Corn is Food - Not Fuel

One of the great things about summer is the ability to have corn on the cob.


Corn is great, but there is no comparison to eating fresh corn right off the cob.

Which makes taking corn and turning it into ethanol fuel a huge tragedy and I dare say even a crime. We should not be turning corn into fuel or corn syrup either! We should be growing this corn for the benefit of the planet, especially those who live in constant hunger. (Or better yet, how about letting farmers plant other than grains out there...)

Now someone is going to point out that ethanol is not normally made from 'sweet corn' which is pictured above, but from 'dent corn'. During some debate a year or two ago, there was one congressman waving a cob of dent corn declaring that nobody eats it, so it is 'OK' to turn it into fuel. Well that is just B.S. For starters, cornmeal is made from dent corn and livestock eat dent corn. And when you start turning it into fuel, you now create a competing demand for the product resulting in increased prices all around. So in the end we are not saving any money, we are just shifting where we pay. This means that the price of ethanol made from corn does not reflect the true price of making it nor does the claimed benefits of reduced reliance on foreign sources of fuel reflect the other costs to society.

There is plenty of fuel in the US that can be used for fueling the country, if the Democrats will let us drill for it. Let's leave the corn for the dinner table.

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A (GOVERNMENT CONTROLLED) TAXI METER FOR EVERY CAR IN AMERICA!

Remember, the President promised no tax increases for 95% of working Americans. Too bad he forgot to tell his fellow Democrats in Congress.

WASHINGTON (AP) — A House committee chairman said Tuesday that he wants Congress to enact a mileage-based tax on cars and trucks to pay for highway programs now rather than wait years to test the idea.

Rep. James Oberstar, D-Minn., said he believes the technology exists to implement a mileage tax. He said he sees no point in waiting years for the results of pilot programs since such a tax system is inevitable as federal gasoline tax revenues decline.

"Why do we need a pilot program? Why don't we just phase it in?" said Oberstar, the House Transportation and Infrastructure Committee chairman. Oberstar is drafting a six-year transportation bill to fund highway and transit programs that is expected to total around a half trillion dollars. - AP

Here is Democrat Wisdom for you: Can't Raise Taxes, Just Invent a New One!

Outfitting every car and truck in America with tracking devices just to collect more tax has to be one of the dumbest ideas, ever. Cars are already taxed in relation to how much they drive through a tax on gasoline. Sure, the rate is different for everyone, based on how much your car consumes as well as how much city/highway driving you do. However, everyone who drives pays and there is no need to make any changes to the cars (such as adding hundreds of dollars of GPS tracking and metering equipment) as the tax is collected at the pump. People who choose hybrid cars save money because their cars use gasoline efficiently and people who choose gas guzzlers pay more for their style choice. Keeping the car in the driveway costs nothing. One reason Democrats give for having a gasoline tax is to encourage drivers to conserve gasoline. Unfortunately for the rest of us, conserving gasoline means less tax money for Congress to waste. So our reward for being better citizens is more taxes. In this case a tax on every mile that you drive your car.

A mileage tax on cars is like putting a Government-controlled taxi meter in every vehicle in America.

The tax would entail equipping vehicles with GPS technology to determine how many miles a car has been driven and whether on interstate highways or secondary roads. The devices would also calculate the amount of tax owed. - AP

As a bonus, this taxi meter is going to also track where your car has been.

Clearly, the simple solution to generate more tax revenue with a declining demand is to just raise the gasoline tax. There is just one problem the Congressman has with that plan. He can't get anyone to agree to raise it because the idea of doing that is so unpopular with voters. So instead he proposes this idiotic solution to get around this obstacle.

"At this point there are a lot of things that are under consideration and there is also a strong need to find revenue," Oberstar spokesman Jim Berard said. "A vehicle miles-traveled tax is a logical complement, and perhaps a future replacement, for fuel taxes."

Gas tax revenues — the primary source of federal funding for highway programs — have dropped dramatically in the last two years, first because gas prices were high and later because of the economic downturn. They are forecast to continue going down as drivers switch to fuel efficient and alternative fuel vehicles.

Transportation Secretary Ray LaHood has ruled out raising gas taxes to make up for the funding shortfall, and the White House has rejected a mileage-based tax. They have not offered an alternative. - AP

Watch out when a Congressman does not get his fill of tax. Reasonable minds would look at where the money is going and try to cut out waste, but not this guy. And look where lots of (highway?) tax revenue is going.

