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So I wanted to start a topic to post my personal thoughts on ethanol, and the various policies and players involved in it.

 

Here is a post on my blog, copying the wording from my latest post on RaceTrac.

 

http://allthingsc2h5oh.blogspot.com/2016/01/first-post-in-while-my-apologies-for.html

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Today, I decided to check out the oil price, and as I expected, I nearly had a heart attack. 

This is the lowest it has been in the 10 year history that NYMEX shows. This is unprecedented. I'm going to turn to the folks at Grand Rapids, MI based TheGasGame to explain this one. Ed Aboufadel knows his stuff with economics. I have met with him personally.

Comment on the December 30 prediction:  Prices held steady until we saw a reset on January 4.  It wasn’t what I expected (a Fat Fingered Greed Grab?), but it wasn’t too dramatic either.  1/2 CORRECT, 1/2 WRONG.

Thursday, January 14, 2016, 7:00AM:  A belated Happy New Year!  But it has not been happy for investors in stocks … or energy, with oil dropping to $30 a barrel.  The question on more-and-more minds is whether the markets are adjusting to Federal Reserve policy, and this is another one of those scares that builds up a “wall of worry”, or if the markets are predicting, or maybe causing, a new recession.  Looking back over my adult life, years where we changed Presidents have not been too hot, economy-wise (e.g. 2008, 2000, 1992, 1980).

For those playing The Gas Game, though, we should be in really good shape.  Wholesale gas prices have dropped below $1, reflecting the collapse of oil prices, and with taxes and other costs, I estimate a price to retailers this morning of $1.56.  With the cheapest gas in GR at $1.75, we have room to drop, and I predict we’ll see noticeable downside action through the weekend. — Ed A.

- See more at: http://www.thegasgame.com/#sthash.J7IViPt4.dpuf

We're showing prices that are unbelievably cheap here. I tell folks that they don't have to be old to remember cheap gasoline prices. I remember $1.60 from when I was, say, 10. I even have this photo that I happened to take when I was 10 with a camera I had just received for Christmas. (look real closely towards the bottom left. I was taking photos left and right, and wasn't necessarily aiming for the price sign)post-2293-0-19906300-1452890364_thumb.jpg

 

One of the reasons I got into E85 and more broadly, ethanol, was because it was being sold at prices I never thought I would see again. The first price I remember for E85 is $2.999/gallon, and this was in June 2012. The first price I paid myself was $3.099/gallon, and I thought that was incredibly cheap. This was the first tank of E85 I put in the Sebring, and I'm proudly using E85 over 3 years later. After the financial collapse of 2008 and the plummeting energy prices which closely followed, we slowly began to see prices recover through late 2009 and 2010. My narrative in 2012 and 2013 was that prices finally breached $3/gallon right after Christmas 2010, never to come back down (with a few exceptions here and there). I figured simply because I was 19 in 2012, that I would never see the cheap prices my parents and other adults I've talked to have told stories about. 

 

Here is an interesting comparison. To begin 2012, Meijer was building a brand new store in a rather confusing area that is technically in East Lansing. It's technically East Lansing, but near Haslett and Bath Township, right on the Ingham/Clinton county line, and right outside of Meridian Township. Anyhow, I was extremely excited for this store to open. The station opened in April 2012, with the hypermarket a short time later. Here is a picture with the first prices, dated April 19, 2012. post-2293-0-06508200-1452891559_thumb.jpg

 

Now check out what the prices looked like last Saturday.

post-2293-0-21518900-1452891185_thumb.jpg

See the change?

 

And so now, the question of viability comes into play. How is it possible for retailers to sell ethanol at such cheap prices? Furthermore, how is it feasible for ethanol plants to produce it for such cheap prices? These are questions that I don't quite have answers to. However, one thing I have noted is how high diesel prices remained as gasoline prices began to tumble. Kerosene prices also stayed high. The price difference between the different grades of gasoline has also gone up. Many folks figure that premium is much better for their cars, even if they only require regular. And with such cheap fuel prices, why not? Well, these higher midgrade and premium prices, higher kerosene prices, and higher diesel prices have helped to cushion significant losses for both ethanol-based fuels and regular gasoline. But now, diesel is below $2/gallon in spots. Kerosene just took a tumble - a full dollar per gallon in price - to $2.99 around these parts. So what now? How are retailers making up for losses? I can tell you now, at $1.55/gallon, nobody is making money (on the retail standpoint and further upstream).

