Thursday, October 31, 2013

What if Ethanol Didn't Raise Food Prices?

Someone emailed us recently. He wrote, "I talk to a lot of people on the subject of ethanol as a source of fuel and some people get kind of hostile because they think that will make the price of food go up. One couple I know have a hog farm in and they claimed that using corn for making fuel made the price of hog feed go up."

It's the most common objection we get to fuel competition. Ethanol has, in fact, raised corn prices slightly, because the corn is more valuable on the market, which has allowed the government to stop some subsidies. Many people in the food industry do not like this because those subsidies were allowing the food industry to buy corn and its products (for example, high-fructose corn syrup) at less than the market price. So they joined with the oil industry in 2008 in a PR campaign to make people think ethanol will raise food prices and cause starvation (read more about the campaign here).

By far the biggest cause of rising corn prices is rising oil prices, and the oil industry has done an expert job of deflecting attention away from their own culpability and laying the blame on their biggest competitor (ethanol). It has been a brilliant campaign, although underhanded and bad for America. They have successfully misled even people in industries that depend on corn (like those hog farmers). Read more about oil price's impact on food prices here, here, here, here, here, here, and here and here.

Having said all that, we really shouldn't bother making ethanol from corn. It's not the most efficient thing to make ethanol out of. The only reason so much of the ethanol in America is made from corn in the first place is that for almost the entire 20th century, farmers had an overproduction problem. They grew too much corn. When there was too much, prices dropped so low that farmers went out of business. Since it's bad for a country's population when its farmers go out of business, the U.S. government has tried many things to prevent it from happening. They could have just told farmers what to grow, but that's pure socialism, and besides, what happens if there's a drought that year? Instead, they tried to find other markets for excess grain. One of the things they came up with is adding ethanol to gasoline instead of lead (gasoline by itself isn't high enough octane to use without the engine knocking, so the oil industry added lead for a long time, but since it is highly poisonous, it was eventually made illegal, so now ethanol is used to raise the octane level).

But many other sources (feedstocks) can be used to make ethanol that are far more productive and efficient than corn. Let me give you some comparisons:

Wheat: 277 gallons per acre
Corn: 354 gallons per acre
Sweet Sorghum: 374 gallons per acre
Sugarcane: 662 gallons per acre
Sugar Beets: 714 gallons per acre
Switchgrass: 1,150 gallons per acre

Sugar beets and switchgrass both require less fertilizer than corn. Researchers have created a genetically-altered strain capable of increasing switchgrass’s massive ethanol yield by another 38 percent!

This doesn’t even begin to cover all the things alcohol fuels can be made from. With gasification technology (heating up organic material until the basic elements separate) we can inexpensively make alcohol fuels from wheat and barley straw, rice bagasse, municipal waste and a variety of agricultural wastes like corn stover (the stalks and husks left over after harvest), sawdust, paper pulp, small diameter trees, etc.

And waste can be made into ethanol (see more about that here).

Ethanol can also be made for $1.50 per gallon right now, without any subsidies, from natural gas or coal, both of which are abundant in the USA and inexpensive (more about that here).We've got so much natural gas, we're just burning it off to get rid of it (mainly because it isn't able to compete in the fuel market yet — but we're working to change that).
Read more about burning off excess natural gas here.

America has plenty of fuels. We simply need to make them available and allow them to compete with each other. Fuel competition will move the United States closer to fuel independence, limit money going to dangerous women-oppressing regimes, lower the amount of lobbying and influence the oil industry enjoys today, revitalize the American economy, drastically improve our national security, help solve our garbage and landfill problem, help people in developing nations rise out of poverty, help prevent mental illness, and reduce the amount of pollution and greenhouse gases that are sent into the atmosphere, into the ocean, and into the ground. And you will be paying significantly less at the pump.

Friday, October 18, 2013

The Myth of U.S. Energy Dependence: What We Got Wrong About OPEC's Oil Embargo

By Gal Luft and Anne Korin, October 15, 2013, originally published in Foreign Affairs.

The first U.S. energy secretary, James Schlesinger, observed in 1977 that when it comes to energy, the United States has “only two modes complacency and panic.” Today, with the country in the middle of an oil and gas boom that could one day crown it the world’s largest oil producer, the pendulum has swung toward complacency. But 40 years ago this week, panic ruled the day, as petroleum prices quadrupled in a matter of months and Americans endured a traumatic gasoline shortage, waiting for hours in long lines only to be greeted by signs reading “Sorry, no gas.”