The tax credit in question originated from a 2005 highway law and was intended as an incentive to mix alternative energy sources, such as ethanol, with fossil fuels. In 2007, the credit was expanded to include non-transportation fuels.

Some papermakers who generate electricity by burning a wood byproduct called "black liquor" saw an opportunity to capitalize. But to qualify for the credit, which only applies to mixed fuels, paper companies have had to start adding in small amounts of diesel, Mason said.

By doing this, Mason estimates that the windfall for 30 paper-producing companies in the United States may reach about $6.6 billion and could rise as high was $10 billion. - MinnPost

So companies that were already using a 'green' byproduct to power their factories, are now being paid a huge subsidy by the Government by twisting a law that was intended to promote the use of 'green fuels'. (Note: I do not blame the companies for doing this.)

Instead of being pissed off at the perversion of a Government program resulting in Billions in wasted tax revenue, this ass of a Congressman has no problem with it, because it subsidizes jobs in his district!

"I think the production of biomass is an important part of energy dependence and good tax policy," said Schadl (John Schadl, spokesman for Rep. Jim Oberstar, D-Minn). "You are not going to see us apologizing for the fact that there aren't layoffs in Cloquet. That is a good use of the tax credit, to keep people in their jobs." - MinnPost

Face it. There is no way that the US will ever be able to provide our pork-addicted Congress with enough tax revenue to meet their agenda. Not only will they turn every car in America into a tax collecting machine, but they will have tracking collars around all our necks before long because you know, once we all get wired up, they are going to need more money and they will realize that this newest tax generation device does not tax us when we are out of our cars.

Hey, my car uses gasoline that contains 10% ethanol. Where do I apply for my tax credit?

P.S.

One real screw in this tax meter plan of Congressman Oberstar is that we are already taxed on lots of roads that we drive on. Are they going to tax us for driving through Delaware on I-95 where the tolls per mile cost more than the cost of gasoline to drive through the state? Is this little machine going to tax us for driving on our own property and on local roads and 'unimproved' roadways? And if the answer is that they will not be taxing us on all roads, why should people who do not use them have these meters installed in their cars?

And how are they going to prevent massive fraud by users disabling these machines? That might be as simple as blocking the GPS signal. It would be impractical to integrate these machines to existing cars in a way that would defeat tampering. And if they ever did manage that feat, surely people will just start not registering vehicles because they can't afford the taxes that come with it. This would be a real possibility out west where the distances to be driven are large and the possibility of an encounter with law enforcement minimal. Then again, you register your car with your state, not the Federal government. So would they expect State Authorities to enforce Federal Tax-Meter regulations?

Surely there are many more issues out there that this Congressman is not interested in hearing about.

Links:
Top lawmaker wants mileage-based tax on vehicles - AP
Paper firms to reap billions from tax credit -- but should they? - MinnPost

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Impending Ethanol Shortage?: Update

On May 9th I documented that we are most likely headed for an ethanol shortage. After all, Brazil is the world leader in ethanol production and all of the news reports were wishing that only if the US could produce ethanol like Brazil. As I noted, we ALREADY produce about the same amount of Ethanol as Brazil. Check out the chart:

You can see that the only real potential source of foreign ethanol is Brazil, and as we all know, they use their ethanol as a replacement for imported oil. They are not likely to have that much to sell to us, especially when you take into consideration our potential demand for ethanol. If all gasoline used in the US was required to contain 10% ethanol, current US ethanol production would have to triple, assuming that 100% of the ethanol produced was used for blending with gasoline. Even if all of Brazil’s current ethanol production was imported, we would still be about 50-70 million barrels short to meet the 10% goal and as we all know, there are other uses for ethanol. See the graph below:

Currently, about 13% of all corn grown in the US goes to ethanol production. It is now estimated that approximately, 20% of all corn grown in the US this year will be used for ethanol production.

WASHINGTON, May 12 (Reuters) - The booming ethanol industry will consume 20 percent of this year's U.S. corn crop, the government forecast on Friday, and soy-based biodiesel also is taking off. Biofuels will bolster corn and soybean prices, the Agriculture Department said in its first look at this year's crop harvest. Voracious demand for corn from ethanol makers will help cut the corn (maize) surplus in half by fall 2007, or 1.14 billion bushels. - Reuters

The article also notes that the amount of corn used for ethanol production this year is up 34% from previous years. Currently there is a surplus of corn, but I wonder how long that will last. As it is, the demand for corn to produce ethanol has resulted in near decade highs for corn prices as exports are also up according to the article. At some point in the near future I suspect that we may face a tough choice of what to do with our corn harvest, use it to feed or to fuel. This will most likely harm international food programs, such as the World Food Program, as excess food can easily be converted to fuel for profit instead of giving it away as in the past. There is also the question of what do we do if the crop has a bad year?

