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Behind the Ethanol Scandal
The Street ^ | 09/17/13 | Dana Blankenhorn

Posted on 09/18/2013 5:57:40 AM PDT by thackney

Something about this decade's economic assumptions has never made sense to me.

The idea that you can anticipate a high and rising price for fuel, regardless of demand, never made sense to me.

What I was taught in economics class was that demand encouraged supply, and at some point the two would balance.

That's what seems to be happening. Shale oil, shale gas, and new strikes around the world are dramatically increasing gas supplies and proven reserves, to the point where one-third of natural gas being pumped in North Dakota's Bakken is being flared, burned away, $100 million in gas a month.

North Dakota's Department of Mineral Resources explained this happens only when the oil flow from a well is being tested. Or, if a producer determines it "is not economically feasible" to connect the gas in a well to a pipeline, they may "seek relief" from paying taxes and royalties on it.

If something is not "economically feasible," doesn't that mean the market has cleared at a price below the cost to bring on production? At its current price of $3.67/MCF, according to the latest report on Investing.com, it's still not economically feasible.

Prices below production costs have long been the problem with ethanol. The Renewable Fuel Standard was created to bridge this gap, enabling production. The idea that traders may be exploiting this program is separate from the question of supply and demand. You wanted supply and you got it. Genetic engineering is coming to the rescue of fuel prices.

A bumper corn harvest, driven by genetically engineered seeds, is driving ethanol prices below those for unblended gasoline. This pressure is going to increase next year.

Ethanol Producer writes that cellulosic alcohol projects, which don't require food crops as fuel, are starting to come on-stream.

Science & Enterprise writes that non-fuel crops like castor beans, genetically engineered to be used as fuel, are also heading to market.

Venture-funded start-ups like Midori Renewables are preparing new catalysts that get even more fuel sugar from existing feedstocks.

So the only recourse left to oil advocates is to attack the the Renewable Fuel Standard that created all this abundance. Take away the bridge, chop off ethanol supplies at the source, and the price pressure on refiners and oil producers may abate.

Issues that appear political are often just economic, and that's the case here. Ethanol, with government aid, is now putting downward pressure on gasoline prices, and the producers of that fuel are howling about unfair competition.

But take away the market pressure of ethanol, do away with the Renewable Fuel Standard, flare enough gas in enough fields, and the market clears at the higher prices fossil fuel producers have built into their own economic models.

The lesson should be clear. The economic assumptions of this decade are wrong. There is a limit to how high natural gas and gasoline prices can rise before the market bites back. Now that this has happened, producers are squealing like stuck pigs.

s the answer to give the old-line producers the political power they need to drive new supplies from the market so that they can keep raising costs and prices? Or is it to see that squealing as a victory and increase the pressure, forcing a permanent re-examination of the fuel industries' cost structures?

The answer to that one, I think, is obvious. The war against oil is being won, and now is the time to go in for the kill.


TOPICS: News/Current Events
KEYWORDS: energy; ethanol

1 posted on 09/18/2013 5:57:41 AM PDT by thackney
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To: thackney

I’d like to find the one person who is behind all this ethanol debacle and kick him in the ass.

Gaskets; seals; fuel lines; oxygen sensors; damage to filters, 2 cycle diaphragms, seats, needle valves - the whole nine yards. I’ve had to rework EVERY 2 and 4 cycle engine I have for yard and tool work because of it.

Fie! On them. May their lives have to depend on the treachery their political maneuvering has wrought.


2 posted on 09/18/2013 6:04:17 AM PDT by Gaffer
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To: Gaffer

So is that why my gas leaf blowers keep dying? I have bought two in last 5 years!


3 posted on 09/18/2013 6:07:51 AM PDT by penelopesire (TIME FOR OBAMA TO ANSWER FOR BENGHAZI UNDER OATH!!)
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To: penelopesire

Pretty much....one thing you can do is buy something called Sea Foam which is a Marine use additive... I have a case of that stuff now and use it in all my engines...you have to read directions and make sure you have the proper mix, but it has saved me some work.


