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Sunday, November 25, 2012

The Unintended Consequences of Government Mandated Biofuel Consumption

Cross-posted from Consumer Energy Report

 Food Deficit

A recent article by George Monbiot explains one of the potential ramifications of diverting grains into fuel. Thanks to extreme weather around the globe:
 ”…this is also a year of food deficit, in which we will consume (31 million tons) more grain than farmers produced. If 2013′s harvest does not establish a new world record, the poor are in serious trouble.”
His main point is that thanks to a growing demand for food driven by an increasing population and improving standards of living, along with the conversion of grains into fuel, the world has to break harvest records every year to keep up. Thanks to grain reserves, humanity can weather years that don’t break records, but failing to break records for two or three years in a row means hunger for hundreds of millions because the price of food will spike as speculators capitalize on the fact that low supply relative to demand equates to higher prices. If weather extremes become more and more common, the odds of running out of reserves becomes more and more likely. (See more: Midwestern Drought, Ethanol, & Renewable Fuel Standard)

It is the prediction of things like mass starvation that help prevent things like mass starvation. This self-nullifying tendency is why a lot of predictions fail to materialize. Ignoring the prediction of massive traffic jams due to road construction could mean that you are the only one on the road because everyone else heeded the prediction, or it could mean that you are stuck in gridlock because you were not alone in ignoring it.

European Union Response

Finally acknowledging the fact that converting food into fuel exacerbates this potential, the European Union has begun the process of scaling back how much biofuel can be made from food. 

From Nature:
French President Francois Hollande last week called an emergency meeting of G20 agriculture ministers. They are due to meet in Rome on Tuesday (16 October) to consider a coordinated response to the sharp spike in food prices that has followed the worst US drought in decades. France is to put global biofuels production at the heart of the discussion.
Last week, a government spokesman told reporters after a French cabinet meeting that Paris “will push for a pause in the development of biofuels competing with food”.
Understandably, European farmers are not happy with this development because the conversion of food into fuel translates into higher grain prices, i.e., biofuel mandates create a chronic shortage.

United States Response

Here in the U.S., corn farmers who got enough rain are breaking out the champagne. Producers of corn ethanol and soy biodiesel are reducing production because with the price of feedstock so high, the more they produce, the more money they stand to lose. Not to worry. Consumption of their product is mandatory. They just have to hold on until blenders run out of credits (by blending more than legally necessary in some years, blenders earn credits that allow them to blend less at other times) and will be forced to pay what ethanol producers need to make a profit again. In the end consumers will pay for everything.

Today’s low natural gas prices (most energy in a gallon of corn ethanol is derived from natural gas as is the methanol used to make biodiesel) are not enough to offset the very high grain prices. (See more: Methanol versus Ethanol: Technical Merits and Political Favoritism)

Impact On Other Businesses

Because these record high grain prices are also hurting other industries that use corn and soy, the governors of eight states containing a lot of those industries are being lobbied to pressure the EPA to waive the mandate to blend ethanol, which in turn, concerns those who gamble for a living betting on the price of food commodities. A waiver of the mandate would release a lot of grain onto the market which would cause them to lose their shirts.

This of course, has all been said before. There are two differences this time around. One is the growing body of evidence of more frequent severe weather and its impact on agriculture. The other is the move by the European Union to reduce the use of food stock for biofuels.

Nissan Leaf Range Issues

Cross-posted from Consumer Energy Report

A group of Nissan Leaf owners recently conducted a test in Arizona to see if high ambient summer temperatures in Arizona have  permanently reduced the capacity of their batteries to hold a charge.

 Does the Leaf go as far as advertised?

From Tony Williams, organizer of the group that tested the twelve Leafs:
“If you need the car to go that mythical 100 miles that Nissan advertises, first know that it never really went 100 miles for the typical US consumer.”
That conclusion, of course, depends entirely on your definition of myth and  “typical US consumer” (a term not used by Nissan on its U.S. website). Click here and then click on one of the colored boxes to see how far a Leaf will go for a variety of driving conditions.