The cause of these ills, Americans explained to themselves, was the Arab oil embargo — the decision by Iran and the Arab members of the Organization of Petroleum Exporting Countries (OPEC) to cut off oil exports to the United States and its allies as punishment for their support of Israel in the 1973 Yom Kippur War. And the lessons they drew were far-reaching. The fear that, at any given moment, the United States’ oil supply could be interrupted by a foreign country convinced Washington that its entire approach to energy security should center on one goal: reducing oil imports from that volatile region.

But Americans were wrong on both counts. The embargo itself was not the root cause of the energy crisis. Contrary to popular belief, the United States has never really been dependent on the Middle East for its supply of oil — today only nine percent of the U.S. oil supply comes from the region. At no point in history did that figure surpass 15 percent. Rather, the crux of the United States’ energy vulnerability was its inability to keep the price of oil under control, given the Arab oil kingdoms’ stranglehold on the global petroleum supply. Nonetheless, for the last four decades, Washington’s energy policy has been based on the faulty conclusion that the country could solve all its energy woes by reducing its reliance on Middle Eastern oil.

Where did this conclusion come from? By the time the six-month embargo was lifted, in March 1974, the global economy lay in ruins. In the United States, unemployment had doubled and GNP had fallen by six percent. Europe and Japan had fared no better, and struggling, newly created countries in Asia and Africa took the worst hits. Countries completely dependent on energy imports found themselves heavily in debt, and millions of unemployed poor had to migrate from the cities back to their villages.

The crisis also dealt a blow to American prestige. At the height of the Cold War, the United States essentially proved that without oil it was a paper tiger. The worried secretary of state, Henry Kissinger, indicated that the United States was prepared to send military forces to the Persian Gulf to take over whatever country was needed to keep the oil flowing. Since 1973, the United States has sent forces to the Middle East time and again in the name of energy security. Moreover, the embargo created a deep sense of vulnerability from which the United States has never recovered. The country has been portrayed that way by its own leaders: in 2006, Senator Joseph Lieberman called it “a pitiful giant, like Gulliver in Lilliput, tied down and subject to the whim of smaller nations.” 

The only proper response, it seemed, was to stop importing so much Middle Eastern oil. Every U.S. president since the embargo, from Richard Nixon to Barack Obama, has sought the elusive goal of “energy independence,” either by increasing domestic oil supply (Republicans) or by constraining demand through a gasoline tax and improving the standards for cars’ fuel efficiency (Democrats). Americans have been led to believe that the vulnerabilities associated with oil dependence would be alleviated if only oil imports decreased. Furthermore, they have been promised that import reduction would yield lower crude prices and thus lower prices at the pump.

Those assertions were wrong 40 years ago and they are even further off the mark today. The long race for energy self-sufficiency reflects a systematic failure to grasp the meaning of the events of 1973 — specifically the exact role that OPEC played during this episode and over the subsequent four decades. It is time to take a fresh look at those events, to rethink the U.S. national fixation with energy self-sufficiency, and to focus on solutions that actually have a chance of getting the United States — not to mention the rest of the world — out of the mire.

GAL LUFT and ANNE KORIN are Co-Directors of the Institute for the Analysis of Global Security and Senior Advisers to the United States Energy Security Council. They are the co-authors of Petropoly: The Collapse of America’s Energy Security Paradigm.

Thursday, October 17, 2013

It's Time to Shock O.P.E.C.

We need to use our newfound energy leverage to cause some oil “shocks” of our own.

By Frank Gaffney, Jr., originally published on October 14, 2013, at the Center for Security Policy:

Forty years ago this week, America received a harsh lesson about the dangers of relying on others for energy.  President Nixon’s decision in the midst of the Yom Kippur War to resupply Israel with U.S. weaponry gave members of the OPEC cartel an excuse to embargo oil supplies to this country and drive up prices worldwide.  It became known as the “oil shock” of 1973.

Ever since, politicians of both parties have promised to reduce our dependency on unreliable foreign sources.  To that end over the past four decades, they have invested untold sums on various schemes – from imposing price controls, producing synthetic fuels and subsidizing ethanol production, curbing demand and diversifying overseas sources of supply for oil and natural gas.

Thanks largely to private sector initiatives and funds, however, real progress has lately been made on this longstanding national objective. Finally, the widespread application of technology like horizontal drilling and hydraulic fracturing (better known as fracking) and a series of discoveries of vast quantities of natural gas around the United States and off its coasts have transformed our situation from one of energy dependency to potentially that of the largest energy exporter in the world.

