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Hybrid Vehicles Hybrid Vehicles - Archived Discussions Will ethanol E85 catch on in the US? Will we Live Green and Go Yellow? 
2104 messages, Last post on Oct 27, 2006 at 5:34 AM
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Replying to: snakeweasel (Jul 02, 2006 9:47 am) Political issues aside, the biofuels issue will be driven by a change in historical trends, so we can't look just at the history without noting how the situation has changed. Except during the seventies OPEC cartel crisis, oil has been a fairly cheap fuel for much of the 20th century, which did not make ethanol price competitive. Now that the fundamentals of demand are changing, the prices are increasing. [T]he capacity to produce that much ethanol does not exist and would have to be created which means the price will not go down soon. It is reasonable to expect that increased production capacity will lower prices, as the supply catches up with a level of demand that spiked by a large amount due to regulatory changes. You are correct that it doesn't exist at this moment, but capacity is being built and planned, so this is a matter of time. All infrastructure takes time and money to build, so we can't consider the potential or lack thereof until we consider the supply side of the equation. As the cost of the raw material increases so will the price of ethanol. As I pointed out above, that may or may not prove to be true. The final retail price of commodities is largely driven by processing and transport costs, not by the commodity prices themselves, and the increased cost of the crop may be more than offset by a reduction in potential transport costs created by the ability to reduce petroleum consumption. Biomass will not produce enough ethanol to make a significant dent That is what I would agree seems to be the most likely stumbling block. If we ultimately can only reduce oil consumption by a few percentage points, then it will have proven to be a rather costly waste. That's why I'd be inclined to increase the likelihood of success by plowing in significant resources to expedite the R&D effort. The current biomasses of choice (corn-based ethanol and soy-based biodiesel) are fairly inefficient, and alternatives need to be developed that make production rampups more scalable. We are early stages here for all of these things, and there is not much incentive at this stage for the free market to push it along on its own.
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Do any of us believe the assertions that diesel engined cars purchased in %'s similar to the EU's would NOT reduce our oil consumption by 1.4 million bbls per day? Do any of us believe this (1.4MM bbl) is an insignificant dent if these numbers are "real calculations" rather than fuzzy, "hopeful-guess" statements made by our own government? The tax incentives are in place NOW, to stimulate the continued and increased sales of fuel efficient vehicles (diesels, too, are included in the group with tax incentives.) My personal wishes for incentives are no longer up for discussion -- the incentives are now the law of the land. I say let's consider availing ourselves of them if we're in the market. Of course, what still galls me is that FFV vehicles actually seem to increase CAFE numbers when they do no such thing. Then it galls me even more to see virtually no "widespread" (or, perhaps, better said "mainstream") advertisements or news stories that explain the sharp decrease in MPG's one "enjoys" when using E85. It is not even an open secret -- for few seem to want to look into the consequences (or one consequence, economic) of using an FFV with gasoline vs E85. The thing missing in action -- and soon to be rectified -- is a variety of vehicles to buy that are FFV's (also missing are diesels -- but Audis, BMW's, Honda's Mercedes and VW's will be a good start.) Both of these MIA's should be addressed by the end of the decade -- but since everything has a lead time of 2 years at least, it would seem that it will be possible to actually buy a car you would enjoy driving (financially and performance wise) that uses a clean compression based power plant sooner than you can buy an FFV and keep it economically filled up with ethanol. Bluetech and version 5 diesels can be here over the next MY or two without too much trouble. An oil glut could make them unpopular -- but that would seem to be the case with FFV's too. Much as I want an oil glut and the price decrease that is suggested will accompany it, I'm not holding by breath.
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Replying to: markcincinnati (Jul 02, 2006 10:42 am) I'm not sure about this, actually. Diesel made from oil is being made from oil (yes, I'm stating the obvious), so the argument seems to be that using diesel simply allows us to get more out of a given barrel of oil because we are using that barrel to provide us with both gasoline and diesel, rather than just gasoline. But let's remember that it's not as if that diesel is being thrown away, it's being used by somebody, somewhere on the planet. Perhaps Americans may not be the one using that specific quantity of diesel, but that doesn't mean that the diesel never enters the supply chain. I may be misunderstanding it, but this argument strikes me as more of a national diversification argument, not one that reduces our global dependence on oil. It's an argument which may hold true when we look at just one group of users (in this case, Americans), but not when we view the global picture. If all things were held equal except that we started shifting toward diesel, rather than gasoline, I would expect that this would simply free up more gasoline for someone else to burn, while reducing their available diesel supplies. That might specifically help the US, but it wouldn't necessarily solve the big-picture political problem of our dependency on these dictatorships to fuel the entire world, and what that does to create resource constraints and competition among the rest of us. |
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Replying to: socala4 (Jul 02, 2006 10:08 am) That is unless the increased production drives up the cost of the raw material by bidding up that product. Increasing production can reduce the price, or it can be the same or it could increase costs. It all depends on things other that making supply meet demand. I just don't see increasing production of ethanol getting high enough without forcing a bidding war on the raw materials to make it to make a real difference.
