Archive for November, 2008


The Three Phony Assumptions About Ethanol

November 10, 2008

There are three assumptions about ethanol that are expounded over and over until the masses are supposed to believe them … but that doesn’t make them true.

Assumption #1: Ethanol will reduce the price at the pump.
When Oregon was having hearings on the mandatory ethanol bill that they passed in 2007, a very interesting question was asked during one particular hearing, of the president of Cascade Grain Products, Charles Carlson. The question was asked by Republican Representative Greg Smith from Heppner, which is interesting in itself because his district was going to have the first ethanol production plant in Oregon come on line soon. Mr. Smith asked if it was really necessary to mandate the E10 law and Mr. Carlson’s response was, yes it was really necessary to mandate E10 because “… we reduce the cost of gasoline at the pumps.” Not one legislator on the hearing panel asked any questions about that totally absurd answer. Some questions certainly come to my mind. How can a monopoly reduce the cost of anything? How can you ever know what an energy commodity based on an agricultural commodity, both of which are traded on the futures market, will cost in the future, especially compared to another energy commodity that is traded on a futures market? Who is so clairvoyant? Turns out that when Mr. Carlson made that statement, ethanol was about $1 / gallon cheaper than a gallon of gasoline, but today ethanol is more expensive than gasoline and the spread is growing. Unfortunately Oregon has no escape clause in its mandatory E10 law. E10 must be produced no matter what the cost of ethanol. Two other mandatory E10 states do have escape clauses which will allow terminals to stop blending ethanol once it becomes more expensive than gasoline, but that is unlikely because of the federal mandate, EISA 2007, and the blending tax credit that the terminal is getting. They will just pass along the higher cost of fuel to the consumer, as always, and pocket the credit.

Assumptions #2: Ethanol will improve air quality
Nobody really has a clue whether this is true. For every study that says ethanol will improve air quality someone has done a study that says it won’t. What is known is that when a car burns E10 some exhaust pollutants go down while others go up. It is so controversial that nobody can say definitively, especially when you factor in the environmental impacts of ethanol production, including the growing Gulf of Mexico dead zone and the clearing of rain forests in third world countries to either plant more sugar for ethanol or to replace the loss of food crop imports, especially soy beans.

Assumption #3: Ethanol will reduce our dependence on foreign oil.
This is the most interesting assumption and the most stated as fact by the ethanol industry and their supporters, but it is obvious that it is just a figment of their imagination based on a single empirical fact with no real world verification.

Fact: ethanol only has about 2/3 the energy of gasoline.

So if you blend it with gasoline at the 10% blending level you would expect about a 3% decrease in mileage because of the reduced energy output of the resulting fuel. You would expect to see this decrease over a statistically large sample of cars. If it were true, E10 would provide about a 7% reduction in fossil fuel usage in cars. The problem is that nobody has ever done a statistically significant, independent study of the mileage loss.

The wrinkle is that all of our modern cars have computer controlled fuel injection and timing systems. Nobody has a clue what the computer does when it sees a new fuel with 10% ethanol in it. The computer collects information from some sensors, one is a ping sensor which adjusts timing, one is an oxygen sensor in the exhaust system that adjust fuel/air ratio based on how much oxygen is present in the exhaust and there may or may not be a few more sensors, probably depends on your make and model and whose fuel computer and sensors the manufacturer bought that year.

Anecdotal evidence in Oregon, after the mandatory E10 law was passed, indicates that a significant number of vehicles are suffering a greater than 10% mileage decrease with the introduction of E10. If this is the case, then we haven’t reduced our dependency on foreign oil at all, we may have actually increased it. But nobody can be sure because the independent analysis has never been done and nobody has ever asked what modern car fuel computers do. Actually you may never get an answer to the fuel computer question because I’ll bet the software is a proprietary trade secret with each company that makes them, because if you google for this information you find no information whatsoever.