The geopolitical and economic significance of this transformation will be the focus of conferences sponsored by two influential, bipartisan groups in Washington this week.  Former Cabinet and sub-Cabinet officers, senior military personnel and other experts will convene on Tuesday under the auspices of the U.S. Energy Security Council and on Wednesday under that of Securing America’s Future Energy (SAFE) to discuss the oil embargo, the intervening years and where we are today vis a vis those who used energy as an economic weapon against us in the past.

It is very much to be hoped that these conversations will not simply repeat nostrums about the inadvisability of being dependent upon unreliable – to say nothing of actually hostile – energy sources.  Or, worse yet, simply revel in the change of fortunes that will, in the absence of further Obama administration obstructionism, enable us to become again a huge net producer of energy.  (Regrettably, between its pursuit of cap-and-trade restrictions on carbon emissions, overreaching EPA regulations, the campaign to destroy the coal industry and further shenanigans with respect to the Keystone XL pipeline, there is ample reason to expect more official impediments to our energy security, not fewer.)

What is needed now is a strategic approach to using our newfound energy leverage to cause some oil “shocks” of our own.

For starters, the windfall of natural gas deposits being found in this country opens up an opportunity to transform the sector in which we are still almost entirely dependent on oil and its byproducts: the transportation of people and goods via automobiles, busses and trucks.  If natural gas can become widely used in eighteen-wheelers and turned into methanol for use in most modern cars, we could dramatically reduce the amount of gasoline we are obliged to import from the Islamists of OPEC.

What is more, as Nobel laureate George Olah observed in an op.ed. article he co-authored in the Wall Street Journal last week, recent breakthroughs in chemistry are allowing another vast U.S. resource – carbon dioxide – to be cost-effectively converted into methanol.  Far better to burn it in our automobiles and in modified surface transportation and maritime diesel engines than to pay exorbitant sums, as Team Obama has in mind, to try to store it underground.

Best of all, by enabling these alternatives to oil and gasoline to become available across America, we can create fuel choice for consumers – and competition for the cartelists.  The predictable effect would be to drive oil prices down, especially as the scores of other developing nations capable of manufacturing their own alternatives to gasoline begin to do so, as Brazil has already done with ethanol.

The result could be to break the back of OPEC, once and for all.  That, in turn, would help dry up the funding that has done so much for decades to power jihadism and undermine our economy.

This is no longer simply a desirable thing to do.  It is absolutely imperative.  As Center for Security Policy Senior Fellow Kevin Freeman has observed, Mideast oil producers seem determined to join the Chinese and Russians, among others, in terminating the U.S. dollar’s status as the world’s international reserve currency.  Should they succeed in this gambit, the profound and debilitating economic and strategic ramifications will make the oil shock of forty years ago look like the good old days.

Adopting bipartisan Open Fuel Standard legislation and taking such other steps as are necessary to enable fuel choice can help us withstand as well disruptions in oil supply and/or skyrocketing price increases in the event of a new regional war in the Middle East.  We can and must be in a position to deliver the next oil shock, not be its recipient.

Frank Gaffney is the Founder and President of the Center for Security Policy in Washington, D.C. Under Mr. Gaffney's leadership, the Center has been nationally and internationally recognized as a resource for timely, informed and penetrating analyses of foreign and defense policy matters. Mr. Gaffney formerly acted as the Assistant Secretary of Defense for International Security Policy during the Reagan Administration, following four years of service as the Deputy Assistant Secretary of Defense for Nuclear Forces and Arms Control Policy. Previously, he was a professional staff member on the Senate Armed Services Committee under the chairmanship of the late Senator John Tower, and a national security legislative aide to the late Senator Henry M. Jackson.

Wednesday, October 16, 2013

Competition Going Up In Smoke

Do you know what you're looking at? This is a photo from space of the Bakken shale oil fields in North Dakota (circled) flaring off the natural gas that comes up with the oil. This is not the only place in the U.S. that the natural gas is simply burned to get rid of it (rather than captured, turned into methanol or ethanol, and used as a liquid fuel that gasoline would have to compete with).

The Bakken shale fields alone burn an enormous amount of natural gas — the equivalent of one fourth of the natural gas Americans use. What a waste! It could be made into a fuel that could sell for half of what gasoline is selling for. And it burns cleaner.

The Open Fuel Standard could provide a good reason for oil producers to capture this valuable resource. They could sell it as a high-octane fuel rather than letting it go up in flames.

Sunday, October 13, 2013

You Should Be Outraged

In America, we have 487 different kinds of breakfast cereals to choose from. And there are, of course, other things you can have for breakfast besides cereal. But for one of your biggest expenses (fuel), you have only one choice at almost every filling station in the country and with almost every car on the road.

