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.
There is no reasoning with you. g’bye
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?
The issue was whether ethanol destroys engines.
It doesn’t.
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.
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.
——— 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
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
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.
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.
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.
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?
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.
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.
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.
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.
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.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.