4 posted on 09/18/2013 6:10:16 AM PDT by Gaffer
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To: penelopesire

Hubby uses the nonethanol gas in our lawn equipment.

http://pure-gas.org/


5 posted on 09/18/2013 6:11:42 AM PDT by Cowgirl of Justice
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To: Cowgirl of Justice

The Willys jeep gets real stuff whenever possible.


6 posted on 09/18/2013 6:14:55 AM PDT by wally_bert (There are no winners in a game of losers. I'm Tommy Joyce, welcome to the Oriental Lounge.)
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To: Cowgirl of Justice
Some of us live in areas that do not have that option.

EPA mandates reformulated gasoline in my area.


7 posted on 09/18/2013 6:15:03 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
Ethanol, with government aid, is now putting downward pressure on gasoline prices, and the producers of that fuel are howling about unfair competition.

With government aid (and the ethanol mandate), it is unfair competition.

And on top of that, it's running up food prices because food producers are converting to feed stocks for ethanol.

Stop distorting the market. The balance will swing back and forth, and there will be periodic inequities in pricing. But, the current meddling is making it worse.

8 posted on 09/18/2013 6:16:26 AM PDT by justlurking (tagline removed, as demanded by Admin Moderator)
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To: thackney

A side effect of coast to coast cornfields is a dying bee population.

So we are paying more for fruits, nuts etc. because growers can’t pollinate effectively.


9 posted on 09/18/2013 6:17:03 AM PDT by cicero2k
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To: thackney
Article is crap. Nobody assumes a high and rising fuel price, regardless of demand. Did everyone forget what happened in 2008?

Ethanol, without federal tax dollar subsidies, would be more expensive than gasoline, while only being about 70% as efficient. As it is now, it still doesn't pay to run E85 with its decreased fuel economy.

10 posted on 09/18/2013 6:27:27 AM PDT by Double Tap
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To: Gaffer
I’d like to find the one person who is behind all this ethanol debacle and kick him in the ass.

Try here...
George Bush has a Rendezvous with Density
11 posted on 09/18/2013 6:29:11 AM PDT by SpaceBar
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To: Cowgirl of Justice; Gaffer

Thanks both for the tips! I will try them and see if I can’t get more running hours out of my latest blower. They seem to die the minute the warranty runs out.


12 posted on 09/18/2013 6:32:05 AM PDT by penelopesire (TIME FOR OBAMA TO ANSWER FOR BENGHAZI UNDER OATH!!)
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To: Gaffer

E10 has been used in cars since the 70s and most manufacturers now warranty their engines for use with 10 percent ethanol blends (and have for decades).

Antique engines, two-strokes, and four-strokes not built to handle ethanol can experience problems with E10, and storing it so as to minimize water absorption is important.


13 posted on 09/18/2013 6:36:02 AM PDT by IronJack (=)
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To: Cowgirl of Justice
"non-ethanol"

After three small engines in for repair, I followed the repairman's advice and switched to no-ethanol premium gas. No problems since then. The repairman said that his business boomed after the introduction of ethanol into regular gasoline.

14 posted on 09/18/2013 6:38:52 AM PDT by driftless2
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To: IronJack

Another ethanol apologist....are you a farmer or ethanol VAR?

I’ve had 4 cars in the past 10 years develop Exhaust system O2 sensor problems that constantly lit-up under certain conditions indicating a problem with the catalytic convertor....In every case it was the wideband O2 sensor that was at fault, degraded by the ethanol in the gas.

These were all your so-called “E10” cars.

Not thanks, you can save that for someone who’ll believe it.


15 posted on 09/18/2013 6:43:55 AM PDT by Gaffer
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To: IronJack

Ethanol is DEATH to engines that are allowed to sit unused for days or weeks at a time. Most autos are started and run multiple times a day, and the tank of gas normally does not sit in the car for long (normally).
Mowers, sno-blowers, leaf blowers, BOAT engines can be expected to sit unused for days AND weeks at a time. Then the ethanol does it dirty work.
For my boat’s NEW engine, I was TOLD to disconnect the fuel line before I left for the week, re-start the engine and let it run until the internal fuel ran out and the engine died. Thus, no ethanol eating up the insides.
As the boat is taken out of the water for the winter, the remaining gas in the tank is transferred to my car and is quickly used.


