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Blenders Credit a Subsidy to the Consumer?

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On a recent call, Robert Rapier reports that ExxonMobil is just fine with the ethanol blenders credit expiring.

 

They say that they don't get the subsidy, the ethanol industry and farmer don't get the subsidy, but that it passes through to the consumer.

 

So then why wouldn't they be in favor of it expiring?  In their mind, ethanol will become more expensive to the consumer, especially E85.  That will keep people filling up on gasoline instead of E85, while gasoline costs many tens of billions annually in social/health ($28 billion in CA alone) and military costs, that the oil companies don't have to pay for (the taxpayer does through their paycheck withholding).  The petroleum subsidy passes through consumer's taxes, benefiting the oil companies.

 

http://www.consumerenergyreport.com/2010/09/15/exxonmobil-says-no-to-subsidies/

 

In this way (since Robert agrees), Robert is in favor of subsidized gasoline being consumed (most of it foreign oil), instead of "much less" subsidized American ethanol being consumed.

 

Nowhere is there a qualifier that the oil companies should send tens of billions of dollars each year to the U.S. government for the military's protection and the social/health costs incurred.  Removing one support (ethanol's) while not removing that of petroleum, makes it terribly one-sided.

 

RR picks gasoline over ethanol.

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I agree Sac, but when I tell people what you just said, they say not much our oil comes from the Middle East. For some reason they don't think that if the Middle East oil got shut off that those users would compete with us for the Canadian, Mexican, and Venezuela oil thus raising prices.

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I know the type:  I was one of them.

 

"We went to war in the Middle East to bring liberty to the masses, to unseat an insane dictator."  No doubt, but that was only part of the reason.  At least half of the reason was to create stability in the incredibly important petroleum region, which brings stability to oil (and energy) prices.

 

It took me years to warm up to more of the whole story.  What can I say...I was a patriot that thought that our U.S. government did things for altruistic reasons only...?  When I lived back there, we thought that this whole thing about Middle East oil was overblown by some sissy peace pacifists on the West Coast.  Perhaps it is a little overblown by those folks, but I would say that at least half the reason we have military involvement in the Middle East is to protect petroleum supplies, which protects our economy (that's not to say that when biofuels get large enough in supply, then we won't have to worry so much about the economic effect of not protecting the Middle East).  They believe it's only for altruistic reasons because they support U.S. servicemen and women so heavily, that they can't bear to think that they are putting their lives on the line also for the important petroleum supplies.  As well, many hold strong beliefs that we need to support Israel (of course we do), and don't like to tarnish that belief with the Middle East petroleum thing.  But it's all of this.

 

What I would say to those folks is:  "If the Middle East stopped pumping their oil, Europe, India, and China would be bidding up our nearby oil sources, and you know how energy hungry those regions are, right?"

 

Or ask them, "If China stopped shipping toys, what would happen to your Christmas toys budget?"

 

Or tell them that OPEC supplies 35 million barrels of petroleum per day, out of total world consumption of 85 million barrels per day.  So, if grain production was reduced by over 1/3, wouldn't you expect corn and soybean prices to soar through the roof, to $10.00+ for corn and $20.00+ for soybeans?  The same for petroleum, of course!

 

I trust that the good folks that I communicate with often in the Midwest would understand that logic.  But it will take them a good while to get past the part about the U.S. government going to war for major reasons in addition to the altruistic ones.  Tell them it's "both and" instead of "either or." 

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Blender credit appears not to be pocketed, but passed on as lower cost ethanol fuel. Wish an economist would explain the fuel supply costing. Maybe the Brumberg group who tracks fuel cost has a tutorial? It’s an extremely complicated international commodity.

 

Attributing national defense costs to petrol markets an interesting factor. International markets and trading important as national critical supplies such as water, food, and raw material. International trade helps all economic boats rise and promotes peace. Poor nations helped and the best path to sustain and improve their citizenry. Trade has done much for the poor, actually the only tool to help in any sustainable and powerful way.  Better for world relations when we rely and trade with foreign countries.

 

U.S. and partners efforts for maintaining and enforcing humanitarian concerns, fair trade, and free society efforts i.e. democracy, education, slavery, exploitation, genocide, illegal activity, etc. truly a brave decent human endeavor and a good record as compared. There is not much to be cynical about. The country has a good heart as well as our businessmen, in general. We may act shortsighted at times, but eventually get it. The sum total of our greatness as a society based on citizen competence to maintain the Republic. This requires obtaining personal training or education on maintaining the nations strength with unbiased history, strengthening the family element as well as improving the unselfish moral personality traits of citizenry.

 

The mass sum total of individual decisions of open informed markets the beauty of America. Freedom of citizens whom mostly get it right. To trust the citizens and offer them a chance to get it right or wrong. Federal bureaucrats have no superior intellect to award them power to direct our decisions. Collin Powel mentions citizens have too many financial federal rocks in the knapsack to lug around. 

 

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Adjustment on that last point.

 

RR may pick gasoline over ethanol.  Or, RR may pick his company's (Merica) biomass biofuels over corn ethanol.  I hope it's the latter, because I can respect him competing against corn ethanol for another biofuel, rather than trying to kill off corn ethanol to benefit Big Oil.