The first question any Leaf owner gets is “How far will it go?” My standard answer is, “Around 100 miles if you’re tooling around town, and roughly 70-75 miles on the highway.” As that chart attests, the car is quite capable of going further than 100 miles especially if you minimize interstate highway speeds. The electric-only range estimates of the Chevy Volt plug-in hybrid are just as dependent on speed but because it automatically starts sucking gas when the charge is used up, the fact that it may not go as far as hoped on a charge is largely a moot point.

Jump on the nearest bicycle and try to make it go 40 miles an hour. The only thing stopping you (gearing permitting) is wind resistance, which increases exponentially with velocity. You would have no problem riding a bicycle 40 miles an hour on the moon where there is no wind resistance.
Interestingly enough, most conventional cars using internal combustion engines actually get better mileage on the freeway. It’s complicated, but in a nutshell, that’s because conventional cars are so inefficient in city driving scenarios (braking and engine acceleration losses) that those inefficiencies actually exceed wind resistance losses below a given speed.
 Analysis of the test results

I was putting together an analysis of their test data when I found a blog post by Mark Larson that beat me to the punch.

Click here to read his report AZ Leaf Capacity Kerfuffle: Much Ado About Nothing?

The above graph, published by Larson, summarizes the test results.

The table above, also created by Larson, summarizes the data in a different format.

This test would never pass muster in the world of science, where a hypothesis is proposed and tested using methods to minimize researcher bias. These guys were out to prove that the capacity of their batteries had been reduced by exposure to extreme heat beyond what the published specifications would predict. When any researcher sets out to prove he’s right, he will invariably manage to do so, at least until his research is peer reviewed or attempts are made to duplicate results. That is why the scientific method was invented.

There is a simple, relatively crude gauge, in the Leaf dashboard to warn owners when their battery won’t hold as much charge as it did when new. Nissan has suggested that some of these gauges may be out of calibration (possibly because of the extreme heat) and may be providing overly conservative estimates of battery life. Lo and behold, one of the cars in the test with a gauge indication of just 10 bars out of 12 went further than any other car.

The fact that more than one of the twelve cars tested by the Leaf owners had gauges that were not accurately indicating battery capacity suggests that a significant number of  Leafs may have gauges that exaggerate battery capacity loss.
In short, this paper failed its peer review. The test actually proved that:
  1.  Out-of-calibration gauges really are contributing to misperceptions.
  2.  All but two of the twelve cars thought to be damaged were actually performing within or just a few percentage points outside of the range band stated in a published Nissan technical bulletin (76 to 84 mile range when consuming energy at a rate of 4 miles/kWh at 70 degrees F ambient air temperature).
Again, from Williams, organizer of the group that tested the twelve Leafs:
“It was sheer stupidity to tell this group of owners that the batteries are ok…”
That conclusion, of course, depends entirely on your definition of OK, and stupidity. Larson’s analysis of the test results (which I concur with) didn’t jive with some Leaf owner’s misperceptions:
 “What I cannot see anywhere in these data is evidence that a Leaf is only achieving half its original range after one year, nor that another Leaf has lost 30% of its capacity in the same amount of time, nor that yet another is losing its capacity at 3 times the rate as anybody else, nor that a relatively new Leaf has lost 9% of its range in only one month.”
 Temperature impact on battery life and performance

Rightly or wrongly, Nissan never claimed that the batteries would perform per that specification no matter what and has warned from day one (in the owner’s manual and in a waiver signed at purchase) that exposing batteries to high ambient temperatures will likely permanently reduce their energy storage capacity faster than what would be expected for batteries not exposed to such temperatures.