 

The other night, the dad and I got fuel at the brand new NUVU fuel station in Ionia, Michigan. He said out loud that he feels bad for fellow ethanol folks to sell at such cheap prices. We filled up at $1.199.

post-2293-0-81179300-1452892506_thumb.jpgpost-2293-0-82632900-1452892512_thumb.jpgpost-2293-0-72648400-1452892520_thumb.jpgpost-2293-0-59592800-1452892524_thumb.jpg

 

I remember spending an entire evening in June 2013 driving out to Romulus (right by Detroit Metro Airport) just to fill up at $2.52/gallon. Two weeks later, I drove 7 hours one way to fill up at $1.749/gallon. June 2014 I drove out to Omaha to fill up at $0.85/gallon. Then, I get fuel for $0.499/gallon at the end of December 2014. And it was only discounted 30 cents/gallon. 

post-2293-0-69218400-1452893328_thumb.jpgpost-2293-0-36755100-1452893325_thumb.jpgpost-2293-0-80105700-1452893332_thumb.jpg

 

Granted, I'm not a full-fledged economist with tons of credentials and decades of experience, but even those folks did not see the plummet in fuel prices coming. 

 

Why have prices plummeted? OPEC has waged a full-out war on the world. In recent years, various factors have come into play that cut into OPEC profits. Many nations, including our own, have realized that dependency on someone else is not a good economic solution. We've undertaken numerous renewable energy drives - including ethanol - and have found oil deposits in our own backyards. And now, according to the last statistic I had heard, less than 1 in 6 barrels of our oil comes from an OPEC country. We produce that much of our own oil. And yes, renewable fuels such as ethanol and advances in battery technology have contributed a large part of that. But even still, OPEC should not be able to influence our fuel pricing and economy this way. And yet, they still are. So what happens going forward? We get dependent on petroleum again.

 

This is as much of a double-edged sword as I've ever seen. Because of cheap fuel prices, folks have more money to spend. Aside from one of the weaker black-friday shopping days we've seen in a while, the price of fuel has been fantastic for business. Folks have more spending money. And they're going out more, using more gasoline. People are back to buying larger SUVs and trucks. Hybrid demand is not nearly what it was when prices skyrocketed in 2008. Flex fuel vehicle production is down a bit. And once folks are hooked on gasoline, we're right back to the embargo of 1973. We've undone decades of progress.

But in the meantime, ethanol and other alternative fuels are having as hard a time as ever. I must say though, I'm impressed at how ethanol is holding its own. Demand for it is relatively strong, and the price is staying competitive in many markets. I see $1.35 for E85 out on the west side of Lansing right now, and I think that's expensive - but then I do a double take and remember thinking I'd never see anything below $2.99 again. I've said before how ethanol is extremely resilient. 2008 and 2012 were two of the toughest years imaginable for ethanol. The collapse of VeraSun, the droughts of both 2008 and 2012 (most notably the latter), and skyrocketing corn prices. And yet, ethanol held its own and emerged stronger than ever. We've seen a continual spike in the number of stations dispensing higher blends even with gasoline being so cheap. I must praise companies like RaceTrac for bringing E85 to states like Florida, Louisiana, and Texas. These are not the first states you'd think of when you think of ethanol. Now you could argue the merits behind that, and why exactly these retailers are doing that, but it is encouraging to see significant growth. So I have no doubt that ethanol will be able to weather this storm too.

 

But it won't be easy.

 

I got to thinking once I saw the basement-low price of crude oil earlier this afternoon. The plummeting price of gasoline is horrible for alternatives. I mean E85 must be priced competitively with gasoline to be able to sell well, and while in many areas it is - that still isn't enough for some folks to use it, many of whom insist that $1.55 for regular ain't that bad either. This is not the only problem on the horizon.

 

This winter has been one of the lousiest I could think of. We're well below normal on snowfall and temperatures have largely been mild and above average. In my memory, nearly every time a winter has a powerful start, it is overall a lousy winter. And this winter has proven as such. We had an 8 inch plus snow here in Michigan back in November. It was great, and I loved seeing it. But in the time since, we have had very little. We ended the month of December with 1.9" of snow here. That is almost a record low. So I segway into my next area of discussion. Years with lousy winters tend to have hot and dry summers to follow. Look at 2011-2012. Perfect textbook example. My mom's 50th birthday in November 2011 was filled with freezing rain, rain, and 8 inches of wet snow. The rest of the winter was mild and saw much below average snowfall. In March 2012, we saw record high temperatures fall one after another. We even hit 86 degrees, in March! That was unprecedented, and indeed was the warmest temperature ever recorded in the month of March here in Lansing. The record warmth lasted for just over a week. Soon after, in one of what I would argue was the most predictable turn of events in meteorological history, much of the midwestern United States saw freeze after frost after freeze after freeze. Look at Traverse City, Michigan, for example. Some 90 percent of the cherry crop was decimated, because the tree flowers bloomed in the March warmth, and were then destroyed by the repeated freezes and frosts. The same thing happened to many other crops. Then, we had a summer that was as hot and dry as many folks could remember in their lifetime, unless they had been around for the Dust Bowl. Some 76% of the geographical area in the United States was under some level of drought at the July 2012 peak. And then, we hit 100 degrees here in Lansing for the first time in nearly 24 years. Not surprisingly, corn prices shot through the roof. Ethanol prices followed.

