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CBO Set to Assess the Use of Ethanol Blends

By Bruce Krasting | Thu, 25 April 2013 22:02 | 3

I got a laugh reading this one from the CBO (Link).

Congressional Budget Office

The cost of the review of ethanol is a measly $1m. Why has it taken so many years to have this study? More importantly, what happens if this study shows that ethanol is proven to be a dud? Answer:

No later than 30 days after the assessment is completed, EPA would be required to submit a report to the Congress, indicating whether the agency agrees with the study’s findings. The NAS and EPA would have 18 months from the time of enactment to complete the study. Mid-level ethanol blends could not be sold until after EPA issues its assessment report.

Related article: Turning Fruit Trees into Biofuel

A few data points on ethanol:
- 10% of all gasoline sold contains ethanol. That comes to 13 billion gallons of alcohol, $25-30b of cash flow a year.
- The energy content of ethanol is 33% less efficient than gasoline by volume.
- Using E10 (10% ethanol) reduces mileage by 3.3%.

Americans drive 3 Trillion miles a year (incredible). If all of the drivers used blended gas containing 10% ethanol it would mean that the reduced efficiency would cost drivers 100b miles a year, or $350B. The actual losses to drivers is less than that calculation as not all gas consumed has ethanol, but the number that consumers pay as a result of ethanol is well in excess of $50b – serious money.

The politics of ethanol is interesting. The House Bill that would force the review of ethanol comes from Congressman Lamar Smith (R-TX). Lamar is the head of the Committee on Science, Space and Technology (CSST). Smith also represents Texas. Does Congressman Smith have an axe to grind in this story? Sure he does – Texas is oil and refining. Those who produce oil and the refiners who convert it into gasoline have a lot at stake. If ethanol is scrapped, then big oil and big refiners will win big. One can be pretty sure that the ‘results’ of the proposed study are already known. H.R. 875 would not have gotten as far as it has unless guys like Lamar Smith already know the answers on ethanol.

Ethanol is a renewable energy source – so that makes it Green. The Administration, and a fair number of Democratic Senators have IOUs to the Greens. The folks who want ethanol have a very big support base. That support base includes environmentalists, corn growers and ethanol producers – but it doesn’t include consumers.

Related article: Big Numbers, Big Profits: The Fleetingly Lucrative RIN Trade

There are some market related consequences to H.R. 875. Should it pass, it will knock the ethanol producers for a loop, the refiners will see a benefit, and I wouldn’t want to be long corn if this Bill comes into being.

I’m not worried too much about the companies who make ethanol, nor do I think that corn is headed for a tumble. H.R. 875 will never see the light of day. And that is the joke in this story. For a lousy million bucks the answers to this could be available for the public to consider. But the public will never have a chance to see those results. We will continue to burn our food and use inefficient energy supplies for years more to come. Welcome to America and its stupid politics.

By. Bruce Krasting

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  • Mark chambers on April 26 2013 said:
    Too much of the general industry's is committed to the drug industry. You'll do anything for your dealer, even cop for a judge to probate money. Regardless of the efficiencies, because ethanols skip the refining process, they are safer from the industrial accidental point of view. The only advantage to crude oil and gas is that once discovered, it can come out the ground freely.
  • jbutzi on April 26 2013 said:
    This has bothered me for a long time...turning food into an inferior fuel. Is the total percent of US corn turned to fuel up to 40% now? Wow. Is it all a result of ag and enviro lobbies? When does common sense get a hearing. Sorry, if that sounds idealistic, but really.
  • libert on April 26 2013 said:
    Environmentalists are pro-ethanol? That's news to me. NRDC, Greenpeace, and EDF are all opposed to corn ethanol.

    See here

    http://switchboard.nrdc.org/blogs/slyutse/new_nrdc_fact_sheet_shows_how.html
    http://www.greenpeace.org/usa/en/news-and-blogs/news/ethanol-is-not-the-answer-sto/
    and
    http://blogs.edf.org/climate411/2008/04/29/corn_ethanol_standards/

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