Posts tagged “corn ethanol”
Sam Avro, Energy Trends Insider editor, recently received an inquiry from a reader about the popularity of ethanol free gasoline in the Midwest. Coincidentally, I recently visited Indianapolis and had noticed a large billboard advertising ethanol free gasoline.
I thought I’d share what I found. Much to my surprise, there are about 8,000 gas stations offering ethanol free gasoline and only about 1,200 offering E85 (85 percent ethanol). There are about ten million flex fuel cars on the road designed to burn E85. Assuming a cost of about $100 per car to make it flex fuel, and assuming that about 10% of flex fuel cars actually use E85, this would mean that consumers have paid about nine billion dollars for nothing.
This spring, the EPA will likely reduce the amount of corn ethanol that must be blended into our fuel supply by about 1.3 billion gallons (for a total of about 13 billion gallons) simply because our transportation system can’t absorb any more of it without exceeding a 10% blend, risking damage to cars. This is called the “10% blend wall.” Unlike beef, or chicken, gasoline, or smart phones, ethanol consumption isn’t consumer driven. In general, because consumers could care less about corn ethanol, fuel blenders also could care less about it except as an economically viable anti-knock additive in more modest quantities. They have to be forced to blend more of it by the government. Unless or until some unforeseen consumer demand arises, mandated blending will be necessary to keep the corn ethanol industry solvent.
And just as importantly, where is future growth going to come from? We can’t use all of our corn crop. This isn’t new technology. We’ve been making moonshine by distilling ethanol from fermented seeds and fruit for thousands of years. CONTINUE»
A recent article by George Monbiot explains one of the potential ramifications of diverting grains into fuel. Thanks to extreme weather around the globe:
”…this is also a year of food deficit, in which we will consume (31 million tons) more grain than farmers produced. If 2013′s harvest does not establish a new world record, the poor are in serious trouble.”
His main point is that thanks to a growing demand for food driven by an increasing population and improving standards of living, along with the conversion of grains into fuel, the world has to break harvest records every year to keep up. Thanks to grain reserves, humanity can weather years that don’t break records, but failing to break records for two or three years in a row means hunger for hundreds of millions because the price of food will spike as speculators capitalize on the fact that low supply relative to demand equates to higher prices. If weather extremes become more and more common, the odds of running out of reserves becomes more and more likely. (See more: Midwestern Drought, Ethanol, & Renewable Fuel Standard)
The following article was written by Andrew Holland for Energy Trends Insider, a free subscriber-only newsletter published by Consumer Energy Report that identifies financial trends in the energy sector. Get you free subscription today.
The ethanol industry has seen its position in Washington severely weakened over the last year. The modern ethanol industry is a creation of Congress; the Renewable Fuels Standard (RFS), the ethanol tax credit, and a tariff on imported ethanol were all responsible for creating the ethanol industry we see today. We should note that this industry has seen some remarkable successes: it has replaced almost 10% of the country’s gasoline fuel supply, with an impact on prices that is marginal at best.
It is important to note that more advanced biofuels still receive tax support: cellulosic ethanol receives $1.01 per gallon in tax credits, but that is set to expire at the end of this year. A Senate bill would extend that credit for a year, as well as retroactively re-instate the $1 per gallon biodiesel tax credit that expired at the end of last year. The fate of these credits is up in the air, as Congress will have to consider a broad range of tax policy questions before the ‘fiscal cliff’ coming this year.
In the paper, we conclude that evaluated at the average ethanol production level of 01/1995-03/2008, the wholesale gasoline prices is $0.14/gallon lower. The change of retail gasoline prices varies across refinery markets from $0.29-$0.40/gallon.
Our brand new weekly newsletter — Energy Trends Insider — debuted this week. We had stories on the implications of the U.S. corn crop, the state of Cleantech investing, Patriot Coal’s bankruptcy, and the potential of pyrolysis oil.
