The Ethanol in Gasoline Scam...

[Gewehr98]

In 2007, 27% of the corn crop in the USA was processed into ethanol.  Ethanol displaced 1% of the total amount of gasoline used by the USA in 2007.

Sources, please.  Exxon-Mobil website?

[Creeping Incrementalism]

In 2007, 27% of the corn crop in the USA was processed into ethanol.  Ethanol displaced 1% of the total amount of gasoline used by the USA in 2007.

Sources, please.  Exxon-Mobil website?

You post E85 facts from a corn-growing association, and then criticize someone for potentially using facts from the oil industry?

This must be a joke, buy I don't see a humorous tone in your post.

[ilbob]

Ethanol has only about 2/3 the BTUs per gallon as gasoline, so you should see some significant reduction in gas mileage when using a 10% ethanol mix. But it should be something on the order of about 4% less than straight gas if the engine is tuned efficiently. A lot of car engines are not tuned to use the mixture very well.

[Lennyjoe]

Gewehr98, at least you can get E85.  Closest one to me is Frederick or just short of DC.  They want 3.89 per gallon of E85. 

I think that's nuts.  I'd have to drive 30 miles to save .10c per gallon to get E85.  Not worth it to me.

BTW, my F-150 is flex fuel but it does me no good here in WVA.

[StopTheGrays]

Ripoff?  Yeah, sure.  I paid $2.99/gallon to fill up on E-85 last night.  Gasoline was $3.99/gallon.  That's an honest $1.00/gallon difference, so even if I got a worst-case 15% difference in mileage, I still make out very much ahead on miles/dollar.

Is the E-85 price a result of any tax payer subsidy to reduce it's cost at the pump? If true, what is the true price at the pump for E-85 then?

I assume gas has a little subsidy but I was under the impression that the ethanol subsidy was at $.50 on the dollar.   

[The Annoyed Man]

Is the E-85 price a result of any tax payer subsidy to reduce it's cost at the pump? If true, what is the true price at the pump for E-85 then?

I assume gas has a little subsidy but I was under the impression that the ethanol subsidy was at $.50 on the dollar.   

There are crop subsidies to farmers as well as federal subsidies to Big Oil and also a reduction of the tax at the pump, I believe.  They add up to a substantial sum, another burden carried by the rest of us. 

[StopTheGrays]

Is the E-85 price a result of any tax payer subsidy to reduce it's cost at the pump? If true, what is the true price at the pump for E-85 then?

I assume gas has a little subsidy but I was under the impression that the ethanol subsidy was at $.50 on the dollar.   

There are crop subsidies to farmers as well as federal subsidies to Big Oil and also a reduction of the tax at the pump, I believe.  They add up to a substantial sum, another burden carried by the rest of us. 

That is sort of what I was getting at. I would like to know what the true price at the pump is though.

[ilbob]

Is the E-85 price a result of any tax payer subsidy to reduce it's cost at the pump? If true, what is the true price at the pump for E-85 then?

I assume gas has a little subsidy but I was under the impression that the ethanol subsidy was at $.50 on the dollar.   

There are crop subsidies to farmers as well as federal subsidies to Big Oil and also a reduction of the tax at the pump, I believe.  They add up to a substantial sum, another burden carried by the rest of us. 

What subsidies are there to big oil?

Ethanol has monstrous direct and indirect subsidies. I have read it is on the order of nearly $1 a gallon.

[The Annoyed Man]

What subsidies are there to big oil?

Before I go looking it up and documenting it, you'll have to agree that a tax credit is, in fact, a subsidy.  If we can't agree on that, I'm not going to the trouble.

[Gewehr98]

That is sort of what I was getting at. I would like to know what the true price at the pump is though.

Before or after the 40-cents/gallon tax on each gallon of E-85 I pay?

(It ain't immune to the same taxes paid on gasoline, lest others think I'm getting some sort of free ride...)