16 posted on 09/18/2013 6:54:27 AM PDT by CaptainAmiigaf (NY TIMES: We print the news as it fits our views.)
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To: thackney

This article doesn’t make any sense.

BTW. Whatever happened to “Peak Oil”.


17 posted on 09/18/2013 6:55:28 AM PDT by saleman
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To: saleman

Oh, the irony.


18 posted on 09/18/2013 7:15:35 AM PDT by VRWC For Truth (Roberts has perverted the Constitution)
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To: Gaffer

There is a pure-gas.org site which lists where you can find ethanol-free gas. I live in TX and would have to drive about 100 miles each way to get some gas. Maybe you will be able to find some closer to you.

If you find some place, you might want to call to make sure they still have the good gas!


19 posted on 09/18/2013 7:19:33 AM PDT by winkadink (During times of universal deceit, telling the truth becomes a revolutionary act. George Orwell)
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To: Gaffer

Yep. And no doubt ethanol is responsble for your bunions, bad breath, and the Lindbergh kidnapping as well. The stuff is the Devil’s brew, I tell ya!


20 posted on 09/18/2013 7:26:54 AM PDT by IronJack (=)
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To: IronJack

There is no reasoning with you. g’bye


21 posted on 09/18/2013 8:00:49 AM PDT by Gaffer
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To: IronJack

Ethanol attracts moisture. Moisture, bad.

Then it goes though phase separation. Bad again.

No amount of upgraded fittings, hoses etc. will do anything about that. They do help with the corrosion caused by ethanol.

BTW. Corrosion, Bad.

Also, Ethanol is less energy dense than gas. Unless you just like getting worse fuel mileage, bad again.

If ethanol was so great then why is the government having to subsidize it? Shouldn’t the free market, such as it is, support it?


22 posted on 09/18/2013 9:38:56 AM PDT by saleman
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To: saleman

The issue was whether ethanol destroys engines.

It doesn’t.


23 posted on 09/18/2013 11:11:00 AM PDT by IronJack (=)
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To: IronJack

OK then. The ethanol doesn’t destroy engines. It destroys fuel lines and fittings in old engines. Also, if you don’t run the engine often, like mowers, boats etc. even new ones, the fuel will phase separate and the gunk that sinks to the bottom of your fuel tank will clog up fuel filters, injectors etc.

Why would you want to burn food anyway? Quit subsidizing ethanol and let it stand, or not, on it’s own “merits” or lack or merit.


24 posted on 09/18/2013 11:49:00 AM PDT by saleman
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To: saleman

All of those condensate concerns were addressed by my comment that the fuel must be kept clean and dry.

If you’re running an engine made in this century, you don’t have to worry about hoses, gaskets, seals, etc.. None of those are neoprene anymore.

I have not commented on whether anyone should burn ethanol or not. I’ve confined myself to rebutting the “ethanol eats engines” argument.


25 posted on 09/18/2013 12:59:21 PM PDT by IronJack (=)
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To: thackney

——— Now that this has happened——

It hasn’t happened. Absent government intervention and regulation, ethanol would not be viable.

There’s going to be lots of corn coming. I just traveled across Indiana, Illinis and Iowa.......... lots and lots of corn, good corn

I saw several wind farms. They were not functioning well. one had only 5% functioning turbines


26 posted on 09/18/2013 1:09:20 PM PDT by bert ((K.E. N.P. N.C. +12 ..... Travon... Felony assault and battery hate crime)
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To: IronJack

This century? Ethanol resistant fuel lines and gaskets etc are only recently being standardized. I’m saying ‘08 or later. Weedeaters, mowers, outboards the list goes on. It’s not condensation either. Ethanol actually draws moisture from air. But yea, condensation would be an issue too..

“I have not commented on whether anyone should burn ethanol or not”

You don’t have to. The government has pretty well mandated it.

Oh, BTW, according to my mechanic ethanol ate up the fuel pump diaphram in my ‘85 Toyota Pu. No big deal to you but the total along with replacing fuel lines etc was over 700 bucks.