Following is an excerpt from that disclaimer from the Williams analysis:

Nissan was anticipating that some cars would be driven in places like, say, Death Valley, or maybe Phoenix during record heat waves. It is likely that these car batteries were affected by heat.
 Click on the pink box in this link to get a feel for how much low temperatures can impact range.
The Leaf owner’s manual makes it clear that the rate of battery degradation will depend on how it is treated over its life.  From my owner’s manual:
The capacity of the Li-ion battery in your vehicle to hold a charge will, like all such batteries, decrease with time and usage. As the battery ages and capacity decreases, this will result in a decrease from the vehicle’s initial mileage range. This is normal, expected,and not indicative of any defect in your Li-ion battery. NISSAN estimates that battery capacity will be approximately 80% of original capacity after five years, although this is only an estimate, and this percentage may vary (and could be significantly lower) depending on individual vehicle and Li-ion battery usage.
Use of quick charge should be minimized in order to help prolong Li-ion battery life.

NISSAN recommends charging the Li-ion battery using the long life mode to help maximize the Li-ion battery useful life.

To prevent damage to the Li-ion battery do not expose a vehicle to ambient temperatures above 120 degrees F for over 24 hours.
If the outside temperature is −13 degrees F or less, the Li-ion battery may freeze and it cannot be charged or provide power to run the vehicle. Move the vehicle to a warm location.
 Passive battery cooling an engineering faux pas?

 Some pundits are questioning the wisdom of Nissan’s decision not to use an active battery cooling system.

Heat is an anticipated potential issue for a few dozen cars in very hot places. Certainly for 99% of the Leafs in the world, the passive system is perfectly adequate. Because there is no such thing as a free lunch, is it a good idea to saddle all cars with the weight, complexity, cost, and energy consumption penalties that come with an active cooling system (pumps, fans, tubes, hoses, radiators, coolant) just for a handful of cars (one or two percent of all Leafs sold in the world) in very hot places even when the owners signed a waiver?

It might be cheaper to buy back a few cars than stick all Leaf owners with that engineering trade off. The plug-in hybrid Volt recalled 8,000 vehicles for safety reasons. Recalls, retrofits and buybacks are common even with conventional cars.

 Nissan’s response

 At the time of my writing this article, Nissan had bought back two Leafs in the Arizona. They also took seven Leafs from owners complaining of reduced range back to their test facility for evaluation.
Nissan’s test results:
  • Nissan identified seven LEAF owners in the Phoenix area who had reported concerns with their vehicles. Nissan brought the cars to its Arizona test facility, removed the batteries for evaluation, measured capacity, and conducted voltage testing on individual battery cells.
  • The Nissan LEAFs inspected in Arizona are operating to specification and their battery capacity loss over time is consistent with their usage and operating environment. No battery defects were found.
  • A small number of Nissan LEAF owners in Arizona are experiencing a greater than average battery capacity loss due to their unique usage cycle, which includes operating mileages that are higher than average in a high-temperature environment over a short period of time.
  • In Arizona, we have approximately 450 LEAFs on the road. Based on actual vehicle data, we project the average vehicle in that market to have battery capacity of 76 percent after five years—or a few percentage points lower than the global estimate. Some vehicles in Arizona will be above this average, and some below. Factors that may account for this differential include extreme heat, high speed, high annual mileage and charging method and frequency of the Nissan LEAFs in the Phoenix market.
They may eventually have to offer consumers a hot climate cooling package for a few thousand extra, similar to the quick charge package I paid for (but have never used …that is now standard). Seattle residents would not need a cooling package.
Expectations and a Class Action Lawsuit

Williams, author of the independent Leaf owner study tells us:
I planned, and completed a promotional trip from Mexico to Canada, “BC2BC”, in June 2012 with my Nissan LEAF. However, my first car could not complete the trip as planned, due to its reduced range capability, so I leased my current LEAF, built in April 2012 and took delivery at the end of May. Now, with 7000 miles (11000 km), and only 3 months of actual use, this car could not complete the trip that it did in June. During the BC2BC trip, several times I arrived with 4%-5% capacity remaining, which means today, just a few months later, I would come up 4%-5% short. This car has never been exposed to the heat of Phoenix, although it was 104F (40C) in San Jose, California the one day that I was there.
He’s convinced that his new Leaf is also deficient even though it has never been exposed to “the heat of Phoenix.” What are the odds?

