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USA Ethanol Policy causing current gaso Price spike?

Discussion in 'Environmental Discussion' started by wjtracy, Jul 24, 2013.

  1. wjtracy

    wjtracy Senior Member

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    Yahoo! Finance argument that US ethanol policy is causing maybe 50% of the recent US gaso price spike. They say the alternate fuels act mandates that the oil companies add increasing amounts of ethanol to the US gaso blend. If the market will not accept higher ethanol (most cars and distribution infrastructure only accept max of E10) then the oil companies must essentially pay a fine (purchase ethanol credits). Ethanol credits are very expensive right now. They say the other option oil companies have is to export the gaso to get out of the USA ethanol mandates. The video suggests future Congress hearings to sort out this problem.

    http://finance.yahoo.com/blogs/breakout/blame-ethanolspike-gasoline-prices-lutz-125424933.html
     
  2. austingreen

    austingreen Senior Member

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    I've got to say there is some fancy talking there. Ethanol cost $2.67 wholesale, and gasoline 2.90 wholesale. That means in a gallon of E10 $0.267 is ethanol, since it has only 70% of the energy of gasoline that would be $0.203, or a differenc of $0.064 cents.
    Nebraska's Unleaded Gasoline and Ethanol Average Rack Prices

    I don't think people would get all upset for six and a half cents a gallon. And it actually has come down in price since those june numbers

    Ethanol’s Discount to Gasoline Widens Third Day as Costs Ease - Bloomberg

    Which means the price increase recently has been all about the cost of a barrel of oil.

    Now there is some craziness in the RFS, that forces companies to buy RINs to comply with the law. This increases the cost of gasoline, but its only a tiny bit. It acts as a gas tax. A direct oil tax would work better! I don't know how much it increases taxes right now but it is small. Congress can be fine mandating E10. Most don't like the idea of E15, and it may hurt current vehicles. Ethanol does not reduce ghg much if at all. Its time to reform the ethanol laws, but that doesn't mean that is what is happening now with gas prices. There seems to be strife in the middle east, that pushed oil up, now light crude is back down to just under $105/bbl, and corn has fallen back to $4.76

    Now if we really want to hit targets, and people had flex fuel vehicles then the gas stations could simply discount E85 until people would buy it, then sell the rins. Cellulistic ethanol is not produced in high enough quantities. Some certificates could not be made up.

    RFS doesn't work, because reduced oil consumption is working. IF they make the RFS a percentage of fuel used, instead of a hard number, no problems. 92% of gasoline already is e10 though, and people don't want to buy e85 even if its less expensive. They don't have vehicles that will take it.
     
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  3. austingreen

    austingreen Senior Member

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    A good summaries about RINs and the renewable fuel standard
    CARD: Outlook for Ethanol and Conventional Biofuel RINs in 2013 and 2014

    Those are december 2012 figures.

    If the US decrease oil use furthur than this drops lower.





     
  4. john1701a

    john1701a Prius Guru

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    Classic greenwashing. Impede steps forward through the use of fear.

    People spread hearsay without a shred of proof or even anything logical to back it.

    What harm could 5% cause that isn't already accounted for under the normal circumstances of aging? What components are actually different in a E85 vehicle? How much profit will some lose when E15 is mandated?
     
  5. bwilson4web

    bwilson4web BMW i3 and Model 3

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    To sell more ethanol, it only needs to be priced 'per BTU' relative to gasoline. In which case I could afford to run E50.

    Bob Wilson
     
  6. austingreen

    austingreen Senior Member

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    You have a strange definition of green washing.

    If you include land use, expanding the ethanol mandate in 2014 as passed will actually increase green house gasses, and raise the price of food. If it is done with E15, most car manufacturers say their vehicles may be damaged, and that includes Toyota. Only a few mega corporations will benefit with a mandate above 14 Billion gallons, unless somehow flex fuel vehicles start using more ethanol. We have seen CARB damage a great deal of diesels by passing changed fuel standards that manufacturers said would hurt diesels. We don't need the federal government to damage a great deal of cars because you say its green washing.

    snopes.com: E15 Gasoline
    Do you believe the auto manufactures or the renewable fuel lobbiests? I'll tell you what, the manufacturers are the ones that will void your warranty. The lobbyist will just ask for more government money. E15 is green washing, there is no environmental reason for it, only a profit motive.