If petroleum was the only fuel that worked, this would be somewhat acceptable. But there are alternatives that are cheaper, burn cleaner, and make your car last longer, and your access to those fuels are being deliberately blocked. That should make our situation completely unacceptable to all of us.

How is our access being blocked? Oil companies make it very difficult or impossible for fuel station owners to offer any other fuel but petroleum. The oil industry has also invested heavily in car companies, which is why we see gasoline-only cars on the road with their flex-fuel capability disabled by the manufacturers, preventing you from having any choice at the pump. The American Petroleum Institute has helped create EPA regulations that prevent widespread use of alternative fuels. And the oil industry spends lavishly to influence politicians in Washington DC. The oil and gas industry employs 736 lobbyists in DC. Just to give you a number to compare that to, the NRA (which is considered a very powerful lobbying group) has 28 lobbyists. Saudi Arabia alone has 100 lobbyists in Washington. And the oil industry also spends lavishly on PR campaigns to discredit alternative fuels.

If this was happening with any other product, people would be completely outraged. But we've grown up with it, so it seems "normal." If there were other choices of breakfast cereal available, but the only one in the store was Cocoa Puffs because the Cocoa Puffs manufacturers were preventing stores from carrying anything else, people would be justifiably up in arms. I know I would. I hate Cocoa Puffs.

And breakfast cereal matters far less than fuel. Especially when you consider two other factors: Oil's monopoly allows OPEC to plunder the world's wealth, and what they are doing with that money is awful for everyone in the world, including their own citizens.

OPEC produces a large enough percentage of the world's oil production that they can cut their production by only a little to raise world oil prices, and they do exactly that. They've been doing it for years. They get together twice a year to determine what price they want, and they keep raising it, and we all keep paying it because we don't have any choice. Saudi Arabia, which has the biggest influence on OPEC, can produce a barrel of oil for less that $2. But they have raised oil to over $100 a barrel. Year after year they reap tremendous windfalls, providing them with almost unlimited funds, which they use to repress their own people, spread violent fundamentalism around the world, and corrupt our government.

This has got to stop, and the sooner the better. Put your outrage into action and let's get it done: Start here.

Friday, October 11, 2013

If You Missed the Energy Victory Webinar

In case you missed the Fuel Freedom's webinar with Robert Zubrin, you can now watch his presentation online by clicking here. It is well worth watching.

A little earlier this month, Fuel Freedom had another important webinar, which is now also available online by clicking here. This is their description of the webinar:

Is energy independence really possible in the United States? Fuel Freedom co-founder Eyal Aronoff will answer that question during his webinar. Presenting the findings of Fuel Freedom’s latest research, Eyal will show exactly what is needed to achieve what every U.S. president since Richard Nixon has pledged to do. Eyal will also clarify what the term “energy independence” actually means, what it would take for the U.S. to become “energy independent” and if energy independence is even possible. The presentation will be followed by a question and answer session, where you can learn even more. 

Watch the webinars here:

When California Had 15,000 Methanol Cars

The following was written by William Tucker, originally published on Fuel Freedom's Over a Barrel:

Do you realize that California once had 15,000 cars on the road burning methanol? And that those drivers loved their performance? But that whole experiment came to an end ten years ago because – get this – natural gas was too scarce and expensive.

In an era when natural gas is cheap and plentiful – when people in the industry are warning that wells may soon be shutting down because there isn’t enough demand for the product – it may be worth going back and taking a second look at what happened in the Golden State from 1988 to 2004.

California, of course, has never been shy about pushing new technologies. At various times the state has pioneered renewable energy, mandated zero-emissions vehicles (electric cars) and tried to establish a “hydrogen highway” for fuel-cell vehicles. Not all these efforts have succeeded and a few have been notable failures. But the methanol experiment, oddly enough, was fairly successful. Now, at a time when it could be seen as prescient, it is largely forgotten

The project began way back in 1988 when memories of the 1970s energy crisis were still fresh and various senators were looking for ways to plug their state economies. The impetus came from a joint effort by Sen. Jay Rockefeller of West Virginia and Sen. Tom Daschle of South Dakota. Rockefeller was looking for a way to promote his coal economy while Daschle had his eye on farm wastes. The ethanol-from-corn effort was already up and running, but both Rockefeller and Daschle recognized that methanol might work just as well and that their home states could benefit. Methanol, after all, can be derived from coal, biomass or natural gas. The result was the Alternative Motor Fuel Act, signed into law by President Ronald Reagan in 1988, which provided a waiver of EPA regulations to allow methanol to be used in cars.