Interested readers can find more information on the newsletter and subscribe at Energy Trends Insider. To give a flavor for the kind of content, I want to share the story on the situation with the U.S. corn crop and how that can potentially impact upon the domestic ethanol sector. This has been a story that we have been on top of for two weeks; had ETI debuted a week earlier this would have been our lead story which was well before the story received much mainstream attention. In fact, I have not seen any detailed analysis yet on the potential implications of this story — but ethanol futures have moved sharply higher in the past two weeks.
Potential Impacts of Poor Corn Crop on Ethanol Market
By: Robert Rapier
I have long felt that one of the biggest threats to the U.S. ethanol industry is a major drought/crop failure in the heart of corn country. This year we may be experiencing such an event. Recent reports indicate that what had been expected to be a record crop of corn has been downgraded such that only 40% of the corn crop is being classified as in good or excellent condition. This is down 48% versus last week and 69% versus a year ago.
Corn prices are naturally surging in response; current corn prices are 21% higher than they were a year ago. Because so much of the corn crop is devoted to meeting ethanol mandates, there is a potential supply conflict being set up between food producers and ethanol producers.
The Domestic Fuels Protection Act Racket Just classic. According to Consumer Reports, the corn ethanol lobby has introduced legislation that would: “ … leave consumers on the hook for any product damage caused by E15 …Rather than trying to solve the problem of preventing damage from E15 and easing its transition into the marketplace, this bill would simply sweep aside all liability for everyone but the consumer,” That picture of a decomposed gasket is an example of what happens over time when an improperly engineered component meets a corrosive compound at elevated pressures and temperatures. In this case, the compound was coffee in an espresso machine. Click here to see a gasket destroyed by ethanol in a gasoline engine. It’s… Continue»
A regular commenter on the R-Squared blog made some reasonable, articulate, and civil comments under my previous post. Rather than address them in the comment field I’ve opted to give my response (which got rather lengthy) in a new post.
If the EPA doesn’t want to up the blend wall, there’s plenty of demand for ethanol around the world. It’s an excellent oxygenate, if nothing else. And there’s no shortage of smog filled cities.
Nobody is arguing to remove the freedom to blend corn ethanol into fuel as an additive if desired by refiners. A 2004 CARB study showed that ethanol actually increased smog forming emissions relative to non-oxygenated gas by 45%. Two years later the EPA dropped the requirement to oxygenate gas. Modern cars can meet very strict emissions standards in a variety of ways.
The official stated goal of ethanol mandates is to reduce dependency on foreign oil, not smog. Although, spending billions to create a corn ethanol refinery infrastructure to replace a modest portion of our oil with a fuel that itself derives 70% of its energy content from fossil fuels seems like a rather (pick a word) way to accomplish that goal. A corn crop can be seen as just one of many steps needed in a process to convert diesel, natural gas, and coal into ethanol.
A new study published in the Environmental Science and Technology journal by the American Chemical Society, has this to say about “the Energy Independence and Security Act of 2007 (EISA) aims to increase annual U.S. biofuel (secondary bioenergy) production by more than 3-fold” :
While EISA energy targets are theoretically achievable, we show that meeting these targets utilizing current technology would require either an 80% displacement of current crop harvest or the conversion of 60% of rangeland productivity. Accordingly, realistically constrained estimates of bioenergy potential are critical for effective incorporation of bioenergy into the national energy portfolio.
I can hardly wait to see the critique of this study that will be cobbled together by the RFA and Growth Energy–the dynamic duo of corn ethanol lobbying organizations.
Note how the brightly colored original warning label with easy to read contrasting text first proposed by the EPA on the left has, under pressure from ethanol lobbyists, evolved into a dull, greasy looking sticker replete with small print that should quickly fade even further into the background as it accumulates gas pump grime. This sticker is the backbone of the EPA’s “misfueling mitigation plan.”
Picture a harried low-income parent in a hurry to pick up a kid at daycare before it closes, who has to first gas up their older model car. Assuming this parent even notices the bland warning sticker, their thought process might go something like this; “Here’s the lowest priced gas. Up to 15% ethanol? Sounds like a good deal to me. Not sure what year this car was made …wonder what the fine print says.”