    We have reports that it would only cost about $100/vehicle to run to an flex fuel open fuel standard. I am infavor of the open fuel standard that would allow cars to run up to M85 and E85. In the future we may have 2nd generation ethanol and methanol, and I would like it if cars were built to run it without being damaged. Right now only about 5% of the fleet is made to use E85. Lets not jump the gun and force everyone to put in E15 just because ADM and other large corporations help run the congress. It likely would take years to damage most post 2001 cars, but why should the government pass any laws to damage our property.
     
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  7. austingreen

    austingreen Senior Member

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    Bob,

    The price of wholesale ethanol is higher per unit energy than wholesale gasoline. This changes with the price of corn and oil. The program has RINs that may be bought and banked. With the value of RINs today the price of E85 at the pump should be lower than gas per unit energy. I don't know any station that sells E50, but the price of RINs would drop if more people wanted E50, cars were made to run on it, stations produced it, and people bought it. I think too much of our farm land has been switch to corn for fuel not food though, and this land use makes other food more expensive also.
     
  8. austingreen

    austingreen Senior Member

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    Just another take. The reason for E15 is to support the mandate.

    Does the mandate actually help farmers? Or just the alcohol producers? Here is one take, that removing the mandate will not hurt farmers much if at all


    What Happens to Corn Prices without the Ethanol Mandate? | Top Producer Magazine


    Perhaps a floor of 7% ethanol by volume of gasoline would be a compromise. That floor is low enough that it would not hit unless corn prices were very expensive or oil very cheap, but would allow those lobbyists to save face. It would remove those some of the corn price pressure we saw last year.



     
  9. dbcassidy

    dbcassidy Toyota Hybrid Nation, 8 Million Strong

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    We pay for the ethanol at the pump, no real surprise there.

    Also we are paying for ethanol effects: at the food store. Acreage set aside for ethanol corn crops should be used for food production, both livestock feeds and human consumption. The droughts farmers have been experiencing only magnifies the problem with ethanol usage.

    Also the energy intensive ethanol process (production, refining, transportation by trucks, diesel fuel usage) really needs to be included in ethanol ability to reduce emissions.

    Seems to be, ethanol gives the ability of emission reduction for consumers at the pump. However, the emissions saved at the pump, gets generated at the growing, harvesting, refining, and transporting for distribution.

    So, looking at the overall, big picture, how much emissions are really being really reduced?

    Any comprehensive studies (farming, growing, harvesting, refining, and transporting by truck)?
    anyone want to share in regards to this?

    In addition comprehensive studies on emissions generated in the production of non-ethanol gaso?

    I would think a side by side comparison of the studies would really show a reduction of emissions using ethanol.

    THAT, IMHO, would clearly justify the use of ethanol.

    I am talking about the above sans job creation and sans politics involved.

    DBCassidy
     
  10. Trollbait

    Trollbait It's a D&D thing

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    In addition to a fuel sensor, a flex-fuel vehicle will have "The fuel tank will be made of a material other than aluminum and the fuel lines will be teflon-coated, because alcohol in large quantities over long periods of time may cause corrosion on certain rubber or aluminum components."
    Unity BioFuels - FAQs - Difference between regular vehicle and FFV

    I had a flex-fuel Ranger. I believe it used stainless steel instead of teflon coating for parts. It did have larger injectors.

    The Oak Ridge National Laboratory did a material compatibility study of ethanol blends. It was aggressive ethanol with water, salt, and acids added. All of which have been found as contaminates in ethanol blended fuel. Over all there wasn't much difference between the the E10 and E17 they tested. The metals did well. The elastomers varied, but all had some degree of swelling.