Just today, we have Senator Clinton calling for a massive increase in ethanol usage.

Clinton is calling for the creation of a $50 billion "Strategic Energy Fund" paid for by increased profits of the big oil companies. She had urged the creation of such a fund last fall when hurricane damage in the Gulf Coast sent the price of gas soaring.

She is also calling for a massive expansion of ethanol, a corn-based fuel additive and substitute, which is currently only available at a small percentage of gas stations in the United States.

President Bush and other elected officials have called for a greater expansion of E-85, a fuel made of 85 percent ethanol that can be used in vehicles built to run on both regular unleaded gasoline and E-85.

Clinton's speech calls for accelerating the spread of E-85 to half of the nation's gas stations by 2015 by offering a 50 percent tax credit for station owners who install ethanol pumps. - Yahoo News

As I noted in my previous post, the US would need over 279 million barrels of ethanol a year to replace just 10% of current gasoline consumption with E-85. This year the US is expected to produce 107 million barrels of ethanol, less than half of what would be needed.

Fortunately, there are plans to produce 'cellulose ethanol' from sources other than corn, like switch grass, as well as agricultural (farm) waste. So instead using the corn, you can use the corn stalks. Hopefully, these new processes will be available in time to meet the increased demand.

Impending Ethanol Shortage? - 09 May 2006
BIO ETHANOL AS A TRANSPORT FUEL (PDF) - Fonterra (source of Charts above)
UPDATE 1-Ethanol, biodiesel eats into US corn stockpiles - Reuters
Ethanol: Myths and Realities - Business Week

Home

Impending Ethanol Shortage?

Just imagine, an energy company announcing that profit has risen 29% on strong demand and there is no outrage from Congress? Well this is the good fortune of Archer Daniels Midland.

Profit in the corn processing division, which includes the manufacturing of ethanol, increased $41 million to $219 million for the quarter. The company also cited improved selling prices for corn starch and sweetener. ADM is among the biggest processors of soybeans, corn, wheat and cocoa and produces soy meal and oil, biodiesel, ethanol, corn sweeteners and flour, with more than 250 processing plants.

Not bad. I’ll have to take a closer look into this company’s stock (ADM). What is not mentioned above is that they also managed to increase the quarter’s operating profit by 46%! (PDF release) The Wall Street Journal also mentions the following concerning ADM and Ethanol.

It expects ethanol prices to rise in the next two quarters, company executives said during a conference call with analysts Tuesday. The company plans this week to ask its board of directors to take a look at building a second U.S. ethanol plant, to produce fuel from corn. The company said it expects that industrywide, U.S. ethanol capacity will increase from 4.5 billion gallons this year to 6.5 billion gallons over the next 12 to 18 months. - WSJ

4.5 billion gallons of ethanol sounds like lots, at first. It is the same amount as 107 million barrels of ethanol produced in the US this year. That equates to almost 294 thousand barrels of ethanol produced each day in the US.

According to this Fortune Article, US gasoline consumption is about 9 million barrels per day. To blend all gasoline used in the US to contain 10% ethanol would require 900,000 barrels of ethanol each day. This means that current US production can only cover about 4 months ethanol demand assuming that 100% of domestic ethanol production is used for blended gasoline with 10% ethanol. Four months would cover the summer months so theoretically the numbers fit, except that it takes a full year to manufacture the ethanol needed for blended gas. This leaves nothing for other uses such as E-85 that we are seeing adds for. (Live Green Go Yellow) E-85 is fuel which is 85% ethanol and 15% gasoline.

The US would need over 279 million barrels of ethanol a year to replace just 10% of current gasoline consumption with E-85. This does not take into account that E-85 gets less mileage than gas, requiring more E-85 to go the same distance with a gallon of gas, nor does this estimate account for any other needs, such as for blended gasoline, as well as other demands for ethanol. From the following chart, you can see that there are other demands for ethanol.

