by Ronald H. Miller
Desperate times call for desperate action. That is the situation facing Big Oil at the moment. After spending billions and billions of dollars to extract increasingly expensive oil out of the ground, USEPA is about to hand another 5% market share to its cheaper competitor, ethanol. Time to spend as much money as it takes to destroy the competition.
The Coordinating Research Council (CRC), an oil industry front, recently issued a scathing study noting that 15% ethanol blends (E-15) are far more damaging and constitute a safety problem as compared to E-10, or good old E-0 which hasn't been seen in years. Never mind that NASCAR runs on E-15 and Indy Race Cars run on E-100. Never mind that Brazil has been running successfully on E-25 for over 3 decades. Never mind that USDOE, with significantly more test data on E-15, quickly debunked the CRC study noting their flawed science. It's an embarrassment for an industry that historically has relied on solid scientific data to prove its points. But unlike the past, times are now getting desperate.
Last year consumers saved $1.09 per gallon because of ethanol. That's over $140 billion in savings - an economic stimulus in its own right. Today ethanol runs about $1.00 per gallon less than gasoline and, unlike oil, ethanol is not subsidized by the government. Congress has been strong about paring back or eliminating subsidies for alternative fuels but the massive 9-figure subsidy program for oil and gas has remained untouchable. One might want to "follow the money" to understand this situation better.
For oil, it's like the little Dutch boy with his finger in the dike. We have reached a tipping point where ethanol is cheaper than oil and the spread is widening. This year U.S. farmers are going to produce a record 15 billion bushel corn crop, nearly 2 billion bushels more than the previous record. That's what happens when you create economic opportunity in a free marketplace. Our corn surplus will be the highest in years - that's food and fuel. And there many new sugar-based energy crops and new technologies for second generation advanced biofuels that require far less water and fertilizer and are available today. If you are the little oil Dutch boy, you can stand there and try to hold back the flood but in the end you will have to flow with the tide.
Fortunately for America we will see E-15 and eventually E-25 just like Brazil. Renewable energy from the sun is sustainable and cheap while mined carbon out of the ground is essentially finite and increasingly expensive. Free market dynamics will determine the eventual outcome. In the meantime, expect to see a scorched earth campaign against alternative energies, funded by large multi-national oil firms with billions to spend to try to maintain the hundred and fifty year old status quo.
So, the next time you see an anti-ethanol study - Follow the Money.
Ronald H. Miller is Managing Director and co-founder of Prisma Advisors, LLC a management advisory firm specializing in advanced biofuels. Mr. Miller has over four decade of energy experience, including CEO of a Fortune 1000 producer of biofuels and food products from agriculture.
May 29, 2012
Popular posts from this blog
This week, in a rare show of bipartisanship, the U.S. Senate voted 62-37 to back military aviation biofuels. This means the "Green Hornet" will continue to fly despite objections from fossil fuel supporters. The Department of Defense consumes 4.6 billion gallons of fuel per year making it the largest single consumer of energy in America. With operations stretched all over the globe, the Air Force and Navy consume about 85% of that total combined. Therefore the DoD has a strategic interest in fuel diversity and security, especially in times of crisis. The United States generates about 250 million tons of Municipal Solid Waste each year of which about a third is recovered through recycling programs, etc. Another 13% is combusted for energy recovery, leaving about 135 million tons going to landfills each year. There is sufficient organic material in that MSW to generate well over 5 billion gallons of biobutanol (jet fuel) - more than required to meet the military
By Ronald H. Miller A recent article entitled "Clean Green Scam" highlighted the case of Rodney Hailey whose company sold approximately $9 million worth of fraudulent biodiesel credits to the oil industry. Petroleum companies need those credits to show compliance with the national Renewable Fuels Standard. Mr. Hailey was convicted of 42 counts of fraud, money laundering and other charges and will likely spend several years as a guest of the federal government. Justice was served, right? Not so, stated the article. What about the innocent victims, in other words "Big Oil"? The focus of the article was on "Washington's torrid 40-year love affair with the ethanol lobby". The "victims" not only paid $9 million for bad biodiesel (not ethanol) credits but also were fined by the EPA for not conducting proper due diligence to make sure the credits were legit. This cost Big Oil another $40 million. In fact the article went on to say, &quo
Ronald H. Miller, 2012 Prisma Advisors, LLC., www.prisma-advisors-llc.com With gasoline prices soaring to $4 and $5 per gallon, it is good to know that relief is available now, but only if the President will act. His "all of the above" strategy has merit. New oil and gas production is not the answer, but it is part of the solution. The Keystone Pipeline is not the answer, but it is part of the solution. Wind and solar the same. And biofuels - to date ethanol has made the only significant renewable contribution to energy security and a better economy. We now enjoy nearly a million barrels a day of clean, renewable ethanol production at the expense of those who hate America.. What's more, the U.S. Navy is not required to escort this sustainable energy source to our gasoline stations. Today ethanol costs $0.90 per gallon less than gasoline and it's not taxpayer subsidized like oil and gas. That means an E10 blend is $0.09 per gallon cheaper than s