I strongly suspect that there’s nothing wrong with his car. I see the problem largely as a matter of expectations. Anyone who keeps careful track of car mileage (like my wife in her Prius) knows that it varies all over the place, usually for reasons unknown. Electric cars are no different in that respect. But, as common sense might suggest, because an electric car only has an 80 mile gas tank instead of a 300 mile one, and because you can’t quickly refill it, you should avoid the edges of its range envelope.

It just isn’t wise to ever purposely drive this generation of electric car to within 5% of its potential range estimate. In the sixteen months I’ve owned my Leaf I have done that exactly twice, and not on purpose (got lost). There are dozens of variables that you can’t control that impact range and with today’s slow rates of charge, you can’t count on filling up in a timely manner if you fall short.

Rule of thumb; if you can’t meet 95% of your annual driving needs within 75% of your car’s estimated range, don’t buy an electric car.

The entire concept of 120 and 240 volt public chargers (levels I and II respectively) seems like one of those “The Emperor has no clothes on” situations. It takes several hours to put a significant charge in a battery with these.  Why would anyone risk finding someone else already using that charger you were counting on (or finding that the charger is on the blink as is often the case), in order to get back home again?

I recently pulled in next to a Volt at a public charger at my local grocery store. I never bother to plug in because it isn’t worth a few cents of free electricity. I certainly don’t need that charge to get home. I asked the Volt owner why he bothered to plug in, which resulted in one of those awkward blank stares. The idea that maybe there was no good reason to plug in had not crossed his mind.

If I were offered more battery capacity for a fee, I’d decline. Because 99 percent of my driving missions are less than 50 miles, I already have more battery capacity than I need. I swap cars with a family member if I need to drive anywhere near the limit of my Leaf’s range. I have my car’s timer set to charge after 1:00 AM to 80% capacity to maximize battery life. I will on occasion charge it all the way up when I have a lot of driving to do the next day. If my daily commute took me to the edge of the Leaf’s range, I wouldn’t have bought it. Leaf owners who bought a Leaf needing to drive it to the edge of its range, quite simply, should have known better.

There are many people who bought Leafs who probably shouldn’t have and some of them are regretting it, as this recently filed class action lawsuit attests.

Having said all that, it will be interesting to see how Nissan now deals with what they already knew was coming–the fact that some owners would have faster than normal battery life degradation. Nissan may have underestimated how many people would experience early degradation because of where and how they are used, and just as importantly, how an American consumer would react to it.

Unplug — Discover The Forest

Cross-posted from Consumer Energy Report

 I’ve seen several billboards around town with this image. I also saw it in an ad here on Consumer Energy Report. They’re part of a joint venture between the Ad Council and the USDA Forest Service. Here is a list of organizations supporting it. Every advertising executive knows that half of their money is being wasted. They just don’t know which half it is. In this case, I hope none of it is being wasted.
Forest fires have been getting bigger and more numerous. I listened to an NPR piece about how this is being called “the new normal.” The main driver appears to be decades of fire suppression that has allowed combustible brush and small trees to accumulate instead of allowing natural fires to periodically clear them out. The resulting infernos burn the mature trees that are normally impervious to smaller fires. The reporter stood on a ridge and looked out over a burned forest that extended as far as he could see. It isn’t expected to recover for thousands of years (i.e. never).

My own forest property is a bomb waiting for ignition. I am typically very critical of energy schemes that plan to burn biota in our cars and power plants. After watching the forest adjacent to my forest property be logged for paper pulp, I might support efforts to replace natural fires with the harvesting of brush and small trees to co-fire with coal, reducing the amount of coal consumed.

Coincidentally, I took the picture of that painted turtle to the right while camping this summer (full-size image here).
Forest fires have been getting bigger and more numerous. I listened to an NPR piece about how this is being called “the new normal.” The main driver appears to be decades of fire suppression that has allowed combustible brush and small trees to accumulate instead of allowing natural fires to periodically clear them out. The resulting infernos burn the mature trees that are normally impervious to smaller fires. The reporter stood on a ridge and looked out over a burned forest that extended as far as he could see. It isn’t expected to recover for thousands of years (i.e. never).