[The Annoyed Man]

You're paying the same tax at the pump, but you're benefiting from all the federal subsidies before it gets there.  That's why it's $1.00 less than gasoline.  So in a sense you are getting a free ride, but it's available to the rest of us, also.  All we need are flex fuel vehicles.

[Gewehr98]

Flex fuel vehicles are available everywhere, but are only a small percentage of the production line.  I bought my current flex-fuel truck as a GSA fleet vehicle in Titusville, FL, and there's no ethanol for sale in that state.  The dealership had X number of them on the lot, the majority were an order for my Air Force base, with the one I bought as a dealer extra in case the base totalled one or two during the year.

It's definitely a regional thing, limited to the cornbelt for now.  Until we switch over to sawgrass/kudzu as the feedstock of choice, it'll stay that way, because ETOH doesn't travel in gas pipelines very well, and must be trucked from the distillery to the pumps.

[roo_ster]

In 2007, 27% of the corn crop in the USA was processed into ethanol.  Ethanol displaced 1% of the total amount of gasoline used by the USA in 2007.

Sources, please.  Exxon-Mobil website?

As CI indicated, text-based conveyance of humor can be problematic.  A smiley of some sort can help when the post is a joke.

Well, I used no smileys, as my post was not a joke.  And the stats I cited are not from either the corn-subsidy-takers association or exxon-mobil, but the USDA, GAO, and a local radio guy who has become rather well known WRT auto issues as well as ethanol.

27% of Corn Crop Claim

Reuters article aggregating USDA, GAO stats:
Ethanol to take 30 pct of U.S. corn crop in 2012: GAO

USDA Powerpoint Used to Accompany Speech by USDA Personnel
http://www.usda.gov/oce/speeches/Collins%203-28-07(2).ppt

Amber Waves, a USDA Publication
http://www.ers.usda.gov/AmberWaves/May07SpecialIssue/Features/Ethanol.htm

Ethanol Displacing 1% of Gasoline Consumed in USA in 2007 Claim
I heard that stat on Ed Wallace's radio show and can't find a text-based record of it on his web site (http://insideautomotive.com/).  But...

This site that shows USA usage of gasoline & ethanol
http://www.americanfuels.info/2008/03/2007-gasoline-consumption.html

The problem is that this site does not separate out imported ethanol from domestically produced ethanol, so it inflates the amount of gasoline corn ethanol replaces if we use these numbers as-is.

But, let us use them as-is, assume that we get zero imports, that the total amount of ethanol burned by autos last year was came from that 27% of the corn crop used for fuel ethanol.  These assumptions will over-estimate ethanol's impact on gasoline displacement.

Toss in some simple arithmetic and we see the following:

Code:

Year        Ethanol: Domestic & Imports (gal)    Ethanol Energy Equivalent (gasoline gal)  Gasoline (gal)        Pct Energy Displacement of Gasoline by Ethanol
2007                6,846,647,000                          4,623,451,713                   135,574,429,000                         3.41%
2006                5,377,400,000                          3,631,288,314                   136,463,908,000                         2.66%
2005                4,048,900,000                          2,734,169,534                   136,362,602,000                         2.01%
2004                3,530,000,000                          2,383,763,110                   136,438,318,000                         1.75%
2003                2,900,000,000                          1,958,332,300                   134,071,954,000                         1.46%
2002                2,085,000,000                          1,407,973,395                   133,552,278,000                         1.05%





                  gasoline_reg btu                             124862
                     ethanol btu                               84318

In 2007, the 27% of the USA corn crop dedicated to producing fuel ethanol displaced 3.41% of the gasoline they would have burned had not ethanol adulterated our fuel gasoline.

Roll-Up

So, my 1% claim can not be backed up with what I was able to find in a quick googling. 

I withdraw it and replace it with the ultra-conservative, benefit-of-the-doubt-and-all-the-breaks-to-ethanol claims that:
"In 2007, 27% of the USA corn crop was consumed as fuel ethanol and displaced 3.41% of the gasoline the USA would have used had fuel ethanol not been available."

