T Nation

2008 Elections


#1

In the upcoming elections, the issue that will define who I vote for is energy. Whichever candidate of whichever party advocates the most intelligent energy reform has my vote. I don't care if I have to vote for a Democrat, this issue trumps terrorism, social security, and even taxes. Take a look at the following article from Forbes.

The Case For Ethanol
Brian Jennings

"The United States has developed an unquenchable thirst for fossil fuels, and it does not appear our consumption will decline any time soon, despite recent supply disruptions that led to more pain at the pump for motorists.

Our addiction to fossil fuels grows more dangerous as we increasingly rely upon foreign sources to meet our demand for both crude oil and gasoline.

There is no panacea, no silver bullet solution that will fix our system overnight. But there is one important step already being taken: a growing supply of homegrown, clean-burning, high-performance, renewable fuel that can operate in every single automobile on the road today--ethanol.

While no new oil refineries have been built in the U.S. in nearly three decades, new ethanol-production facilities are coming online at a rate of almost two per month. Today, 92 ethanol plants are operating across the country with a total production capacity of 4 billion gallons of fuel annually. Two dozen more plants are now under construction to provide an additional billion gallons of ethanol.

The economic impact of the homegrown ethanol industry is tremendous, both from a trade standpoint and that of America?s Main Streets.

An average-sized ethanol plant costs approximately $65 million to build and will employ nearly 40 people. These positions are good-paying, high-skill jobs--chemists, engineers, managers, marketers. The plant?s $56 million in annual operating costs circulates throughout the community many times, benefiting everyone from the farmers who provide the corn to make the fuel ethanol to the local businesses that supply goods and services for the production facility. An ethanol plant will increase tax revenue for local and state governments by at least $1.2 million annually.

Why is this scenario more favorable than relying upon foreign supplies of fossil fuels? Workers in Nigeria have jobs because we import their oil. Venezuelan gasoline suppliers do not use the goods and services of U.S. businesses. No OPEC money benefits roads, schools or parks in America. Regardless of whether you view these nations as "good" or "bad," the bottom line is that they are reaping the economic benefits of our energy dependence.

From the perspective of trade, our increasing imports of oil and gas are a costly habit. America?s trade deficit in crude oil has risen from $27 billion in 1987 to $100 billion in 2002. This deficit is the primary culprit in our total trade deficit. Given that each billion dollars in trade deficit costs the U.S. 19,100 jobs, this is a counterintuitive drain on the U.S. economy that must be plugged.

Growing America?s ethanol industry is part of the solution to this problem. For every barrel of ethanol that is produced, 1.2 barrels of petroleum are displaced at the refinery. Ethanol won?t replace 100% of the fuel we use, but it is a critically important component in America?s energy-supply portfolio. As a nation, we should do everything possible to ensure that this renewable-fuel source grows to its greatest potential."

Ethanol is a way to shrink our trade deficit, improve our environment, and put money in the hands of Americant farmers that is now being sent to nations that are breeding grounds for terrorism. So come 2008, disregard the hype, ignore the scare tactics. This must be the defining issue. If Brazil and Thailand can gain energy independance, well then damnit, so can we.


#2

It's an interesting enough article, however a few issues were overlooked (of course they are issues that Forbes might have difficulty addressing given the ideological slant of the publication).

The first issue is that of subsidies. The US corn industry is very heavily subsidized (even by the standards of an already heavily subsidized American agricultural sector). Assuming that ethanol were to take the role proposed by the author, a large industry (and lobby) would result. This, combined with our levels of fuel consumption, would bring a number of issues to the fore. How would foreign sources of cheaper corn and conceivably of cheaper ethanol(if it can be safely transported internationally) be dealt with? Further subsidization? Tariffs? Quotas? Open competition?
It seems that without keeping tariffs in place (which I do not see to be likely in such a situation given public furror past and present over fuel prices as well as our levels of consumption) that the US would become dependent upon other countries for our fuel - again.

One of my questions is how would ethanol be taxed? Due to the fact that the corn industry is already subsidized, would ethanol taxes simply be written so as to fund these subsidies, or would we essentially be double taxed in paying fuel taxes in addition to having some of our other taxes siphoned off to fund these and other subsidies?

The problem of fuel consumption in the US is not addressed at all - unless you consider the author's calling ethanol a 'part' of the solution addressing the issue. If it were possible to run every vehicle in the US on Ethanol, we would not be able to produce enough domestically to meet this demand. Disregarding the fact that land varries with respect to how well one is able to cultivate corn on that land, there is simply too little land in this country to grow enough corn to produce the ethanol required to meet such demand. Levels of fuel consumption would first have to decrease through a combination of increased efficiency and any number of other options (I imagine some efficiency could be gained simply by moving to engines that are engineered to use ethanol rather than gasoline).

