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The US has an ethanol problem

12.01.2010  |  Billy Thinnes,  Hydrocarbon Processing, 

The US ethanol industry can owe its existence to the whims of American presidential politics and international intrigue. In 1973, the Arab oil embargo put a hurting on US gasoline supplies and outraged drivers, many of whom were the voting public. Ethanol was seen as a solution to balance out the country’s gasoline addiction. Since the main ethanol fuel is corn-based, that meant Iowa was ground zero for ethanol’s emergence, with its acres upon acres of corn fields.

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The US ethanol industry can owe its existence to the whims of American presidential politics and international intrigue.  In 1973, the Arab oil embargo put a hurting on US gasoline supplies and outraged drivers, many of whom were the voting public.  Ethanol was seen as a solution to balance out the country’s gasoline addiction.  Since the main ethanol fuel is corn-based, that meant Iowa was ground zero for ethanol’s emergence, with its acres upon acres of corn fields. 

A coincidence that helped ethanol emerge and get traction in Washington was the fact that every four years, the presidential primary circus comes to Iowa.  Iowa is one of the most important states in the primaries, with it being placed second after New Hampshire.  That means that a lot of politicians out grandstanding were asked their position on ethanol and to no surprise, most supported the nascent industry.  Throughout the late 1970s, 1980s and 1990s, an individual could not get elected without embracing the ethanol vote in Iowa in hopes of winning that primary. 

The US’s current sorry situation with ethanol is a direct result of retail politics, and good public policy is rarely achieved with pandering promises made to prospective voters.  So ethanol flourished with fat subsidies from Washington and then the green movement came along and the drumbeat for alternative fuels became louder and ethanol was positioned to be that fuel.  This is despite the facts that its environmental value is questionable at best, it takes food out of the world’s food supply and places it in the fuel pool and it is a much less efficient fuel than petroleum based gasoline. 

There is no question that the world should explore and develop alternative fuels to help with transportation and energy production needs into the future.  But ethanol, the first horse out of the gate, is destined to be a major failure.  Even environmental guru Al Gore has come to the conclusion that pushing bulging ethanol subsidies was bad public policy.  Two good stories that cover Mr. Gore’s change of heart can be read here and here.

Compounding the US’ ethanol problem is that there is no quick and easy escape.  There are mandates on the books pushing an increase of ethanol in the fuel pool.   Even though the Environmental Protection Agency recently slashed the 2011 ethanol mandate from 250 million gallons to 6 million, the principle of these mandates were poorly thought out and in execution have become asinine.

The US is having financial problems, both its citizens and the federal government.  As Congress struggles with massive debt, there are two things they can do to help turn things around.  The first is to repeal all ethanol and cellulosic fuel mandates and start over with a better understanding of what alternative fuels offer the best assistance.  The second would be to cut the ethanol subsidy entirely.  If the brave senators and representatives at the Capitol could do that, they would save the nation at least $7.7 billion dollars (the total amount of last year’s ethanol subsidies).  By my reckoning, that’s a good chunk of change and sound financial policy. --Billy Thinnes (billy.thinnes@gulfpub.com)   



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01.26.2011

This article hit home about unsound government subsidizing of questionable technology. Millions are starving in the world, and the right thing to do is to use corn and bio-crops for food, not fuel. Increasing the ethanol percentage from 10% to 15% in gasoline is troubling. Throw hydrogen fueled cars into the same unsound technology boat. It takes more energy to make the product than the product is worth. Instead, the federal government should be concentrating on capturing the billions of cubic feet of natural gas flared off in African oil fields every day, solar, hydroelectric (river and tidal), and nuclear energy technologies.


12.14.2010

The ethanol from corn program is one of the dumbest government programs to date. And, unfortunately, it looks like Congress has inserted the extension of this program in the latest tax bill. Making fuel from foodstuffs is insanity leading to higher food prices and, with the additional land used for its production, actually contributes more to "global warming" emissions. And even Al Gore is against it now.


12.08.2010

The Raw materials for ethanol are the food items in many countries, and complete withrawal of the Subsidy on this would allow the growers to deversify the markets and hence the undeveloped countries will get easy acess to market share of corn and cereals means the cost reduction. So thanks to the proposer specially the Friends of the Earth Society for the various efferts to convince the Senate in this regards.


12.07.2010

I agree that ethanol subsidies should be cut, but food prices and fuel prices both have to go up dramatically before that can politically happen. With the Fed dramatically monetizing our debt that inflation is coming soon, but until then the oil majors will get politically punched for picking on agricultural interests. The ethanol defenders can score political points too easily currently by sticking to this scheme.

On a more cynical tact maybe more oil companies should buy up ethanol producers and take those subsidies for themselves. Then it wouldn't matter which way the shoe dropped.


12.07.2010

fyi


12.07.2010

I think you might go a little bit further back in history if you want to see how my fight to produce methanol at $0.25 per gallon is difficult in the face of legislation which allows ethanol at $2.50 per gallon subsidies. Start here:

http://www.state.gov/s/l/c5818.htm
http://www.allbusiness.com/energy-utilities/oil-gas-industry-oil-processing/9287357-1.html

There is a lot more to this story if you are in the methanol business...like me who is fighting to bring it back inside America.

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