    However, this was an exposure study concerning dispensing equipment. The materials weren't exposed to the fuel blends under a pressure differential. They were just submerged in or hung above the fuel. The exposure was for just 4 weeks, without any wet and then dry cycles. The temperature was lower than what an engine and its bay might reach.
    http://info.ornl.gov/sites/publications/files/Pub27766.pdf
    Some bits from the conclusion:
    "None of the metal or alloy specimens exhibited corrosion rates at noteworthy levels, including those
    galvanically coupled. ... Phase separation of the water (from the ethanol) did not occur. However, it is possible that phase separation may occur occasionally in actual use. Another noteworthy consideration is that the test coupons were unstressed, and there is some evidence that stress corrosion cracking may occur, in some instances.
    ...
    The seal manufacturers take great pains not to define failure criteria for a particular rubber for the following three reasons.
    1. For each elastomer type, there is a wide range of properties, depending on the processing conditions,
    degree of crosslinking, copolymer levels, additive types, and concentration.
    2. There are a wide variety of sealing applications. In fact there are almost as many different
    applications as there are seal types. O-ring usage is defined as either static or dynamic. The durability
    is highly dependent on the application, and there are a multitude of dynamic situations such as for
    pistons, valves, etc., requiring elastomer seals. Even for static face seals, pressure, temperature,
    lifetime, and even vibration are all factors that must be taken into consideration.
    3. The complexity and variety of elastomer formulations and applications mean that any failure criteria
    would have to be qualified for each of the many formulations, processes, and applications, and are
    beyond the original scope of this study.
    As a result, seal manufacturers will not warrantee their products based on any rating system.
    ...
    Most elastomers exposed to fluids will, at some point, undergo dry-out cycles as well. When the
    elastomer becomes dry, it will lose mass (and volume) if the solvent dissolves and extracts out one or
    more components during drying. The loss of mass and volume will increase the potential for leaking since
    a portion of the original seal is removed, thereby decreasing seal pressure. An elastomer compounded
    with plasticizers will also be susceptible to embrittlement (or increased hardness) and an overall loss of
    durability if the solvent is able to extract out the plasticizer components. Embrittlement will lead to
    decreased durability and increase the potential for cracking during shrinkage and use. Other additive
    compounds serve to improve durability by providing additional protection against ultraviolet radiation,
    ozone, and wear. Dissolution and removal of these compounds may not affect the physical properties but
    will reduce the elastomer durability and useful life."

    So while simple soaking shows little difference between 10% and 17% blends over a short time, the actual vehicle components are exposed under harsher conditions for longer periods of time in a vehicle. With the average age of the fleet being over 10 years, there is a good likely hood that older cars contain materials that won't withstand ethanol as well as a new one. Getting older cars off the road might be a good thing for some, it isn't for the people that depend on them to get to work.
     
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  11. wjtracy

    wjtracy Senior Member

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    Recent congressional hearings on the renewable fuels standard as covered by Climate Progress. Sounds like even they think it is a mess. Apparently many involved parties agree the law needs to at least be modified (to reflect that gasoline demand volumes and advanced biofuels volumes have not increased like Congress had assumed when writing the bill).

    Untangling The Political And Policy Knot Around America's Biofuel Mandate | ThinkProgress

    P.S.: BTW the ClimateProgress article brings up the raising corn prices negative impact on the needy people in Central America(Guatamala) which someone pointed out here on a different thread
     
  12. Trollbait

    Trollbait It's a D&D thing

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    To replace MTBE, only 5% ethanol is needed.
     
  13. wjtracy

    wjtracy Senior Member

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    My understanding is the technical issue with E15, besides some cars, are all the train cars, trucks, etc equipment in the distribution system designed for E10 (so-called 10% ethanol blend wall). The "solution" for this is blender pumps which allow user to choose to custom blend a solution % ethanol 10% up to 85%. Obama admin has promised many more blender pumps to be built in the country's gaso stations.

    We do not scientifically need any oxygenate in the fuel anyways. MTBE came about in wide use only when Congress first attempted to mandate ethanol (Clean Air Act Amends of 1990). Oil industry at that time fought for MTBE in addition to ethanol. But I believe 10% min. ethanol is where we are heading. The rationale for this is the need(?) for alternate biofuels (biofuels mandate).
     
  14. JMD

    JMD 2012 Prius 4 Solar Roof

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  15. austingreen

    austingreen Senior Member

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    When the real mandate was passed, after disqualifying mtbe, with gore breaking the tie braking vote, there were a number of issues.

    1) Reduced Oil use
    2) Reduced Pollution (environment)
    3) Jobs Jobs Jobs
    4) Help the farmers

    Of these number 1 is the only one that most believe today. Post 1996 cars don't even reduce their pollution with the small epa requirement, ghg when you include land use is about neutral, but we have added pollution to water (dead zone in the gulf) by the chemicals used to grow so much corn, and mono cultures are never environmental. The jobs really never materialized, the multiplier was all faked, and most family farmers don't even get anything out of the program. The mandate was kept but not the subsidy.

    Most of the ethanol infrastructure was built after 2001. Last year with a bad crop we hit the food wall, where corn ethanol was diverting land from growing food to growing fuel. This year we will hit the blend wall, where more ethanol is required than can be used in E10 + E85. Next year the mandate goes up but the blend wall likely will drop again. RINS could be used in 2012-2014 to compensate, blenders went above the mandate and banked credits, but there is an explosion looming in 2015. Its time for congess to fix this mess they created. Only the oil reason still remains, that and the corporate welfare to large ethanol producers. A mandate of 7% of gas used would allow throttling back in years like 2012 with bad crops, but still reduce oil use by 5% (7% x 0.70 energy of gas=4.9%+0.1% e85).
     
