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RE: Great, even more ethanol BS
By dluther on 1/14/2008 7:04:00 PM , Rating: 4
Pretty simply:

1 gallon of gasoline: $3.75
1 gallon of ethanol: $1.50

Combined price: $5.25 = [(3.75+1.50)/2]

Price per gallon of E50 blend: 2.63 (5.25/2)

Percent price reduction: 30% (over gasoline)
Percent MPG reduction: 15% (over gasoline)

plus the cost of subsidies

How much in subsidies does gasoline incur?

RE: Great, even more ethanol BS
By masher2 (blog) on 1/14/2008 7:59:19 PM , Rating: 2
> "How much in subsidies does gasoline incur? "

None. In fact the production and sale of gasoline incurs a fairly hefty profit for the state.

Ethanol is just the reverse....every gallon you buy costs you (and me) a sizeable hidden chunk of tax dollars.

RE: Great, even more ethanol BS
By dluther on 1/15/2008 2:36:08 PM , Rating: 2
Again, you with that 'all-or-nothing' attitude...


Not even close.

When I speak of government subsidies, I'm including such non-visible considerations such as:

- Reduced corporate taxes on the petroleum industry
- Hugely reduced sales taxes on gasoline and petroleum
- Government funding of programs that primarily benefit the petroleum industry
- Government financed wars and military actions that only benefit the petroleum industry

Right now, ethanol production needs to be subsidized because that's the only way it will grow to be a self-sustaining industry. And really, name the industry of any importance that hasn't received federal subsidies. I can name a few that have:

- Petroleum
- Public transportation (including rail and air)
- Banking
- Agriculture
- Highway

... the list of distinguished club members continues.

The ethanol production industry needs to be embraced by the petroleum industry instead of shunned like it currently is, because like it or not, the world is slowly but surely moving away from petroleum-based locomotion and energy production.

You won't find me arguing that right now, at this moment, gasoline works better in our cars than ethanol does. Tomorrow is another story.

And the production method mentioned in this article eliminates my objection to ethanol by eliminating the use of our food crops to make it.

RE: Great, even more ethanol BS
By TomZ on 1/14/2008 11:01:09 PM , Rating: 1
According to this web site, the subsidies add $2.21/gallon for ethanol:

Combined price: ($3.75+($1.50+$2.21)) = $3.73

Then considering the MPG hit, it's a net loss.

The moral of the story: It's real easy to underestimate the magnitude of the handouts from the federal government.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 1:07:23 AM , Rating: 2
Here is a recent article published in the Des Moines Register:

They don't seem to editorialize a lot in the article. Cargill and Monsanto are companies that know a little about agribusiness.

I have a degree in math, you and your linked website must be using a new math. Since there are >2.6 gal of ethanol produced per bu of corn I wouldn't mind splitting up the extra "$2.21/gal," over $6 a bu. you seem to be suggesting ethanol production adds to the value of a bushel (56#'s) of corn. Oh wait, even with corn prices at all time highs it's not worth much more that $4/bu at the farm gate, and 100% Ethanol is worth less than $2.21 a gal on the open market. I sure wish I saw all the subsidies from the government you and some other posters seem to think farmers and ethanol produces get because of ethanol. There is a blender tax break for ethanol that the ethanol producer and farmer does not see. It is like a windfall profit for the blender. The zfacts site sure puts an interesting spin on the "facts according to zfacts."

It was recently brought to my attention that there was a popular TV show that used ethanol as "the evil" plot device. I guess that explains why many of the facts I read about ethanol seem to be made up facts, or facts taken out of context to make a point.

I agree with the complaint that the governments shortsighted cheap food policy has hurt the economy in the long run. Policy that resulted in cheap grains with surpluses measured in days when the annual harvest would start encouraged many new uses for grains, especially corn. Ethanol is just one of those uses. So now when it seems we might run out of Corn, Wheat and Soybeans before the next harvest, endusers are getting a little excited about locking in their supply needs. But don't despair, it won't be long until corn is so high priced ethanol producers won't be able to afford to use corn to produce ethanol..... Maybe it won't be long until a bottle of soda is more expensive than a bottle of water.

Think I'll go out to the kitchen right now and make a big tasty bowl of field corn.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 8:32:56 AM , Rating: 2
For someone with "a degree in math", you've wholly misinterpreted a simple 8th grade word problem. To compute the true cost of ethanol, the amount of corn input isn't required, and you've also confused the hidden costs with the market rate.

The equation is simple:

Total Cost to Consumer = Market Rate + Hidden Cost (this is true for any product subsidized by the government)

To compute in costs per unit, we need Market Rate per unit (price in gallons, which we know) and Hidden cost in gallons. To compute the latter, we simply do this:

Hidden cost/gallon = Total Subsidies Paid / Total Gallons produced.

Now, I don't know if the DATA on that website is correct or not, but they've certainly set up the problem correctly.

RE: Great, even more ethanol BS
By glennerd7 on 1/15/2008 8:47:18 AM , Rating: 2
Masher, I thought you might be interested in this....

This is old news in terms of converting organic material to fuel. A company back in 2003 designed a plant that would take any carbon based material and turn it into oil. Discover magazine ran an article on it back then.

It is really an incredible process. Discover then ran a follow up article in 2006 to see where they were at with it.

After reading the second article it was very disheartening to see all the red tape that the designers have fought. The politicians and special interest groups have made it very difficult to produce anything oil related by taxing the snot out of it. Just from a recycling point of view this is great. The United States could begin digging up our land fills and running the refuse through one of these to lower our foreign oil dependence.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 12:07:46 PM , Rating: 2
That's interesting. I heard about the plant when the state Governor had it shut down. Glad to hear its back in operation, and hopefully they'll get to the breakeven point soon.