My own forest property is a bomb waiting for ignition. I am typically very critical of energy schemes that plan to burn biota in our cars and power plants. After watching the forest adjacent to my forest property be logged for paper pulp, I might support efforts to replace natural fires with the harvesting of brush and small trees to co-fire with coal, reducing the amount of coal consumed.

Obviously, mechanically harvesting that material is difficult and expensive, or paper pulp mills would do it instead of harvesting live trees. I’d also support laws that forced paper pulp to be made from thinning operations, although it would increase the cost of paper, but maybe that wouldn’t be such a bad thing either. I use very little paper anymore, and have practically lost the ability to write with a pen!

Ironically, Seattle has recently outlawed the use of plastic grocery bags. If you forget to bring cloth ones you can pay extra for paper bags, made out of trees. We always recycled our plastic grocery bags as trash can liners. Our supply has run out. I just purchased a box of plastic trash can liners.

George Monbiot summed up my thoughts on this topic nicely. Read Plastic bag obsession is carrier for environmental ignorance.

Is the U.S. Military Presence in the Middle East a Subsidy for Big Oil?

 Cross-posted from Consumer Energy Report


Should the cost of maintaining a military presence in the Middle East be viewed as a subsidy to oil companies? This idea has been  repeated often enough to become unchallenged conventional wisdom codified by the “NO WAR FOR OIL” bumper sticker.

It has been argued that the Gulf and Iraq wars were not necessary to keep the global price of oil stable and neither is our continued military presence in the Middle East. There is no way to rerun the experiment to see what the world would look like had we not had the Gulf and Iraq wars. My guess is that the Gulf war was probably a smart move, the Iraq war,  maybe not so smart.

As for the continued military presence, it is money well spent if it is helping to maintain peace in the Middle East. As Steven Pinker effectively argues, one key to reduced levels of violence is an effective police force:
As a young teenager in proudly peaceable Canada during the romantic 1960′s, I was a true believer in Bakunin’s anarchism. I laughed off my parents’ argument that if the government ever laid down its arms all hell would break loose. Our competing predictions were put to the test at 8:00 am on October [7], 1969, when the Montreal police went on strike. By 11:20 A.M. the first bank was robbed. By noon most downtown stores had closed because of looting. Within a few more hours, taxi drivers burned down the garage of a limousine service that had competed with them for airport customers, a rooftop sniper killed a provincial police officer, rioters broke into several hotels and restaurants, and a doctor slew a burglar in his suburban home. By the end of the day, six banks had been robbed, a hundred shops had been looted, twelve fires had been set, forty carloads of storefront glass had been broken, and three million dollars in property damage had been inflicted, before city authorities had to call in the army and, of course, the Mounties to restore order.
In my neck of the woods the “No War for Oil”  bumper stickers are typically found on cars burning biodiesel because most biodiesel stations here give them away to promote their product. So, are these people really more concerned about world peace than the rest of us, or are  they just victims of marketing?  I cede the point that if it were not for oil (and Israel), our elected officials might do nothing to prevent a Middle East version of Darfur, but would that be a good thing?

Those who drive cars that use less liquid fuel have the right idea (TDI diesels, hybrids, and electric cars). Those who drive vehicles that simply replace fossil oil with food oil are IMHO, victims of marketing. Last week I was driving my Leaf in rush hour traffic and on two occasions I put my windows up so I wouldn’t have to breath the soot spewing out of two different vehicles burning biodiesel. Their smell will usually alert you to their presence.
The owners of these bumper stickers seem to think that if we stop importing oil:
  • Our economy will no longer be susceptible to oil price fluctuations.
  • We will no longer strive to maintain peace in the Middle East.
  • Our military budget will shrink.
But is any of that likely to happen if we stopped importing oil? And not to defend big oil, but why has the oil industry been singled out as the sole beneficiary of peace in the Middle East? The whole goal of maintaining that peace is to keep the “global” price of oil (the same price that we have to pay for it) lower, which is not the goal of any oil company I’m aware of.