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  16. austingreen

    austingreen Senior Member

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    They go as high as E100, every car can burn at least E25. They mandated car makers make cars that could do this. I would be in favor of congress mandating the same thing, but include methanol as well as ethanol. Brazil also changes the blends requirement based on market conditions, anouther thing we can learn to do.

    The ethanol lobby wants to change the rules for cars not built for it. Over half the cars on our roads were designed for e10, not E25 like they are in brazil. Brazil put the car requirement in place before putting ethanol in the fuel. Only about 5% of the fleet on the road is flex fuel in the US. All the big auto companies have said they will not cover under warranty any damages from E15.
     
  17. JMD

    JMD 2012 Prius 4 Solar Roof

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    This may be the problem

    image.jpg
     
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  18. wjtracy

    wjtracy Senior Member

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    Very nice recent article on 10% ethanol "wall" issue. If you are following the issue, Congress made a little mistake in 2007, mandating more gallons of ethanol to be blent into gasoline than the 10% max for many cars and distribution facilities. Apparently EPA has acted recently to give temporary relief from 2007 mandates.

    Some feel EPA is not legally allowed to give relief, and we need a BiPartisan ruling in Congress (I know its an oxymoron to use the words Bipartisan and Congress in the same sentence).

    Without relief, gasoline suppliers are expected to pay penalty fees (ethanol credits) for not blending > 10% ethanol into gasoline. These fees would cause gasoline prices to increase.

    The "solution" (with intense lobby fighting behind the scenes) is thought to be for Congress to mandate 10% ethanol (instead of a gallons ethanol mandate that exceeds 10%).

    How Washington Could Push Gas Prices Higher | The Exchange - Yahoo! Finance
     
  19. austingreen

    austingreen Senior Member

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    ADM payed a lot of congressmen a lot of money for those votes. The idea was that E85 would take over. It isn't. Oil prices are too low, corn prices are too high. The fleet doesn't have enough flex fuel vehicles to do it. Marginial land is being used for corn.

    Solution: Congress can pass the open fuel standard to allow vehicles to use E85 and M85 if they ever become viable. It likely would have to give the epa power to change pollution tests with instructions to stop just willy/nilly raise levels, there needs to be reasons to lower certain levels. That way if economics change (cellulistic ethanol, high oil prices, etc) the fleet is ready.

    E10 makes reformulated summer gasoline more expensive (or heavier polluting). They need to roll the mandate back to some percentage say 7% of gasoline. The raw number is wrong if we actually are consevering oil in the future.

    Bid to Repeal Ethanol Mandate Seen Diluted by EPA Change - Bloomberg
    EPA has already done some relief. There is strong bipartisan support in the house to repeal this, as blue and red states with large populations like California and Texas don't like it. The problem comes in the Senate and the presidency. If you want to run for president, as al gore admitted, you hold your nose and vote for ethanol. The corn producing states like minisota and nebraska, even though they have many fewer people get equal voting. If the EPA didn't allow relief, the above article says a bill lowering the mandate would have a greater chance to pass.

    They are doing this now. It is not much money in 2013. 2014 is the big deficit year. That is when higher prices from the mandate would really kick into place.

    10% is too much. Allow some wiggle room for the market. At 10% corn ethanol in bad crop years worse than 2012, there would be worse spikes to food prices. Why not let reformulated gasoline use less ethanol in the summer? Is it because it would hurt ADM's profit? If gas use goes down isn't that the purpose of the mandate. It certainly doesn't lower pollution or help the enviroment. Those claims were debunked.
     
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  20. austingreen

    austingreen Senior Member

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    Just to add the groups in favor versus opposed
    Ethanol Mandate to be Debated for Two Days Before House Panel - NationalJournal.com
    Just for lobbyiests
    Against the mandates are - oil, environmental (concerned about global warming or dead zone in the gulf), beef, dairy, restaurants, auto manufacturers

    For the mandates are - corn ethanol producers and renewable energy groups.

    The groups against the mandate has more influence, if it is in a single bill. You can see by the groups why California, Texas, and Oklahoma would be majorly against the mandates, and how a state like Wisconsin with both dairy and corn interests might want them weakened. ADM would like you to think its just renewables against oil, but that is far from correct. Get to cellulistic ethanol though and the coalition against the mandate shrinks a great deal. In 2005 when the the big mandates were first passed that cellulistic promise was higher than today, which has lead to a change in politics.