[fishpoopoo]

Originally Posted by parishht

I am a firm believer in changing over to ethanol.
At least all the farmers will be able to get a good price for their crops.
We could also put more farmers back to work.

ethanol is a politically convenient FRAUD.

i offer you a bit of original, insightful, reasoned and informed analysis that you won't get anywhere else.

there is no easy fix ... if there was we would have seen it by now.

read on and be enlightened.

President Bush called for an increase in the biofuels usage mandate to 35 billion gallons by 2017. The current mandate increases to 7.5 billion gallons by 2012. So, this is a call for a very significant increase in the mandate.

For some perspective, total annual gasoline consumption should grow to around 150 billions by 2017, while total diesel and heating oil usage should grow to about 75 million gallons. So, a mandate for 35 billion gallons by 2017 would represent about 15% of the future total fuel supply (some 225 billion gallons).

Is that realistic? In short, probably not. Existing gasoline-powered vehicles can run up to 10% ethanol, so that could account for about 15 billion gallons of demand. Increases in ethanol demand beyond that would require very significant increases in the number of ethanol-powered cars (which can run on 85% ethanol). However, the lack of widespread ethanol distribution infrastructure and the lower mileage of ethanol-powered vehicles could significantly reduce their desirability/feasibility over the next 10 years. Further, growth in ethanol production to just 15 billion gallons would require the usage of 5 billion bushels of corn – about half of projected corn production (despite expectations for acreage yield increases from improving seed technology). A mandate of 35 billion gallons would require essentially ALL of the projected corn production. Lowering tariffs to Brazilian ethanol could provide some incremental supply, but increasing imports would probably not be viewed as increasing energy independence (although reliance on Brazil is probably safer than reliance on many oil-producing countries) So, I think there are significant barriers to ethanol going above 15 billion gallons (and maybe even getting to 15 billion gallons).

As for diesel, my understanding is that there is no real limit to the amount of biodiesel that can be blended into diesel. And, the distribution infrastructure already exists. And, biodiesel gets similar mileage to regular diesel. So, many of the limits on ethanol production do not pertain to biodiesel. The big constraint is the supply of oil inputs (primarily soybean oil). Even increasing production to about 1.5 billion gallons would require about 12 billion gallons of soybean oil. But, that would use about 1/3 of soybean oil production. Importing other oils (such as palm oil from southeast Asia) could provide some incremental supply, but there are environmental concerns with destroying rainforest to plant palm, and again, relying on other regions may not be viewed as moving toward independence.

Further, both ethanol and biodiesel production use natural gas or electricity which is based on natural gas. Large increases in biofuel production could necessitate imports of liquefied natural gas – increasing dependence on LNG producing regions. So, again, if the goal is energy independence, that could create some contradictions. Further, burning natural gas produces about 75% of the carbon emissions of burning oil – certainly less, but the net reduction may be smaller than realized.

So, I think overall the crop supply (and ethanol distribution and mileage constraints) and natural gas supply put pretty significant limits on biofuel production going much above about 15 billion gallons. The only way to get to anything like 35 billion gallons would be for cellulosic ethanol to become economic. This would involve using enzymes to break down various plant matter (switchgrass, etc.) to produce ethanol. My understanding is that the enzymes are still very expensive and that production costs can be about $4-to-$5 per gallon. There is also environmental concern over control of the enzymes – obviously, the potential for escape of enzymes designed to break down all plant matter could present an environmental hazard. It is certainly possible that the costs of cellulosic ethanol will come down dramatically and that the enzymes can be adequately controlled – but, that is obviously a big question. Cellulosic ethanol would still have the hurdles of lack of ethanol distribution infrastructure, lack of significant numbers of E85 vehicles, lower ethanol mileage, and increasing natural gas usage – however, it would “solve” the lack of adequate crop inputs (corn and soybeans).

The big picture remains that the amount of political support for biofuels is huge and across the political spectrum. The government appears to be willing to highly support all biofuel alternatives – if the economics don’t work, the government may be willing to make them work. In the current (and expected 2007) commodity price environment, biodiesel does not appear to be economic – will the government do what is necessary to make it economic (increase tax credits) in the face of higher crop prices, higher beef prices, higher food/beverage prices, and the requirement for higher taxes/lower spending/higher deficit? The political will certainly appears to be there now.