Domestically Produced Fuel

There are two main reasons commonly cited  for why we would like to have all liquid fuel come from domestic sources:
  1. To keep the supply cost stable
  2. To reduce the trade imbalance
When we talk about supply we really mean supply relative to demand (shortages cause prices to rise and vice versa). In other words, what we are actually seeking is to stabilize cost. But because oil is fungible, domestic production won’t lower the price of oil significantly because those who own it are free to charge as much as the global market will bear:
The secret to making a profit in refining these days is for refiners to source crude oil domestically and then sell the refined products to US consumers at prices based on imported oil.
So scratch item one. Domestically produced oil does not necessarily significantly lower the price of gasoline for consumers.
Item two (reduction of the trade imbalance) is a moot point because we can’t reduce oil imports quite simply because we can’t produce significantly more domestic oil in perpetuity or displace much with agrofuels. The only way to accomplish a long-term reduction in imports is to reduce liquid fuel consumption, period, which has nothing to do with the military budget. And to do that you would have to convince your average American to start driving cars that get mileage similar to a Prius, or diesel Golf  instead of the best selling vehicle, the Ford F150 pickup.

It’s complicated. Earlier this year, along the Gulf coast, most of our imported oil ended up being exported after being converted into higher-priced gasoline and diesel (3.12 million barrels/day exported verses 5 million barrels/day imported), demonstrating how oil imports can actually reduce a trade imbalance.
After seven years of trying,  the idea that we can simply replace a significant (or even a measurable) amount of  imported oil with agrofuels at prices equal to or below the price of oil has proven to be a pipe dream. A few years ago Robert Rapier tried to quantify corn ethanol’s impact on imports but couldn’t find an impact, suggesting it is quite small to insignificant.

Midwest Drought

Food price, wildlife habitat, and water quality issues aside, the Midwest drought is demonstrating another reason why we should not become too dependent on agrofuels — price instability. Many corn ethanol refineries have been operating in the red this year because the price of corn is so high. So far, they can’t charge oil companies enough to cover their costs because each corn ethanol company is competing with the next one and their customers will naturally go for the one with the lowest price. They would have to collude to fix their prices (as the ethanol lobby always claims grocery chains do when the price of food spikes), which is illegal. Eventually, enough refineries will go out of business, and use up enough reserves, to allow the price of ethanol to climb (because its use is mandated, the price is not locked to global oil prices). And we all know who will get stuck with that bill.

We have not bought oil from Iran for decades. That’s mostly a symbolic move after the hostage crisis. They still sell their oil to other customers. We could stop buying oil from the Persian Gulf (16% of imports) or even from OPEC altogether (40% of imports). We don’t do that because it would cost more to buy all of our oil from non-OPEC sources, not to mention that it would be largely meaningless to do so since  oil is fungible (we buy oil at a premium from Canada, they might import for less cost for their own use from OPEC, pocketing the difference).

The Benefit of Protecting Global Markets

Even if we assume for the sake of argument that the military budget actually is a subsidy to oil, we would have to assume that the subsidy applies to the global oil market and not just our own. We have taken on the role of global sheriff  because world peace is good for business. The cargo containers flow from ships to rail and vice verse day and night at our sea ports. Allow the flow of energy to our trading partners to be reduced (a global price hike) and you will cut that flow of cargo containers.

Japan is experiencing some serious economic trouble at the moment largely because they are importing so much fossil fuel energy thanks to having their nuclear off line. We certainly wouldn’t want their supply of energy tripped up (through a global price hike) because, ironically, the technology developed in the Prius and Leaf hold the keys to our own liquid fuel independence.

The computers we type on would be of much lower quality and cost a great deal more were it not for this global market. Cars, tools, bikes, monitors, computers, and much of the food we eat come from trading partners who are also dependent on affordable supplies of energy.

