already been made. The CAFE Standards are taking us up to 35 mpg in only a few short years


     

    4 Hummers and a Volt will get you to an average of over 50 MPG. 9 Armadas and a Leaf will do the same for Nissan.

    25,000,000 EV’s will save us one million bpd. We should hit that mark somewhere around the turn of the next century. Convert every car and truck to an EV, and we save 8m bpd. Then, we’re only importing HALF our oil needs. Wouldn’t that be exciting?

    I was fairly optimistic about the future until recently. Then, I started looking beyond how I would deal with peak oil personally, and started looking at the big picture. The macroeconomics are downright ugly. Especially for countries with big oil appetites or large, already hungry, populations. A crushed economy led Germany into WWll. A need for oil led Japan to join them. Things are going to get combustible in the near future. All the little guy can do is duck for cover.

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  72. By Wendell Mercantile on November 10, 2010 at 1:47 pm

    Perry~

    Don’t forget the 1.3 billion people in China and one billion in India who all want to move up to the Western quality of life they see on the Internet and in movies. The truth is that not every Indian or Chinese will be able to buy and drive a Buick (or even a flex-fuel Chevy as Rufus does). The next 50 years or so will feature a real competition for resources.

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  73. By perry on November 10, 2010 at 2:00 pm

    Wendell Mercantile said:

    Perry~

    Don’t forget the 1.3 billion people in China and one billion in India who all want to move up to the Western quality of life they see on the Internet and in movies.


     China is never far from my mind Wendell. When oil becomes too expensive, or too scarce, to meet Chinese demand, the Chinese will have to make a decision. Send 500 million peasants back to farms to work the depleted soil by hand, or send an army to snatch what remains of Mideast oil reserves.

     

    Like you’ve said before, a world population of a billion would be a lot easier to feed, clothe, and transport. The second half of this century might not be so bad after all.

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  74. By Ana Cristina Merino on November 12, 2010 at 5:10 pm

    HELL NO! Maybe someone in Congress will grow some balls and employ those words early and often.

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  75. By Researcher on January 16, 2012 at 11:14 pm

    I am a high school student and I wrote a paper as part of an extensive high school research project where I have chosen to publish my research paper in an effort to provide a reasonable and objective attempt to give credible and summative information on the topic of the impact of ethanol and whether ethanol producing farmers should receive subsidies. Please check out my website at http://ethanolsubsidies.squarespace.com/

    [link]      
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