As a side note - the author does make one false assertion in stating that no benefit comes to Americans from those monies paid OPEC nations. If the stimulatory economic effect from the billions of dollars that OPEC nations have invested in US companies is taken into account, there is surely an accrual of benefit to the American public by way of the taxes paid by those corporate entities, as well as those paid by other American corporations (this assumes, of course, some transference of the effect of investment to other corporations and sectors that compose the broader economy).


#3

BigPaul, I think you kind of answered a few of your own questions. In regard to the subsidy/taxation question, I think the answer would be to not tax ethanol and cut back on subsidies. The revenue lost from taxes would be defrayed by the subsidy cuts. The lack of taxes at the pump would make ethanol even more competitive with gasoline. Farmers wouldn't need subsidization with such a demanding market opening up to them.

With regard to fuel consumption in the US, we don't really have to grow enough corn to run all of our cars on 100% ethanol. Even if we grew enough corn to merely make every gas station offer a fuel that is a 50% gasoline and 50% ethanol, we would still be cutting back dramatically on our dependance on foreign oil.

Last, corn is not really the most efficient vegetable to make ethanol out of. Sugarcane is, but right now, prices for raw sugar are are at such a premium that it is not in the best interest of US Sugarcane growers to sell it to ethanol producing comapnies. If we keep moving forward with our Free Trade agenda, however, sugar prices would fall in competition with foreign growers, opening up a whole new avenue for green fuel.

I know you're probably gonna piss and moan now that we're still dependant on foreign sources if we're buying sugarcane from other countries, but I'd rather be building trade relations with our Central American and South American neighbors than pumping billions of dollars into the Middle East.

Here's where I got the Sugar info.


#4

Ethanol is not an alternative fuel.

Just because Brazil uses slave (practically) to grow and harvest sugar cane to produce Ethanol does not make that solution economically feasible for the rest of the world.

If ADM could grow sugar cane where they currently grow corn then we might be able to find out if this idea would ever be truly feasible. But ADM can not grow sugar cane in the heartland and this will never be feasible on a large enough scale to support any real portion of the worlds energy needs.

Paying peasants pennies an hour to swing machetes is not an option in the US. ADM runs their equipment on diesel. There is a reason for that.

Last but not least...Ethanol is not an alternative fuel.


#5

I think Bio Diesel is another good option. If they could get Ethanol and Bio Diesel in production to fill every car that can operate with it may solve our energy Crisis


#6

Nope. I think this could be a good situation insofar as it could provide additional political leverage given the number of countries where the cultivation of inputs for ethanol is possible. Selectively increasing tariffs or temporarily limiting or banning imports of such products from select countries beats the hell out of posturing, war and the occasional covert opertaion.


#7

Lets see...
Ethanol can be used in place of gasoline.
Ethanol is not gasoline.
...Sounds like an alternative fuel to me.

It's not like there are dozens more countries around the world with very low wages where we could buy sugar cane from.
Additionally, if there were truely a shift to ethanol as an alternative fuel I do not doubt that technology would be quick to catch up. Take the mechanized tomatoe picking machine - it was not invented untill the bracero program was discontinued, and therewith a source of cheaper labor.

A huge sugar industry exists in the US, part of that industry is sugarbeets whick are processed to make sugar. I do not recall off hand what different areas of the country grow sugarbeets, but I don't doubt that a portion of the heartland has a sufficient climate to do so.

That reason would be...?


#8

Marmadog

Ethanol is an alternative fuel.

If Free Trade continues its expansion, we will not have to use slave labor to grow sugarcane.
A)Prices will drop due to the competition from foreign markets.

B)We could always buy from those markets that do use slave labor if we really wanted to get a deal. (Before everyone gets all huffy with me, I would like to remind you that the sneakers you work out in were most likely stitched together by an 11 year old asian girl getting paid a nickel a day. Unless you're smart enough to support New Balance, but that's another post.)

While it is true that ADM cannot grow sugarcane in the heartland, they do not have to. If we switched over to ethanol/flex fuel, I'm sure a variety of crops would be used. The Corn that the heartland produces would still be a highly viable contribution. Also, we have to realize that ethanol is still in its infancy as a fuel source. If the United States got behind this issue in a big way, our scientists could probably modify crops to provide higher ethanol yields. If we can grow a human ear on a mouse's ass, I'm pretty sure some MIT or Caltech nerd can geneticallt modify corn to have optimal starch content for ethanol production, or even create new strains of sugarcane that are hardy enough to grow in cooler climates.

Bigpaul also raised the matter of sugarbeets, which I know for a fact can be grown as far north as Maine. I'm pretty sure if you can grow it in Maine, you can grow it in the Heartland.