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Something that has not been hashed out here is an obvious problem of converting to non-sugar sources for ethanol. It is an entirely different process involved making ethanol from a biomass such as wheat straw, wood chips or switchgrass. Iogen has the only working plant to do just that. They have not gotten funding to build a 350 Million plant in Idaho. Will we ever build those plants? From all I have read current corn stills are not usable for other types of ethanol production. Will anyone want to spend millions and probably billions to ramp up this use of other materials to make ethanol. It is not in the interest of companies like ADM. They want to make all the ethanol they can from corn. Would you invest big bucks in a venture that could be worthless if oil prices drop as they will. It is not too far off. Nobody would believe when I said gas would get below $2.50 per gallon by fall. It has hit $2.12 in KY already. OPEC is not going to let some upstart companies squeeze their money supply.
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Replying to: snakeweasel (Jul 02, 2006 12:45 pm) That may be, it's a fair guess. (Which is one of my points -- at this juncture, all of us are speculating, and none of us really know what will happen.) Personally, I don't see the likelihood of a commodity pricing problem -- individual ag producers have virtually no power to set prices -- but I do question the ability for the fuel itself to become so abundant that it will do much to impact the price of oil.
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Replying to: socala4 (Jul 02, 2006 1:57 pm) I don't think the actual production of ethanol will have any real affect on our purchasing of oil. It is still very possible that it takes more oil to make ethanol than you get back. So it is a win for OPEC. They just have a history of dropping prices with the least little drop in oil movement. As some of the countries having internal problems come up to normal production levels. They will probably be over producing the demand, and the price will come down.
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Replying to: gagrice (Jul 02, 2006 3:59 pm) They are NOT being subsidized (or at least they were not last year at this time) to do this in the same way ethanol is being subsidized ($.51 per gallon.) Were they to build the infrastructure to actually do this on a large scale and produce gasoline and simultaneously reduce our dependency on Middle Eastern oil, there would probably be little more than a "thanks for playing" mention on the evening news (after the initial cheap oil hit the market and we got back to the lower prices we were enjoying a few short years ago.) Were there to be tax credits, rebates, subsidies, subventing and subterfuge for all I care, Shell seems to think that we could use ONLY American crude for 100 years and not import another drop. Conversely, Rand says, "well, the more practical way to use this oil is to increase our use of our own natural resources to 25% of our demand, which would essentially give us the ability to use our oil for about another 400 years" [sic] (but at THAT level.) The theory continues and perhaps even foreshadows a possible oil glut (theory since it has only been put into small use, rather than big, full - scale pedal to the metal production that Shell (and others) probably would do were they given half the economic incentive to do that ADM (et al) presumably has been given.) The data suggests that once we got fully into cooking our shale to create our own crude, the overall cost of a bbl of oil would drop from today's $72+ per bbl by perhaps $15 to $30+ less. The cooked oil, to underscore, from June, 2005, was able to be made viable at a rate about $20/bbl (Rand Report link in previous blogs.) Factor in start up costs and other infrastructure build up costs and throw in a couple of 500 million dollar retirement packages and perhaps the cost of a bbl of our own goo would be $40. Keep in mind the KNOWN reserves we have identified from this one source are triple the reserves of Saudi Arabia. It will take years (more than 10) to do much of anything that will slow down our need for dino fuel. Why not "encourage" Shell and others to see what a little help from their friends might do toward answering the question "what's cookin' underground in Colorado?" This, in response to my Congresswoman who claims she'd rather send our money to Iowa than Iran. I don't want to send our money either place. Well, in some free market way, it almost would seem that folks will involuntarily send their money to Iowa (so they have to be "mandated" to do so), yet they [we] have proven time and again to be quite eager to send our money to the middle east, Mexico, Canada, South America and so on. My Congresswoman's email to me detailed all the ramp up (and $ encouragement) we are providing companies to build CORN refineries. From what I have read, if we build corn into ethanol refineries they are not "automatically" able to use other biomass for the same purpose. Further, if what is being written about the impact upon our ability to export corn (as in sharply reduce or eliminate it altogether) -- and how much of our farmland we would have to devote to the production of food crops that will be instead turned into ethanol (71%) if we choose this route -- is true, won't there be global consequences? Is it really "OK" with the rest of the world to no longer get any (or at least a lot less) corn from us? The economic and practical evidence continues to mount, seemingly against, this course of action. We have the resources and we have the technology to extract a lot of "time" from the oil we have right here, right now. It seems like much of what we discuss, argue, debate and contradict here is mainly about buying time without bankrupting ourselves. Shell must feel like a screaming voice in the wilderness from what I can gather. Meanwhile, King Corn, not Big oil (this time) dips into the public pocket for help. Don't cry for me Argentina -- whatever.
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Replying to: markcincinnati (Jul 02, 2006 5:28 pm) Sounds like your Congress woman needs to do some homework. Last I heard we are not getting any of that crap oil that Iran is selling. In fact that is a part of all the saber rattling. They have very high sulfur crude that is not much in demand around the world. I think they have some of the same ideas about taking over Saudi oil as Saddam had in 1990. Shale oil is an interesting prospect for sure. I think the natives of the area are nervous. I would look for the same kind of resistance to shale oil as we are seeing off the coast of Florida. CA & ANWR. As has been shown we can have all the reserves in the World and still not get to it. Lots of obstacles to producing oil. Our Congress talk a good story about energy independence. Too bad their actions do not accomplish anything to achieve that goal.
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Replying to: gagrice (Jul 02, 2006 7:55 pm) Send your tax-donations to King Corn, P.O. 3.14, Black Hole, USA, Planet Earth. Sheeesh.  Have a piece of pi on me.
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