Greg Staff on ethanol costs and inefficiency

Greg Staff (who for purposes of full disclosure works at an oil and gas pipeline company) sent me this note which deserves to be reprinted in its entirety for my readers. The link in the "P.S." is quite interesting as well. Hey Ross - Don't know if you saw and or commented on this editorial in the October 6 Denver Post. I've been meaning to write you on it but haven't had the time. http://www.denverpost.com/search/ci_7097174 In this article, the Denver Post enthuses about a $1.28/gallon subsidy for ethanol ($.51 for all ethanol, plus $0.10. for ethanol produced by any producer who produces less than 60 MM gallons, plus $.67 for cellulosic ethanol.) The $.67 goes away in any year that 1 billion gallons is produced. The Post is therefore advocating an annual subsidy (tax) of just under $1,280,000,000 - because the billionth gallon would never be produced. One billion gallons equals ~23,800,000 barrels (bbl). One gallon of ethanol equals about 75% of a gallon of gasoline energy-wise, so the 23,800,000 bbl of ethanol equals 17,850,000 bbl of gasoline. One gallon of crude oil makes about .7 gallons of gasoline, so the 17,850,000 bbl of gasoline keeps us from importing about 25,500,000 bbl of crude oil. This is equal to about 30 hours of the United States' crude oil consumption. True - we will not be sending $90 x 25,500,000 = $2.3 billion dollars overseas, but the $2.3 billion is costing us $1.28 billion for 30 hours of fuel. This is doing nothing for the deficit, nothing for the environment, and virtually nothing for energy independence. While the editorial is not "new," it's still "current", in that the media are in love with ethanol. There are studies that show that the net energy value (NEV) of ethanol is positive and those that show it is negative. (http://www.mathproinc.com/pdf/2.1.6_Ethanol_NEV_Comparison.pdf). Even if the "best" conversion is used, wherein ~.25 gallons of ethanol's energy is used to make it, ethanol still pales in comparison with crude oil, in which only 5% of the oil's energy value is used to produce a gallon of crude oil. (Disclaimer - you can find all kinds of claims regarding these percentages.) Regards, Greg Staff PS: Here is a great discussion (April 2006) of some of the misleading information that is out there about the energy efficiency of ethanol - and how the government has helped with the misinformation. http://i-r-squared.blogspot.com/2006/04/energy-balance-for-ethanol-better-than.html
  • Allen
    Comment from: Allen
    11/04/07 @ 12:58:19 pm

    The flippant comment I like to make about ethanol is that we'll replace our dependence on North American oil... I mean, foreign oil with dependence on foreign water. But as we can see above, we won't replace our dependence on foreign oil with anything; we'll just be dependent on foreign water to boot.

  • Um, I'm trying to understand the math here. If the author is saying just under 1,000,000,000 gallons a year of cellulosic ethanol will be produced, and the subsidy will be $1.28 per gallon, doesn't that come to a total subsidy bill of just under $1,280,000,000 (i.e., $1.28 billion a year), not $128,000,000,000 (i.e., $128 billion)? Also, in your cost comparison, you are comparing the foreign exchange saved ($2.3 billion) with the subsidy (which should be $1.28 billion). But consumers will still have to pay around $2.3 billion for the ethanol as well, since the price of ethanol tracks the price of gasoline. One could regard some of that $2.3 billion + $1.28 billion as spending on ourselves, but to get that production will mean diverting resources (some of which, like nitrogenous fertilizer, will also have to be imported) that would otherwise be available as inputs for more-productive uses.

  • TheSUBWAY.com
    Comment from: TheSUBWAY.com
    04/18/08 @ 12:51:40 pm

    We found an interesting article about the problems with Ethanol on ConsumerReports.org: http://blogs.consumerreports.org/cars/2008/03/ethanol-e85.html "But there are some problems with increasing ethanol blends. Ethanol contains less energy than gasoline, so increasing the amount of ethanol in gasoline will likely result in lower fuel economy. Increasing standard fuel blends from zero to 10 percent ethanol, as is happening today, has little or no impact on fuel economy. In tests, the differences occur within the margin of error, about 0.5 percent. Further increasing ethanol levels to 20 percent reduces fuel economy between 1 and 3 percent, according to testing by the DOE and General Motors. Evaluations are underway to determine if E20 will burn effectively in today's engines without impacting reliability and longevity, and also assessing potential impact on fuel economy."