Paying peasants pennies an hour is not necessary to switch to an ethanol based fuel market. Don't really know where you got this from. ADM runs their equipment on Diesel. Hmmmm. Perhaps because, at the present time, we haven't invested the resources into exploring alternative fuels. Perhaps its because biodiesel has not yet attained the economy of scale necessary to make it competitive with diesel, or it is not as readily available as diesel, because a large chunk of the population wants their cars to run like Henry Ford meant them too in the heady days of the early 1900's. Progress? Who wants that?!

Last but not least....Ethanol is an alternative fuel.


#9

Brazil developed their ethanol indusrty in a bid to wean themselves from imported oil. They also live a lifestyle that requires much, much less energy per capita than the US. These efforts yielded their current success- they don't rely on imported oil for energy.

One thing that escapes most folks who cite Brazil's success is the environmental degradation occurring in the Amazon River Basin due to all that sugar cane farming and burning to ferment and distill all that ethanol.

Another thing relates to what I mentioned above: They don't drive SUVs 100+ miles a day from the suburbs. Comparatively speaking, those few who DO own cars drive VERY small ones. Skateboards with lawnmower engines.

A major obstacle for us is the nature of how we do agriculture- current agricultural "inputs" employed by the US are not, per se, "renewable". Nitrates used in commercial fertilizers are produced using atmospheric nitrogen and methane (from natural gas) via the Haber-Bosch process. Various chemical treatments for weeds and bugs are also derived from petroleum. And there ain't enough manure and bat guano to make up the difference!

Absent these inputs, the agricultural productivity required to produce amount of ethanol we'd need to keep our suburban ball rolling would likely fall off a cliff.

I hate to burst people's bubbles, but the simple fact of the matter is that renewable fuels aren't going replace even a substantial fraction of our current petroleum use. We will absolutely have to learn how to live with less energy. A lot less.

Petroleum is simply solar energy stored in plant and animal life reformed over millions of years- and we will have used nearly every drop of it over a period of about than 200 years. That represents a lot of energy released over a short period of time. Replacing it will not be a trivial task.


#10

Man, it's like banging your head up against a wall. The beauty of ethanol is that it be mixed with gasoline. This means we can lessen our oil imports. Not eliminate, lessen. Doing so would be good for our economy for a variety of reasons. The problem with America is our all or nothing attitude. Maybe we won't attain the same degree of energy efficiency as Brazil, but as I keep trying to stress, even if we could cut our oil dependance in half, even if we could reduce it by 25%, by 10%, it would be a great thing.

Most cars in sold in the US today are built to be compatible with a fuel mixture of 90% gasoline and 10% ethanol. I think it would be a great start if this 90/10 mixture became universally available. The US uses about 140 billion gallons of gasoline a year, and by the end of next year we'll be producing only 5 Billion gallons of ethanol. Clearly, we haven't even begun to scratch the surface. You people are acting like I'm trying to rip the corn out of your children's mouths or something. We have a LONG way to go ethanol production will start putting a dent in our food production.

Knowing this country's love of excess as well as I do, I would wager that most Americans would rather increase ethanol before they start cutting back on their energy use.


#11

Check out the other thread.

http://www.T-Nation.com/readTopic.do?id=1032533&pageNo=2#1033771

I am skeptical of ethanol too. Some quick searches of the internet show many others are skeptical as well.

The latest most friendly estimates indicate that 1 Btu of energy must be used to create 1.24 Btu of ethanol from corn.

When you consider how much land space etc. will be required for corn production in order to have any significant impact on the oil situation this doesn't look good to me.


#12

With out doing an exhausting study of the subject, I see the date 2001. You could use solar energy to evaporate the alcohol. AZ is building an ethanol plant south of the valley. I do not know if it will be solar or not.


#13

To my understanding hydrogen is actually a negative energy balance fuel in that it takes more energy produce than is contained in the fuel itself. For some reason that has not stopped the government from subsidizing the bjesus out of its development.


#14

Ethanol is nothing but the farm lobby trying to get more money. If it was viable - private industry would be doing it right now.

No one has brought up nuclear energy. That is where we need to be looking. If we can power an entire fleet of submarines with nuclear power, why can't light homes and fuel vehicles with it?

Short of that - why don't we release the left-wing imposed restricions on domestic drilling? Open up ANWAR, and any place else that has the potential for oil production?

Off shore is a black gold mine, but the enviro-whacks have us blocked. If it wasn't so lucrative - why would Mexico be building one right now?

This shortage is proof positive of left-wing feel-good policy screwing us all.

I have no sympathy for Big Oil either. Profiteering is wrong. I think I may actually be reversing a previous stance I had wrt to Big Oil, but I don't care.