Take this from the Ethanol Facts website:

About 30 percent of the nation’s gasoline contains ethanol—and most of that is in the form of E-10 Unleaded. In some areas of the nation, ethanol is blended at rate less than 10 percent due to state-specific regulations. (On the other hand, some states are considering increasing the standard blend to 20 percent ethanol.) - Ethanol Facts E-10

These numbers mean that current domestic Ethanol production can barely meet domestic demand, explaining why ADM is interested in building a new ethanol plant. There is currently a need to import ethanol. Unfortunately, there is a 54 cent per gallon tax on imported ethanol. This equates to 5 cents per gallon of gas that includes imported ethanol.

Imported ethanol is most likely to be used near large ports, such as NY where there is high demand and shipping in imported ethanol is cheaper/simpler than moving domestic ethanol from the heartland to the coasts since it is not possible to move ethanol through existing pipelines. These areas also tend to have higher gasoline prices than other parts of the nation. Since we need to import ethanol, you would think that congress would be eager to repeal the import tax in order to provide relief to consumers. Think again:

"It's a step in the wrong direction," Sen. Charles Grassley, R-Iowa, said Friday. He is chairman of the Finance Committee, which would consider any change in the tariff. "It would send a signal that we're backing away from our own efforts to seek energy independence."

The panel's top Democrat, Sen. Max Baucus, D-Mont., also said that a change in the tax would be a mistake. House Speaker Dennis Hastert, R-Ill., whose state has the biggest ethanol producer, Archer Daniels Midland, also opposes a tax change.

If the administration tries to move on its own, says Sen. Byron Dorgan, D-N.D., whose state is another center of ethanol production, "they would run into a big fight in Congress." - Chron.com

Not only is our congress going after the oil companies, but at the same time they are going to sell out the whole country for some votes back in their home states. The silly thing is that there no need for protectionism. Just where is all of this foreign ethanol going to come from?

Take Brazil’s ethanol revolution which has been all over the news. Certainly they must be a threat to our domestic ethanol industry. Think again. Brazil produces about the same amount of ethanol as the US (5 billion gallons/year.)

Just where does Congress think we are going to import all this Ethanol from?

Currently, about 13% of all corn grown in the US goes to ethanol production. The Department of energy things that the ability to produce more ethanol from corn is limited. There is plans to produce ethanol from other materials but that is still a couple of years off. The problem is Congress set the wheels in motion for increasing ethanol demand. The questions are, can increased production meet demand and will Congress sit on the sidelines while American users are gouged by the producers of ethanol?

P.S.

I thought that the purpose of putting ethanol in gasoline was to help reduce our dependence on foreign oil. However, as Oxblog points out, Senator Durbin sees that including Ethanol in gasoline as a way of revitalizing the small-town America.

SEN. DURBIN: At this point in time, I tell you there is a boom now and opportunities for these ethanol production facilities. I want to see that happen. You know why? Because in downstate, small town America, that I represent as well, these are the best job opportunities they can find. These are business opportunities in communities that have otherwise almost given up. They have a chance now. And if you’re going to allow us to become, allow this import of fuel from Brazil we may find ourselves as dependent on foreign ethanol as we are today on foreign oil.

So we can partly thank Senator Durbin for the high price of gasoline as he sees ethanol in gasoline as a good way to subsidize small-town America. Not that farmers already get tons of subsidies as well as price protection. (i.e. sugar.) The joke is, farmers are always claiming that Government actions make their products too expensive to market. They receive Government money which results in overproduction. They then look to export their overproduction. The Government says "That's great, but you must use US-Flag ships to export the grain with." They then complain to their congressmen that the Government is driving them out of business. My question is, at what point did their business become uneconomical? How about at the point they asked for aid. Of course the requirement to use US ships is a way to subsidize US shipping. Funny how the farmers see it differently.

Note: This is part 1 of 3 concerning Gasoline, Congress and ExxonMobil. Keep in mind that I am currently an owner of a small portion of exxonMobil and BP.

Archer Daniels Midland Profit Rises 29% on Strong Demand - WSJ
Archer Daniels Midland - Homepage
Mixing Gasoline and Moonshine – Cato Institute
$3-a-gallon gas: Blame Washington, not Big Oil - Fortune
Congress Opposes Ethanol Tax Change - Chron.com
BIO ETHANOL AS A TRANSPORT FUEL (PDF) - Fonterra (source of Charts above)
National Corn Growers Association
Ethanol Facts
E-10 Unleaded