A year later, President George H.W. Bush became an enthusiast, promising to put 500,000 methanol cars on the road by 1996 and a million by 1998. Such presidential promises are often wildly exaggerated, but Ford did take up the challenge and put out a Taurus model that could run on 85% mixes of both ethanol and methanol. This was a time when gasoline had become cheap again, however, and there wasn’t much interest around the country. But California decided to take the initiative.

Mike Jackson, who was the lead technical advisor for the California Energy Commission and now works for Fuel Freedom, recalls the experience: “The original justification was petroleum displacement in response to the 1973-74 crisis, but you learned fairly quickly that that wasn’t sustainable,” he said. “But we realized there were air quality benefits so we shifted in that direction.”

The state partnered with Ford and Volkswagen, agreeing to set up a series of fueling stations if they would bring out cars capable of running on methanol. Then the state started buying methanol vehicles for its various fleets. “It was a technical success but an emotional failure,” Jackson said. “The biggest problem was range anxiety. There were only 10 fueling stations at that time and it just wasn’t enough. There were times when people abandoned the cars on the freeway because they were afraid they were going to run out of gas.”

Then Roberta Nichols, head of the research and development effort at Ford, came up with an idea. Ford would produce a flex-fuel vehicle (FFV) that could run interchangeably on a variety of fuels. The car could handle blends of 85% ethanol or methanol but could switch to gasoline if necessary. Ford produced a Taurus FFV and the program once again went into high gear.

The clean air benefits were adding up and the state started to consider ratcheting down the NOx requirement to the point where the oil companies would have to add methanol or ethanol in order to meet them. Suddenly, the oil companies stunned the state by announcing that they would be able to meet the standard by producing a new “blended” fuel. “Everybody’s jaw dropped,” Jackson said. “Why hadn’t they mentioned this before? But they said they could achieve the same thing by adding MTBE, which is methanol based, so that was it.”

Now the MTBE additive created a new problem for methanol. Since methanol was one of the feedstocks for the production of MTBE, supplies began to be diverted and it became more expensive to use as a substitute fuel. However, MTBE eventually came under pressure because it was getting into drinking water. California and New York banned it in 2004 and most states quickly followed suit. By that time, ethanol was going strong, with more and more of the corn crop diverted into its production, and the 10% ethanol blend became the substitute for oxygenating fuel and reducing NOx emissions. “We ended up with cleaner gasoline technology,” Jackson said. “But we lost sight of the idea of methanol as an oil substitute.”

By this time, the country had fallen into the “Fuel of the Year” syndrome. Hydrogen had a big run in the late 1990s. Then, after the turn of the century, it was the electric car. Somehow methanol got lost in the shuffle. The program limped along until 2004 when the state finally abandoned it. With natural gas selling at $7 per mBTUs and peaking as high as $11, it didn’t seem to have any future.

Now with natural gas supplies flowing in surplus, the California experiment suddenly seems far ahead of its time. Methanol made from natural gas at $3.25 per mBTU could sell at nearly half the price of gasoline made from $100-a-barrel oil. Methanol from coal could revive the flagging fortunes of the coal industry. Methanol reformed in the field could solve the problem of flaring in the Bakken Shale, which now wastes the equivalent of one-quarter of U.S. gas consumption every year.

Yet the methanol initiative is now largely forgotten. And of course there’s always the problem that EPA regulations do not allow it to be used in automobiles. With natural gas surpluses now at the point where a national oversupply is being predicted for 2017, however, it may be time to go back and give the California experience a second look.

Tuesday, October 8, 2013

Energy Victory Webinar Tomorrow

The author of Energy Victory and world-renowned engineer Dr. Robert Zubrin will be speaking to fuel competition enthusiasts tomorrow, Oct. 9th at 11 a.m. Pacific Time. It costs nothing to participate in this online discussion. Hear how the U.S. can bolster its national security by breaking free of oil. Click here to sign up.

Don’t miss out on the opportunity to get the facts and ask your own questions. What do you have to say about flex-fuel vehicles, boosting American economic growth and the future of U.S. energy policy? Dr. Zubrin is one of the most important figures in the fuel choice movement. He originally came up with the idea of an open fuel standard, and his book Energy Victory is the seminal work of the movement.

The webinar is hosted by Fuel Freedom Foundation. They've got a continuing program called Fueling the Conversation, dedicated to reducing the cost of driving your existing car or truck by opening the market to cheaper fuel choices at the pump.

Sign up for the webinar with Dr. Robert Zubrin by clicking here.