My original claim would have required the absurdity of requiring 2700%(1) of the USA corn crop to replace all the gasoline used in the USA in 2007.

[sarcasm]My revised and sourced claim requires a do-able & quite reasonable 792%(2) of the USA corn crop to replace all the gasoline used in the USA in 2007.[/sarcasm]

[tongue_in_cheek]I see no reason why that won't scale up.[/tongue_in_cheek]










(1) IOW, the entire 2007 corn crop multiplied by 27 times.

(2) IOW, only the entire 2007 corn crop multiplied by 7.92 times.

[roo_ster]

Here is a good roll-up of the fuel ethanol from corn in the USA how/why:

Insight April 27, 2006, 3:06PM EST text size: TT
Ethanol: A Tragedy in 3 Acts
Amid the current panic about gas prices many people are embracing ethanol. But that's not such a good idea

by Ed Wallace

During the comment period for the RFG (reformulated gas) program, supporters of ethanol had argued that the volatile organic compound (VOC) emission standards in the program -- 42 U. S. C. 7545 (k) (3) (B) (i) -- would preclude the use of ethanol in RFG because adding ethanol to gasoline increases its volatility and raises VOC emissions, especially in the summertime.

Background

The American Petroleum Institute v. the U.S. Environmental Protection Agency [Docket #94-1502 (Heard by the U. S. Court of Appeals for the District of Columbia Circuit and decided on April 28, 1995)]

If there were ever a time when the truth in advertising standards should be put back into place, it's now -- during the current (third) attempt to convince the public that the massive use of corn-derived ethanol in our gasoline supply will alleviate our need for foreign oil. Ultimately, the answer to just one question determines ethanol's actual usefulness as a gasoline extender: "If the government hadn't mandated this product, would it survive in a free market?" Doubtful -- but the misinformation superhighway has been rerouted to convince the public its energy salvation is at hand.

Act I, Scenes 1 and 2

The use of ethanol to reduce our dependence on foreign oil is nothing new. We also considered it during our nation's Project Independence in 1974, the year after the first Arab oil embargo. After the second energy crisis in 1979, an income tax credit of 40 cents per gallon of 190-proof ethanol produced was instituted as an incentive for refiners of ethanol to blend this product into gasoline.

Because this federal largesse now existed, within five years, 163 ethanol plants had been built -- but only 74 of them were still in operation. As gasoline availability opened up in the 1980s and gas prices went down, many ethanol plants simply went out of business.

Shortly thereafter, in yet another attempt to broaden the product's usage, Congress enacted a law that allowed car manufacturers to take excess mileage credits on any vehicle they built that was capable of burning an 85% blend of ethanol, better known as E85. General Motors (GM) took advantage of the credits, building relatively large volumes of the Suburban as a certified E85 vehicle. Although in real life that generation of the Suburban got less than 15 mpg, the credits it earned GM against its Corporate Average Fuel Economy (CAFE) ratings meant that on paper, the Suburban delivered more than 29 mpg.

Other manufacturers also built E85-capable vehicles -- one such car was the Ford (F) Taurus. Congress may have intended simply to create a market for this particular fuel by having these vehicles available for sale. But what the excess mileage credits actually did was save Detroit millions each year in penalties it would have owed for not meeting the CAFE regulations' mileage standards.

Act II, Scenes 1 and 2

In the mid-'90s the Clean Air Act of 1990 kicked in, mandating that a reformulated gasoline be sold in the nation's smoggiest cities. So the Clinton Administration again tried to create an ethanol industry in America, by having the Environmental Protection Agency mandate that fully 30% of the oxygenates to be used in gasoline under that program come from a renewable source. But members of the American Petroleum Institute had already geared up for the production of Methyl Tertiary Butyl Ether (MTBE), their oxygenate of choice. The ensuing lawsuit was argued before the Court of Appeals for the District of Columbia on February 16, 1995.