RE: Great, even more ethanol BS
By Fritzr on 1/15/2008 9:44:38 PM , Rating: 2
More info on this comapy and their version of hydrous pyrolysis is in a Wiki article

The page also has links to more general information on the process.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 10:46:56 AM , Rating: 2
Why don't you enlighten me on the "Hidden Costs." I'd like to plug them into my bank account.

The current farm program is complex. Would you point out the hidden subsidies for ethanol. I think if you look at the farm bill you'll find money for food stamps, school lunch, foreign aid and many other programs. Some minor declining direct payments to farmers were decoupled from production, I see the decoupled payments as a mistake. Other direct payments kick in to keep farmers in business when market prices are so low no farmer could afford to raise corn, beans, wheat etc.; not currently a factor. There are non recourse loans on commodities that the farmer has to repay with interest, often cited as a subsidy. I find it interesting that China has a grain reserve, the USA does not; If you play with fire you get burnt.

There is a blenders tax credit for ethanol, but I wouldn't call that a "Hidden Cost;" lost revenue, sure. The blenders tax credit should encourage infrastructure investment. See article above for GM complaint on blender foot dragging.

I don't see ethanol, especially from corn, as the "answer." However it is not "the evil" either. The fact is ethanol from corn can be done now, but I would think there are better cheaper alternatives being worked on. In a free market the market decides the winners.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 12:06:38 PM , Rating: 2
> "Why don't you enlighten me on the "Hidden Costs"

Glad to. A hidden cost is one you don't pay directly. The hidden costs for ethanol are twofold. First is the government subsidy package, which totalled about $3.4B in 2006. That's money you and I pay in taxes, even if we don't see the cost at the pump. The second hidden cost is the lost mileage for ethanol, which forces us to buy more gallons to travel the same distance.


Yes. So what's your point? That one government program deserves another?

> "In a free market the market decides the winners"

That's just the point. Subsidizing ethanol distorts the free market. Alternatives which might truly be cheaper appear not to be, due to the subsidy. Ultimately, that only slows introduction, and forces us to waste resources on less efficient alternatives.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 1:10:03 PM , Rating: 2
$3.4 B is nothing. Administrative costs eat a lot of that. I also think you have lumped some of the program costs of the programs I've mentioned in that figure. A figure that you seem to dislike paying taxes for, but you don't mind paying less for food you buy. It's much like taking money from one pocket and putting it in another. Unless of course you don't think that that tax expense is reflected in the lower price you pay at the grocery store. The farm program could have been viewed as a social program, a cheap food program, it subsidizes production and is reflected in lower prices to the consumer. Ethanol wasn't even on the screen when the last farm bill was passed, so it's a bit of a stretch to ascribe the cost to ethanol. I think they are working on a new one right now.

I do agree the blender tax credit and lack of the tax credit on imported ethanol is troublesome. But I'm not sure the argument that alternative sources of energy production are being suppressed because of the "subsidy" is a bit of a reach. I repeat I do not see ethanol as "the answer." I personally view it as an alternative energy source that is opening the door for other alternative energy sources. But to blame current market conditions entirely on ethanol is to deflect the blame from poor planning in the past. Some people seem to be using Ethanol as a smoke screen and ethanol has become a convenient "evil" plot device.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 2:11:00 PM , Rating: 2
> "$3.4 B is nothing."

Whoa there! Glad you're not my congressman. And you have to remember that's just for the very small amount of ethanol already produced. The lion's share of that money is the $2.5B spent on the 51 cent/gal blender credit. Which means if we buy ten times the ethanol, the government subisidy rises to nearly $30B.

> "Administrative costs eat a lot of that"

No they don't...and even if they did, it would change nothing. It's still a hidden cost you and I have to pay regardless.

> "But to blame current market conditions entirely on ethanol"

I don't see anyone doing that. The fact that other problems exist, however, doesn't change the rational analysis of ethanol.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 2:48:22 PM , Rating: 2
I don't see a $2.5B tax not collected as a subsidy. I also see I wasn't writing about the same "subsidy" as you were, sorry.

Actually a lot of bad press is not based on a rational analysis. If corn had not been so dirt cheap ethanol production from corn would never have gained traction. Even now it seems to be economically viable.

RE: Great, even more ethanol BS
By Fritzr on 1/15/2008 9:42:08 PM , Rating: 2
Okay the subsidy cost for ethanol is $2.21 per gal. Now find the equivalent figure for the gasoline. Starting point would be the cost of military ventures to secure oil supply, cost of support for maintaining friendly governments in countries that supply our oil, subsidies (if any) to the various companies transporting, producing & distributing the oil & oil derived products. Add in any other costs that you can find that would not exist without the petroleum economy. When you have done this, then your adding the subsidy cost will be reasonable. You made a mistake that is very basic. You took an equation and added an extra factor to one side without adding the matching factor to the other side. Note the military cost is a lot less for subsidy cost purposes than the published budget, since expenditures for things like US bases, Pacific theatre deployments, NATO commitments etc. are not part of the subsidy cost. There are many "foreign aid" expenditures that are also disguised bribes for oil producers.

The relative costs will matter little a century from now since at that time the petroleum economy will be over. There will likely still be oil production, both extraction and synthetic, but the supply will be unlikely to be enough to support today's lifestyle. Now is the time to plan for the economy that will replace the petroleum economy. If we wait until the oil supply drops below what is required then the time to do the R&D, design & deployment of commercial solutions will no longer be available. Ethanol is not the solution. It is instead one of many solutions that collectively will solve the problem.