 

In the end though, those who know that RR is ex-Conoco and is now trying to gain support for his company's own version of biofuels, it does seem a bit petty for him to be out there trying to kill off corn ethanol. 

 

And Growth Energy should be very wary about RR's input for the Fueling Freedom Plan, since RR is trying to kill off corn ethanol in favor of his own company's biofuels (if they eventually come to market, which won't be in any significant volume for many years down the road).  If the Blenders Credit is actually going to the consumer by keeping ethanol prices lower, then a removal of the credit will drive up the price of ethanol and make all of those thousands of new ethanol blender pumps useless anyway--the consumer won't buy ethanol priced near the price of gasoline.  This very likely is RR's ultimate goal--watch out.

 

http://gigaom.com/cleantech/where-in-the-world-is-robert-rapier-hawaii-working-on-merica/

 

"For anyone searching for a smart critical analysis of the biofuel industry, Robert Rapier’s blog R-Squared has been like a breath of fresh air. The engineer, who has led teams creating biofuel technology at Accsys Technologies, Conoco Phillips and Celanese, has spent years crunching the numbers on the economics of various biofuels on his blog and used the medium to take startups and investors  to task for some audacious claims. Well, now the avid blogger has a lead role in a new biofuel entrepreneurial venture that has its own bold vision of how biofuels will fit into the world."

 

"Rapier told us in an exclusive interview last week that he has taken a position as the chief technology officer of Merica International, a company that is building out a vertically integrated approach to sustainable and localized biofuels. Merica, headquartered on the Big Island of Hawaii, will act as a holding company for a variety of companies, Rapier told us, including Forest Solutions, a forest management group, SunFuels Hawaii, a synthetic biodiesel provider, a yet-to-be-named company that will develop a biomass trading platform, and a company that will concentrate on acquiring and developing biomass conversion technologies. In addition, Merica owns parts of several other clean energy companies that will contribute to the company’s vision, like Choren Industries, a German company that makes waste to fuel gasification technology."

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The postings of RR and responses to his post very interesting. It’s good to get opposing opinions that challenge thinking and viewpoints. We need to think of it as an opportunity to discuss pros and cons. This is interesting even to a pro ethanol community, to vet the weakness and strengths. Very boring to always follow the lead cheerleader. People have questions and when they see such a discussion believe the postings not merely propaganda. The opposing viewpoints won't vaporize, so, better to discuss.

 

That’s not to say we indulge in forgery, just saying keep up the accurate information and enjoy discussion. No need to get bent out of shape when someone ventures away from group think, Sac, you certainly not afraid of that. :).

 

Also, this alternative energy market is fast changing and adapting. We shouldn't think the ultimate solution is at hand and should be set in concrete. No, better to keep the R&D and alternatives floating about. It's not merely a factor of mass production. We discuss often the intelligence of mass producing flex vehicles with poor mileage or the wisdom of utilizing ethanol as blend agents or competing fuel. This RR guy has much interest and knowledge of alternative energy. His idea of building out Iowa as a state run mecca of E85 has merit. It may push farm and engine technology to efficient use of high blend ethanol fuel. Our country was originally setup to have the states be the creative and experimental lab for ideas. Very bad for the feds to clamp down on state powers and try to manhandle all from the comfort of D.C. isolated political machine.

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Again to clarify my position--RR doesn't have bad ideas, but he most definitely presents them in a way to damage corn ethanol and that we have gotten to a point of 12 billion gallons.

 

RR says some grandiose things that are actually read by the readers to disparage corn ethanol.  Sure it would be great if Iowa were to use only E85 (or E100!), but if you don't read the intent between the lines, then I request that you read his articles again.  Nearly every time there is something good to be said for ethanol (like with the Edison 2), he inserts little jabs about how the mileage actually should be decreased 30% or how the price spread isn't enough to overcome it, etc.

 

consumerenergyreport.com/2010/09/17/progressive-insurance-automotive-x-prize/

 

"This ethanol-fueled (E85) vehicle demonstrated an incredible 102.5 MPGe (miles per gallon gasoline equivalent) on the test track. (RR note: According to the formula for MPGe, that means that actual mileage on E85 was 73 miles per gallon; MPGe divides the actual mileage by the ratio of the energy in the fuel used over the energy in gasoline; for fuels with lower energy density than gasoline, MPGe is greater than actual MPG)."

 

He should have researched further to understand that this was an E85 only engine; tuned to take full advantage of ethanol's properties.  No need to decrease the mpg's.

 

I haven't asked RR to keep quiet--much to the opposite, I have only asked that when he writes that he not insert those jabs (which many of us disagree with the figures he uses) and such a negative spin on things; to work with the realities of the situation instead of setting up a straw man to knock down (stating what would be perfect in a perfect world, then saying that corn ethanol is no good since it doesn't live up to that).

 

I wouldn't be doing my job as a commenter if I did not take RR to the mat on these obvious biases and smears, and the tactic to put up corn ethanol as needing to be some perfect fuel, then to tear it down.

 

Especially as he would stand to benefit hugely financially should corn ethanol simply disappear, and his own company's fuels to replace it.  And especially when his views are published in major news outlets across the internet.  Why would an executive of a fuels company get such coverage across so many outlets, all the while damaging corn ethanol's successes?  What if Rex Tillerson of ExxonMobile were doing the same?

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