The EPA took the position that it had been given a mandate to find ways to conserve the nation's fossil-fuel reserves, so it needed a renewable fuel -- and ethanol neatly fit that bill. But there were problems with that argument, not least of which was the fact that the judges could find no charter or mandate from Congress that gave the EPA the statutory right to do anything about fossil fuel, reserves or otherwise.

Even more damaging, the EPA's own attorney admitted to the judges that because of its higher volatility, putting ethanol into the nation's fuel supply would likely increase smog where it was used. One of the judges, on hearing that the EPA was actively promoting a substance that could in fact diminish air quality, wondered aloud, "Is the EPA in outer space?"

The final decision favored the American Petroleum Institute. The judges agreed that the EPA was bound by law only to promote items that would improve air quality -- not to reverse the nation's advances in smog reduction. That decision was apparently forgotten with record speed. In the summer of 2000, ethanol as an additive was mandated for the upper Midwest, including the city of Chicago and parts of the state of Wisconsin.

Act II, Scenes 3 and 4

After Asian economies had collapsed in the late '90s, the price of oil had fallen to as low as $10 a barrel. Gasoline was selling in many parts of the U.S. for as little as 99 cents a gallon. But by 2000, the per-barrel price had risen to $32, and gas was averaging $1.55 a gallon nationally. As they are today, the nation's drivers were incensed by the rising prices of gasoline and oil. And then reformulated gasoline made with ethanol hit Chicago and points north. Gas prices there suddenly soared over $2.00, with a few stations selling their product for as much as $2.54 per gallon.

At some stations in southeast Wisconsin, where reformulated gasoline wasn't required and gas cost considerably less, pumps ran dry in the panic, as savvy consumers topped off their tanks. Citing the Lundberg Survey, the Associated Press on June 12, 2000, stated, "Dealers in the Midwest, where many cities use a reformulated gas blended with the corn derivative ethanol, are paying a premium at wholesale."

Just a few months later, Brazil -- which had worked toward energy independence since the mid-'70s oil crisis and had already mandated that the percentage of ethanol in its fuel be raised to 24% -- was forced to import ethanol refined by the Archer Daniels Midland Co. (ADM) when the nation's sugar-cane crop suffered a devastating drought. Brazil understood that a year of poor crops was just as damaging to its national fuel supply as Iran taking its oil off-market would be to the rest of the world.

Then came the third act in this ethanol play -- and possibly the most misleading and disingenuous PR campaign ever.

Act III: Cue the Fact-Checker

It started with Congress, which mandated that even more ethanol be used to extend the nation's fuel supply. From General Motors, an ad campaign called "Live Green, Go Yellow" gave America the impression that by purchasing GM vehicles capable of using E85 ethanol, we could help reduce our dependence on foreign oil.

What GM left out of its ads was that the use of this fuel would likely increase the amount of smog during the summer months (as the EPA's own attorneys had admitted in 1995) -- and that using E85 in GM products would lower their fuel efficiency by as much as 25%. (USA Today recently reported that the Energy Dept. estimated the drop in mileage at 40%.)

But one final setup for the public has gone unnoticed. At the Web site, www.fueleconomy.gov, which confirms the 25% to 30% drop in mileage resulting from the use of this blended fuel, another feature lets users calculate and compare annual fuel costs using regular gasoline to costs using E85.

But the government site's automatic calculations are based on E85 selling for 37 cents per gallon less than regular gasoline, when the USA Today article reports that at many stations in the Midwest E85 is actually selling for 13 cents per gallon more than ordinary gas. Using the corrected prices for both gasoline and E85, the annual cost of fueling GM's Suburban goes from $2,709 to $3,763. Hence the suggestion that truth in advertising should come back into play. Possibly GM could rename this ad campaign "Shell Out Green, Turn Yellow."