Oh, my girlfriends ‘97 Johnson outboard with the VRO. Fuel pump gone. Carbs screwed with the crap I had to clean out of the gas tank. Phase separation. Never could get it to run right afterward. That’s ok too. She just bought a 90 hp optimax to the tune of about 9,000


27 posted on 09/18/2013 1:35:11 PM PDT by saleman
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To: bert

There is a limit to how high natural gas and gasoline prices can rise before the market bites back. Now that this has happened, producers are squealing like stuck pigs.

- - - - - -

The gasoline/ethanol statement was stupid enough claiming it market driven. But the high natural gas prices impacting the market leaves me believing the author was high when it was written.


28 posted on 09/18/2013 1:37:29 PM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Damn Ethanol right straight to hell!

Anyone who wants this in gasoline, rot in hell.

This is a sin. Forcing people to burn this as it makes no sense. While the corn lobby is smiling.

Straight to hell.


29 posted on 09/23/2013 12:09:20 PM PDT by hadaclueonce (dont worry about Mexico, put the fence around kalifornia.)
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To: Gaffer

I agree! Think you will find the big agri-biz companies like Archer-Daniels-Midland are the real culprits. Of course the delusional environmentalists started the debacle.

The EPA is ruining our way of life. Nothing works as well as it used to work, and they won’t be happy until all appliances, soaps, fuels, and everything else are crappy and expensive. Fie! on them indeed.


30 posted on 09/24/2013 2:59:02 PM PDT by Pining_4_TX (All those who were appointed to eternal life believed. Acts 13:48)
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To: Cowgirl of Justice

Family in NE told me that all their gas is now ethanol. They can no longer find non-ethanol gas at the stations where they usually buy gas. It happened overnight.

Wonder what the deal is?


31 posted on 09/25/2013 2:15:47 PM PDT by Pining_4_TX (All those who were appointed to eternal life believed. Acts 13:48)
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To: Pining_4_TX

Surprised it took so long.
Around here (Indiana) it’s been 10% ethanol most everywhere since the 90s.
You can still get 100LL at the airport.


32 posted on 09/25/2013 2:17:01 PM PDT by nascarnation (Democrats control the Presidency, Senate, and Media. It's an uphill climb....)
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To: nascarnation

You have my sympathies. Ethanol is horrible, ruins engines, and decreases gas mileage. Oh, and it probably pollutes more than real gas does. Brought to you by the tyrants at the EPA and enviro-whackos.

Come on down to Oklahoma. We can still buy real gas at many stations.


33 posted on 10/02/2013 3:42:58 PM PDT by Pining_4_TX (All those who were appointed to eternal life believed. Acts 13:48)
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To: Pining_4_TX

I’ve worked on cars and engines for 50 years, and really the only ethanol related stuff I’ve seen is fuel lines in weed whackers and chain saws.
Which may be just cheezy Chinese polymers.
I’ve got a barn full of outdoor power equipment, ATVs, and stuff that’s run on E10 for its whole life, a lot of this stuff is over 20 yrs old.

I’m not a fan of the ethanol program, but I’ve just not seen all the problems folks continually allude to. Fuel tanks in old boats, yes, but again that’s a pretty small population.


34 posted on 10/02/2013 3:50:39 PM PDT by nascarnation (Democrats control the Presidency, Senate, and Media. It's an uphill climb....)
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To: nascarnation

That’s good news... I guess, since we will probably all be forced to use this stuff sooner or later.

When local gas stations started selling E10, they didn’t post any notices that it was E10. We noticed that our cars didn’t seem to have the pep they did before. I thought there was something wrong with my Mazda 3. Once a law was passed requiring stations to reveal what kind of gas they were selling, we bought real gas only and noticed a big difference in the cars’ performance.


35 posted on 10/02/2013 4:03:44 PM PDT by Pining_4_TX (All those who were appointed to eternal life believed. Acts 13:48)
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To: Pining_4_TX

I’ve heard mileage reduction on E10, but not performance complaints. Often the performance tends to be a bit better.
E85 is often used for cheap racing fuel around here in Indiana where it is readily available.


36 posted on 10/02/2013 4:06:18 PM PDT by nascarnation (Democrats control the Presidency, Senate, and Media. It's an uphill climb....)
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