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Just an FYI.
Some of you might be interested in a lengthy editorial published today in the Los Angeles Times:
Drunk on Ethanol
August 20, 2007
Drunk on ethanol - Los Angeles Times
Included is a very brief cite to ISU research. (And note, I do not support the Times' call for new CAFE standards).
Newsweek also published an article on ethanol this week:
A Sweeter Way to Go Green
August 19, 2007
Is Sugar Ethanol Better Than Corn-Based? - Newsweek Business - MSNBC.com
Doing a Google search on an unrelated topic, I happened across another ethanol article. It was published Saturday in the (Madison) Wisconsin State Journal.
Here is a blog entry that cites (and links) the article:
Big Ethanol | Gristmill: The environmental news blog | Grist
Here is a quote from the article itself:
David Swenson, an economist at Iowa State University who has written extensively on ethanol production in the United States, said the rapid expansion in Wisconsin and nationwide signals trouble for ethanol producers and investors.
Wisconsin produced about 210 million gallons of ethanol last year, and the state's yearly production capacity is expected to jump to more than 400 million gallons by the end of 2007. The increase will be driven mostly by Renew's new plant, United Ethanol in Milton, about 40 miles southeast of Madison, and increased production at Western Wisconsin Renewable Energy Cooperative in Boyceville, about 215 miles northwest of Madison.
"I would argue that the market, if it's not saturated, it's darn close," Swenson said. "Because prices are relatively low, the predictions that are coming out are saying they don't expect these plants to be making a profit in the next year. And if that's the case, it's because there's too much ethanol."
That overproduction could have dire consequences for the industry, Swenson argues.
"The existing plants across the board are going to have lower returns on investment," he said. "That's going to slow the rate of growth in these plants to somehow align in the growth of national demand, and that has yet to be determined. ... (There) is going to be more efficient, larger plants. Plants with much better scale of economies are going to be in much better position perhaps than some of these older plants."
Swenson believes the ethanol boom has been built on poor reasoning and without economic justification by politicians and industry backers.
"And they're using a mixture of national security and environmental benefits, which are questionable," he said.
What a shocker, the market overreacts to potential profit. It's a story that's been told a million times.
Looks like cheap E85 is on the way for those that drive FFV's.
. . . and government welfare and self-serving politicians.Quote:
Originally Posted by Incyte
I agree. What a shocker.
Some of these renewable energy subsidies don't appear to be so costly when one considers the price that we are paying to ensure an uninterrupted supply of oil.
The keywords being "some" and "don't appear to be so costly."Quote:
Originally Posted by alaskaguy
There is no reason to believe market prices would not prove far superior at allocating such resources. The Iowa State economist got it right. If gentlemen like Senator Grassley manage to precipitate another farm crisis in the next five to ten years, there is no reason for the general public to be at all sympathetic.
What is the true cost of oil? How do you measure the externalized costs of oil; environmental, national security, and lives lost to ensure an uninterrupted supply of oil?Quote:
Originally Posted by Clone83
I have to say that I am of two minds on this issue. But the alternative fuel critics need to have a quick and accurate comeback to AlaskaGuy's questions if they want to get traction on this issue.
Ethanol needs to be temporarily subsidized for a variety of reasons including (1) to hasten the infrastructure buildup necessary to compete w/ petro and (2) because petro refiners will and have been fighting ethanol tooth and nail.
The benefits of being free from foreign oil and the development of domestic alternative fuel industries (ethanol and otherwise) will vastly outweigh any temporary subsidy.
If I'm not mistaken the ethanol "subsidy" is really just a tax credit an is not a "subsidy" in a true sense.
One of the most heavily subsidized industries is the solar energy sector but I don't see anyone complaining aobut that.
Don't forget about wind generation, in which Iowa has become the second leading state only behind Texas in the entire country...Quote:
Originally Posted by Incyte
Don't forget hybrid vehicles which are also heavily subsidized.
Heck, the oil industry is subsidized. They get tax credits for certain things as well. Tax credits for new exploration and and new infrastructure. Its not like its only related to ethanol.
in theory, the idea of having a pseudo-renewable energy source grown right here at home is fantastic, but when you consider how much ethanol is mandated for production by 2012 vs. the total fuel consumption for transportation in the US annually, it's still a drop in the bucket. Here in Colorado, there is a chevy radio advertisement for FFV's and E85, which the commerical claims comes from "corn grown right here, which is good for Colorado." As someone who works in water resources, I beg to differ. The state is actually limiting irrigation in many places, yet expects to meet the demands for more ethanol production, for an ever growing population on the front range. The rapidly sprawling communities are buying up water rights on the plains where the corn is grown, which I must question how actually "good" this is for Colorado. I share this only because it is just one example of the conundrum's facing society when it comes to how we fuel our country and manage the precious resources we have.
Again, there is no reason to believe market prices would not allocate such resources in a far superior manner.
Read the linked articles and all of those I've linked in the past. Oil subsidies are miniscule compared to ethanol (see the recent Des Moines Regsiter article) And it isn't just the tax credit, but corn that is subsidized and the tariff on imported ethanol. (How does trying to keep out ethanol from Brazil promote US supply and E-85?)
We are only on the cusp of all the problems that will be associated with current policies. Corn-based ethanol would only supply something like 10-15 percent of all US gasoline, even if all the corn ground were used for ethanol. To get people to make celluistic ethanol will require further government intervention. (Where does nuclear fusion now stand?)
There is no reason to believe politically-motivated politicans will do a better job setting prices/subsidies/mandates, etc., or really come anywhere close. It is sad the continued reverence Iowans have for the economic ideology of Herbert Hoover. The idea that government officials are better able to allocate resources than a system of market prices is simply false.
And of course the tax credit is a subsidy in a true (economic) sense.
Gasoline taxes go to pay for infrastructure, and compared to other kinds of taxes are very politically and economically efficient in that they are in the nature of a user fee.
I believe the law was changed a few years ago so ethanol no longer 'robbed' the road fund, so that now the amount that otherwise would have been paid on ethanol sales now comes out of the general treasury.