Ethanol Exports Increase Dependence on Foreign Oil
Near the end of my recent post documenting some of the antics of various ethanol interests, I wrote the following:
“As always, I invite a response from ethanol interests or readers who wish to dispute my points. If someone wishes to engage on these points, the floor is open, and I am open to publishing any feedback.”
Someone did respond, albeit not directly to me. A reader recently alerted me to the following article written by Brian Westenhaus at the New Energy and Fuel blog:
Let’s start with a lie, albeit most likely the lowest level of lie, everyone is lying about ethanol. It has gotten so that the lies are pervasive, even such that John Stossel at Fox News is making quotes and suggesting that ethanol is a huge political boondoggle. Admired bloggers like Robert Rapier have allowed emotional prejudices and technical biases to discredit their commentary.
When someone accuses me – explicitly or otherwise – of lying, they have my attention. I read the article carefully to find examples of these “emotional prejudices” and “technical biases” (I am admittedly technically biased against lots of things — for technical reasons of course). After all, if you are going to accuse someone of lying, you need to clearly show your case.
Unfortunately, the article provided not a single example from my article. It simply left the implication that somewhere in my article, there were lies. I thought this was fairly irresponsible of the author — after all in my post I did provide explicit examples from specific parties — so I challenged the author in the comments. Later, in the comments the author accused me of using “silly numbers.” Again, no examples.
Not only did I have a problem with the implication that I am lying and then failing to give examples, but the following claim was made in the article:
The [ethanol] production level is finally high enough that a bit of the production (about a million barrels per month) is going for export, offsetting the imported oil bill and adding to the pressure on oil prices.
In the comments following the article, he continued to press that argument in a response to me:
American ethanol is producing close to a million barrels a day and exports are about a million barrels a month. Its a terrific value add to oil and natural gas that’s exported for hard currency that offsets in a small way what oil imports cost.
Young man, I am very disappointed with your work. Comments like “So taxpayer-subsidized ethanol exports actually increase our oil dependence – at taxpayer expense.” is a falsehood, plain as day.
I offered to debate the matter, because how we spend our tax dollars with respect to energy policy is an important matter. Misinformation should be addressed head on. After my reply lingered in moderation limbo for several days, it was finally published, but there was no indication that the author was willing to debate the above claims. So this essay will serve to argue the point that ethanol exports do in fact increase U.S. dependence on foreign oil. Given that the author characterized this as “a falsehood, plain as day” one of us is seriously wrong.
It is a fact — acknowledged by even the most die-hard ethanol proponent — that oil is used in the production of ethanol. For example, there is diesel involved in farming and transporting corn, there are oil-based herbicides and pesticides, and there is oil involved in transporting ethanol. That alone isn’t necessarily a problem, because if it only takes a small amount of oil to produce a relatively larger amount of ethanol — and then that ethanol is used domestically to displace gasoline — then one can certainly make the case that the oil investment was worthwhile and at the end of the day U.S. oil consumption — and by extension oil imports — were actually lower because we produced and used that ethanol. The amount of oil (and other fossil fuels) used in the production of ethanol is a separate debate, but one thing is crystal clear: Oil is used in the production of ethanol.
Export that ethanol and the situation is quite different. Not only is more oil now embedded in transporting that ethanol to far-flung locations like Saudi Arabia, but there is zero displacement of domestic gasoline. So the gallon of ethanol that is exported required a fraction of a gallon of oil to produce, and yet did nothing to displace any oil domestically. Thus, each gallon of ethanol that is exported actually requires the U.S. to use more oil on a net basis. Since we don’t produce enough oil to meet our needs, that gallon of exported ethanol increases our dependence on imported petroleum. That is true, plain as day, and Brian Westenhaus is wrong.
Further, what about the assertion that exported ethanol is a “a terrific value add to oil and natural gas?” A terrific value for whom? Taxpayers, who enable the practice? Ethanol producers couldn’t afford to do this if it wasn’t being subsidized. So taxpayers pay $0.45 to subsidize a gallon of ethanol (ignoring for a moment all of the other ways ethanol is subsidized), and it is then exported out of the country. The currency is received by the ethanol company. Saudi Arabia, for instance, gets a U.S.-taxpayer funded discount on their fuel purchase. So it is a terrific value for Saudi Arabia. It is a terrific value for ethanol producers to get taxpayers to fund their export market. But it isn’t such a great value for the vast majority of taxpayers.
It is only a matter of time before this practice is stopped by certain countries that are trying to develop their own ethanol industries, just as the EU stopped the practice of U.S. biodiesel producers shipping subsidized fuel to Europe. Because the biodiesel industry had grown production based on this export market, loss of the market proved devastating. Ethanol producers should heed that lesson. Countries that don’t produce ethanol, on the other hand, will be glad to continue receiving fuel subsidized by U.S. taxpayers. I can imagine that Saudi Arabia must be chuckling at the idea that the U.S. is subsidizing their ethanol purchases, but that we’re also buying and importing more foreign oil because of said purchases.
The ethanol lobby has responded that they would love to sell that ethanol domestically, but they can’t until the U.S. government forces us to buy more ethanol. Well guess what? Nobody is forcing them to produce more ethanol than the market demands. Instead of exporting, why don’t they just scale production back a bit? That’s what other industries do when demand falls. They don’t receive perpetually growing, taxpayer-funded markets. Or, they could produce cost-competitive product so they can grow the domestic E85 market. Nobody is preventing them from doing that.
Further, since one of the rallying cries for those arguing to keep the subsidies was that ethanol reduces dependence on foreign oil, it is really a moral imperative that they don’t participate in a practice that actually increases that dependence. The hypocrisy of citing soldiers dying for oil as a reason to keep the subsidies flowing — and then turning around and exporting subsidized ethanol — is nauseating. It also completely defeats the purpose of the subsidy in the first place.
To conclude, the author of the aforementioned article wrote in his comments directed to me “I and other responsible folks need a foil to counter, and you’ll do just fine for a while longer, if you so choose.” I can certainly be your foil — if you make irresponsible arguments. I can be a foil for those who would misrepresent or mislead. But just be aware that if you choose me as your foil, 1). Arguments will be specific, fact-based, and referenced; and 2). Anecdotal evidence won’t be a part of the argument.
- For those who want an inside edge in the energy sector.
- Written by veteran energy analysts and insiders with a track record of accurately predicting trends.
- 100% FREE!
- And Much More...
Energy Investment Forum
June 10-11, 2013 - San Francisco, CA
A Case of Renewables versus Natural Resources
June 10-11, 2013 - San Francisco, CA