 

My concern is that this could happen again in 2016. I'm going to say that it would be wise for ethanol producers to hedge their bets. Now I must put in the disclaimer that this is what VeraSun did in 2008, largely leading to their bankruptcy to close the year. But here's how it's different. VeraSun locked in corn contracts at $6.50/bushel. Corn prices are nearly half that right now - $3.50/bushel. Based on history, I believe it is unlikely for prices to fall significantly further. As it is, farmers aren't making much at this price. If 2012 is repeated, it is imperative to prepare ahead of time.

 

I'll add more to this later as the thoughts come to me. I apologize for ranting here, but there is a lot I have been thinking about lately. Please, by all means, I aim to start a discussion - so feel free to reply.

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Gasoline prices being so low, it is tempting to use it. I gave in recently on a road trip since there were no stations close enough to each other that carried it/were a pain to get to far off the interstate. Back to 100% E85 now. My vehicle thanks me. (2015 Chrysler 200).

 

I run my son's Neon and my 99 Dakota on ~ 50% E85 and 50% E10. No blender pumps out here.  :( They both run fine even in the cold. It's a little different at high altitude I suppose, less air so less need for a rich air/fuel mixture. I've even run the Dakota on 100% E85 and like the Neon it's a non-flex fuel vehicle and it ran fine, however I did notice a slight power decrease at higher RPM's, I don't want to run it too lean so that's why I mix it. 

 

There really should be no reason why automakers can't put in some type of a fuel pre-heater for flex fuel vehicles so it's easier to run E85 year round, similar to what they used to do for diesel powered vehicles.

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Even I have been tempted, but I've said that I would sooner drink gasoline myself than put it in my car. When I see the gallon amount exceed the total sale, it isn't really that hard to stay strong anyways! Plus I remember thinking I'd never see a price below $2.99/gallon again.

 

I'm glad to hear you're committed - especially in a state that doesn't have a direct-supply program like yells hose, like we do here.

 

Funny you mention the heater option. I've read that it is included in vehicles sold in Brazil. At the start of last year, I had a Chrysler dealership install an engine block heater. It cost me $300 after buying the heater itself and having it installed. I will say though, that was some of the best $300 I have ever spent. All I do is plug the heater into an extension cord, and I never have any starting trouble. It increases engine efficiency, and decreases the amount of time I have to warm the car up. Thus, it saves fuel, and decreases wear and tear on the starter/ignition.

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The block heater is a very good idea. One that isn't sexy enough for average environmentalist to concern themselves with, probably because they live in temperate Southern California. Consider the benefits, 40% quicker warm up in winter, $25-$50 fuel savings during the winter, and less stress on the engine. But, if as most appear to have a remote car starter to include the idling to warm up fuel savings that figure would surely be a multiple. Consider most of the emissions occur in the warm up period of engine, one would think the Environmentalist would zero in on that cheap opportunity for improvement. I read these people claim no one would bother themselves with the plug in, but conversely, they claim plug in vehicles inconvenience not a factor? The comfort and safety factor should be enough motivation to plug in the heater, yet the decreased emissions per short trips is huge. Some automotive companies have this as standard equipment in colder climates. This should be the norm. The cost is a fraction as compared to your expense. Also, not to hard to heat the tranny oil either. Actually, I think automotive should put in a cabin heater, auto timer, battery heater, trans heater, and coolant heater all powered from plug in. This would be step one in plug in power. Also, the technology could be initiated with remote start if the car is utilized off schedule. Same for AC needs. Have a electric motor power available to cool the cabin in summer. Actually, when observing how consumers use their car, long ago automotive should have powered the AC and heater per battery as well and utilize the cell phone remote start. For example, flying into the Dallas airport one could call the car and initialize the AC cool down. How, about passengers sitting within cabin during parking conditions that can turn the heater on with small battery coolant pump to maintain heat or energize the batter motor for AC comfort? As I understand some of this will be accommodated with the highly desirable mild hybrid benefits starting production year 2017.        

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Kia is introducing a car with coolant heater (heat exchanger) powered by exhaust. This may be a superior solution as exhaust heat is considered waste. The heat is almost instantaneous and high btu. So, the engine warm up cycle substantially reduced at no increase inconvenience, no coal power emissions, and no extra utility cost. This solution should be superior as the device carries the engine to fully operating temperature, unlike the block heater that only achieves a partial warm up.  

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The early Ford Escape Hybrids had a block heater that also warmed the battery (trickle charge). Since a cold battery is the main reason you don't get EV mode in Midwest winters, it was an interesting concept.

 

My main complaint is my factory block heater plug was so hard to unplug. I'd have to wiggle it back and forth for half a minute to get it off.j

 

Now a magnetic plug like they use on the Surface tablets would be cool. Just drive off and it unplugs.

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The 2005 thru very early 2008 FEH had the wiring to the hybird battery.  It did help out in the colder winter months as I have one in my 2005 model.   BUT..the darn thing went kaput last month and they no longer make replacements--that is engine block heater wiring kit for these vehicles.

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