With oil topping $135 a barrel, ethanol must be cheaper than gasoline, right? Not if you adjust for the fact that ethanol has about 30% less energy content than gasoline by volume.

The American Automobile Association monitors daily average national prices for gasoline and E-85, motor fuel blended with 85% ethanol and 15% gasoline. When the ethanol fuel-economy penalty is taken into account, E-85 cost $4.704 a gallon compared to $4.486 for premium gasoline and $4.078 for regular gasoline. Here’s today’s chart from the AAA’s Web site:

Read More | Category: Economics of Ethanol

 That’s what two Cornell University economics professors argue in the commentary below, published by Resources for the Future

The Forgotten Flaw in Biofuels Policy: How Tax Credits in the Presence of Mandates Subsidize Oil Consumption

Resources for the Future, June 9, 2008

 Harry de Gorter and David R. Just
Gasoline prices are at record highs, and there is widespread public confusion over the reasons why and who is really to blame. But the devil is all in the details. Here we will look at one aspect of the ongoing policy arguments over the effect of biofuel mandates on food prices and the environment. Far more corn grown in this country is now going toward fuel production, not food consumption, causing food prices to escalate around the world. And many recent studies argue that indirect land-use changes - resulting from farmers shifting from other crops to corn and taking land out of conservation to plant even more - may enhance greenhouse gas emissions. What is left out of the debate is a significant contradiction in current biofuel policy: tax credits subsidize petroleum-based gasoline consumption when used in conjunction with mandates. This has very important implications because the primary goal of biofuel policy is to reduce dependence on oil. (more…)

Read More | Category: Energy Security, Economics of Ethanol

“Some of the most commonly recommended species for biofuels production are also major invasive alien species,” the paper says, adding that these crops should be studied more thoroughly before being cultivated in new areas.

A friend of mine jokes that green lobbying groups love any and every form of energy–as long as there is no market for it. As soon as a market develops–even a government-contrived market–the greens decry the environmental impacts and organize opposition. For example, Rober Kennedy, Jr. professes to love renewable energy–until somebody tries to build a wind farm in Nantucket.  Greens were once keen on corn-ethanol and bio-diesel, but now many condemn these so-called first-generation biofuels for contributing to deforestation, water pollution, and greenhouse gas emissions. Will their love affair with cellulosic ethanol similarly grow cold? 

May 21, 2008
New Trend in Biofuels Has New Risks
By ELISABETH ROSENTHAL, New York Times

ROME — In the past year, as the diversion of food crops like corn and palm to make biofuels has helped to drive up food prices, investors and politicians have begun promoting newer, so-called second-generation biofuels as the next wave of green energy. These, made from non-food crops like reeds and wild grasses, would offer fuel without the risk of taking food off the table, they said.

But now, biologists and botanists are warning that they, too, may bring serious unintended consequences. Most of these newer crops are what scientists label invasive species — that is, weeds — that have an extraordinarily high potential to escape biofuel plantations, overrun adjacent farms and natural land, and create economic and ecological havoc in the process, they now say. (more…)

Read More | Category: Environment

A column in today’s Greenwire [subscription required] reports that POET, the nation’s largest ethanol producer, won an $80 million DOE grant to turn corn cobs into ethanol.  Greenwire also notes that in December 2007, Congress upped the tax credit for cellulosic ethanol to $1.01 per gallon.

John Ashworth, a team leader at DOE’s Renewable Energy Laboratory, predicts that as gasoline prices continue to rise, carmakers will produce more flex fuel (E-85-capable) vehicles, and gasoline stations will install pumps like those in Brazil, which offer a wide range of ethanol blends. He estimates that by 2010 or 2011, POET and its competitors will produce about 200 million gallons of cellulosic ethanol a year.

Read More | Category: Subsidies and Mandates, Economics of Ethanol

The planned $12.5 billion in new outlays on bio-refineries seemed to make sense when crude-oil prices began rocketing last year. But the price of palm oil — produced widely in Southeast Asia — has climbed even more steeply, making biodiesel plants that use the commodity commercially unviable.