Because we know that not all subsidies are boondoggles, we would have to determine if this hypothetical military budget subsidy pays off. To find that out you would simply divide the part of the budget allocated to protect global oil supplies by the amount of energy contained in that supply. Compare that number to just about any other subsidy you can think of (agrofuels, wind, solar, nuclear) and you would find that it pays off royally. Feel free to run that number for us but the cost per unit of energy won’t have enough impact to give oil any advantage over the likes of corn ethanol.

Another test would be to compare military expenditures to the cost of converting a percentage of our vast coal and natural gas resources into a liquid fuel as Nazi Germany did and as is done in South Africa today. A properly regulated free market doesn’t leave money laying around on tables. If it were cheaper to do that than import, we would be doing it, and as with tar sand oil, environmental ramifications would be brushed aside. I live a short distance from Gas Works Park, which is the remains of a facility that actually converted coal into a gas to be used for heat and lighting in Seattle. The arrival of electricity and natural gas made it economically non-viable.

Militarists who can’t sleep at night worrying about getting enough fuel to fight the next big one can relax. If we should ever find ourselves in a war big enough and long-lived enough that we would need to tap that coal and gas to fight it, we would do so. The idea that we could fight a war with corn ethanol and soy biodiesel, (which account for about 99.9 percent of our liquid biofuels) is ludicrous, which is why the military has been funding research for alternatives.

In summary:
  1. We can only significantly reduce the oil trade imbalance by using less liquid fuel. Corn ethanol and its poor cousin, soy biodiesel,  are incapable of having a significant impact on our oil imports. The increased domestic oil production that we are presently experiencing is a temporary blip.
  2. To claim that the price of peace in the Middle East (benefiting every industry dependent on oil by keeping global costs down) is a subsidy to the oil industry (where the majority of oil companies might actually have bigger profit margins without peace in the Middle East)  is nonsensical.
Photo courtesy of PMillera4 via Flickr

Ethanol Saved Consumers $134,400,000,000 in 2011?

Cross-posted from Consumer Energy Report

Back in 2009 two researchers released a study that suggested corn ethanol was saving American’s money at the gas pump. I wrote to one of the authors asking for clarification. His reply:
In the paper, we conclude that evaluated at the average ethanol production level of 01/1995-03/2008, the wholesale gasoline prices is $0.14/gallon lower. The change of retail gasoline prices varies across refinery markets from $0.29-$0.40/gallon.
He also added that the results were unique to prevailing conditions in 2009. According to Wheels, the report has been updated and now claims corn ethanol saved Americans a buck a gallon. However, thanks to ads trying to make hay from this study by the nation’s largest corn ethanol lobbying firm, aka, The Renewable Fuels Association, the study caught the attention of two other researchers:
Mr. Knittel of M.I.T. said in an interview that ethanol most likely reduced gasoline prices, at most, by 10 cents a gallon, after adjustments were made to account for the biofuel’s lower energy potential relative to pure gasoline. He described claims made by the trade group, which have appeared at bus shelters and billboards, particularly around Washington, as “false advertising.”
 Economic studies of this nature can be hard to refute because the only people qualified to critique them are other agricultural economists or statisticians. Common sense can only get you so far. However, Mr. Knittel and Mr. Smith are qualified to critique the study:
To illustrate their critique, the professors employed the same statistical models used in the Iowa State report to draw intentionally absurd conclusions, among them that ethanol production depresses the price of natural gas and increases unemployment in the United States and Europe. “We also used their model to show that ethanol production is causing my daughter to grow older, and if it was taken away she’d get younger,” Mr. Smith said in a telephone interview. “We know that’s not true, or at least we hope it isn’t true.”
Now that’s what I call good use of sarcasm. Shockingly, a spokesman for the RFA defended the scholarship their ad was based on, and never mind that he is no more qualified to defend it than you or I.
The study results are based on regional restraints on supply caused by refinery capacity, so the results will change if you enter a period of lower domestic fuel demand, increasing export of refined petroleum products, and record high prices for corn. Don’t expect to see results of the next study on any bus station billboards if it finds that ethanol is costing Americans $billions.
1200 x 112,000,000 = 134,400,000,000