 Costlier Palm Oil, Europe Oversupply Cast Cloudy Outlook

By TOM WRIGHT
April 30, 2008

JAKARTA, Indonesia — Plans to invest billions of dollars in biodiesel refineries across Southeast Asia have been put on hold as the prices of key raw ingredients — particularly palm oil — have shot up amid surging food demand in China and India. (more…)

Read More | Category: Environment, Economics of Ethanol

The World Bank’s World Economic Outlook 2008  reports that, “although biofuels still account for only 1.5 per cent of the global liquid fuels supply, they accounted for almost half of the increase in consumption of major food crops in 2007-07, mostly because of corn-based ethanol produced in the United States.” [p. 60] 

Read More | Category: Food or Fuel?

Quotes below from Brian Jennings, thanol lobbyist.

All clips and quotes taken from the Brownfield Netork

A coalition of anti-ethanol groups led by the Grocery Manufacturers Association (GMA) continues its effort to get Congress to change the Renewable Fuels Standard. Brian Jennings is Executive Vice President of the American Coalition for Ethanol (ACE), they are doing everything they can to counter the GMA effort. He says they have the facts to support the Renewable Fuels Standard but, “A lot of these groups have decided the facts don’t matter.”

Facts don’t matter?!?! Be careful of throwing stones from a glass house, Mr. Jennings:

ACE Says: “The food processors would like us to remove ethanol from the marketplace.”

Fact: All they have called for is a freeze in the ethanol mandate, not a removal of ethanol from the market place.

ACE Says: “We all know that high fuel prices are the primary factor leading to higher food prices.”

Fact: We know no such thing, … USDA says fuel prices are 3 pct of retail food costs - commodity prices are 19 percent.

ACE Says: “The Grocery Manufacturers would like the public and Congress to think that ethanol is the only reason behind food prices and that is very dishonest”

Fact: The food industry has said that ethanol is one of the key factors, not the only one. It is ACE and Mr. Jennings’ rhetoric that is very dishonest.

Read More | Category: Food or Fuel?, Economics of Ethanol

Cattle herd liquidation seen as troubling sign
Wednesday, May 21, 2008, 4:15 PM

by Peter Shinn

The Daily Livestock Report published by the Chicago Mercantile Exchange on Tuesday noted troubling evidence of cattle herd liquidation. The report’s author’s, livestock economists Steve Meyer and Len Steiner noted an increased pace of cattle slaughter this year amid steadily climbing feed costs.

“Despite high cow slaughter rates in 2006 and 2007, current cow slaughter remains well above year ago levels,” the Report said. “Weekly beef cow slaughter in April was an average 10.4% higher than the already high levels of a year ago and 21.7% higher than the 2003-07 average.”

DTN Chief Livestock Analyst John Harrington agrees with that assessment. Harrington told Brownfield Wednesday the slowly dwindling U.S. cattle herd hasn’t yet fully translated into higher costs to consumers. And when that happens, Harrington suggested the entire dynamic of beef consumption in America could change.

“Beef may become very expensive and something you eat relatively rarely and more likely in a restaurant than anyplace else,” Harrington said. “I’m not predicting that, but certainly that’s a concern.”

But Harrington has a bigger concern. He pointed out the average age of beef producers is getting older, not younger, reducing the incentive to ramp production back up even when prices do improve.

“It’s a very difficult decision for many of these guys to say, “Well, you know, I’m going to expand the herd. Oh, yeah, Junior doesn’t want to come back. I can’t find any help. So what am I thinking of? I’m closer to retirement than anything else.’” Harrington explained. “So this is the factor that I think we kind of have to struggle with.”

As for the possibility of big future beef demand increases, Harrington emphasized the most potential still lies overseas. And he noted sanitary and phytosanitary trade barriers still limit opportunities for U.S. beef in that arena.

“We’ve got to continue to grow that foreign market, and as you know, that’s been kind of difficult,” Harrington said.

Read More | Category: Food or Fuel?, Trends, Latest News

REUTERS: USDA HEAD DOWNPLAYS CALLS TO CUT BIOFUEL MANDATE

By Christopher Doering

May 19, 2008

WASHINGTON (Reuters) - Agriculture Secretary Ed Schafer said ethanol is not having a “major” impact on food prices, and downplayed calls by lawmakers and industry groups to make changes to programs that promote increased use of biofuels. (more…)

Read More | Category: Food or Fuel?

BIOFUELS: Hutchison pushes for ethanol mandate freeze

By Josh Voorhees, E&ENews PM reporter

May 19, 2008

 Sen. Kay Bailey Hutchison (R-Texas) today floated legislation [subscription required] to freeze the corn ethanol mandate at its current level of 9 billion gallons a year. (more…)

Read More | Category: Federal Legislation