Epilogue: Get this Wasteful Show Off the Road

The other negative aspect of this inefficient fuel is that numerous studies have found that ethanol creates less energy than is required to make it. Other studies have found that ethanol creates "slightly" more energy than is used in its production. Yet not one of these studies takes into account that when E85 is used, the vehicle's fuel efficiency drops by at least 25% -- and possibly by as much as 40%. Using any of the accredited studies as a baseline in an energy-efficiency equation, ethanol when used as a fuel is a net energy waste.

Furthermore, no one has even considered the severe disruption in the nation's fuel distribution that mandating a move into ethanol would cause. Over the past month, gas stations from Dallas to Philadelphia and parts of Massachusetts have had their tanks run dry due to a lack of ethanol to blend. The newswires have been filled with stories bemoaning the shortage of trucks, drivers, railcars, and barges to ship the product. Ethanol can't be blended at refineries and pumped through the nation's gasoline pipelines.

The recent price spikes for gasoline have forcibly reminded the people of Chicago and Wisconsin of what happened when ethanol was forced on them during the summer of 2000. Moreover, the promise of energy independence that Brazil has explored through ethanol is widely misunderstood. Recently a Brazilian official, commenting on our third and most recent attempted conversion to ethanol, said that when Brazil tried using agricultural crops for ethanol, it achieved only a 1:1.20 energy conversion rate, too low to be worth the effort.

FINAL BOW?

On the other hand, ethanol from sugar cane delivered 1:8 energy conversion, which met the national mandate. Unfortunately for us, sugar cane isn't a viable crop in the climate of our nation's heartland. But the part of Brazil's quest for energy independence that the media usually overlooks is that ethanol wasn't the only fuel source the country was working on: Its other, more important, thrust was to find more oil. To that end, last week Brazil's P50 offshore oil platform was turned on. Its anticipated daily output is high enough to make Brazil totally oil independent.

More smog, infinitely worse gas mileage, huge problems in distribution, and skyrocketing prices for gasoline. Maybe now that we're witnessing the third act in America's ethanol play, the upcoming epilogue will close this show forever. Even great advertising works only if the product does.

A Note from the Author

To the Readers of BusinessWeek Online

I honestly appreciate the rapid and varied responses to my column on ethanol.

Rest assured, I am not in the pay of an oil company, nor has any oil company ever paid to sponsor my five-hour radio show in the Dallas Fort Worth area. In fact, my many writings and discussions on the current problems with the price of oil and gas have brought me numerous complaints from oil companies.

That said, I want to respond to some of your concerns.

1. With all respect, I have a problem with the idea that "good journalism" is reporting both sides of the story and "letting the readers or viewers decide." Sadly, because so many practice that -- however unevenly -- everyones left wondering what is the real story is behind an issue. The whole concept is why today so many important issues are wrapped in obfuscation.

2. You think I "have no problem paying $3+ per gallon for gas." Well, knowing the price of gas could be somewhat lower, paying that much does bother me, a lot. But I'm much more concerned about the average family in this country, raising kids; I worry that the current price of gasoline puts a burden on them that the budget cant stand for much longer. But this assertion misses the entire point of my column: If you dont like paying $3 a gallon for gasoline, then use E85 where available -- and your effective costs for fuel, because of the dramatically reduced gas mileage youll get, will make that $3 per gallon more like $4.

3. I don't believe the concept that Big Oil is "scapegoating ethanol to protect their market share" is accurate. According to my research on the subject, some oil investments cost upward of $5 billion or more. If there were a natural and viable market for ethanol, one would think that any oil company, rather than investing in large offshore platforms that are prone to hurricane damage, or doing business in regions of the world with known terrorist problems, would be better off simply buying millions of acres of farmland and growing ethanol crops to use in their fuel. Particularly as today there is a 51-cent-per-gallon direct tax credit on each gallon refined. Obviously, that would go a long way toward eliminating their federal taxes completely; so the very fact that oil companies don't grow or refine ethanol leads one to believe it might not be a good business model.

4. I thank the gentleman who wrote saying I was the first to mention that ethanol has the potential to create more smog due to its higher volatility. I've long had a problem with the description of reformulated gasoline as a "cleaner burning fuel." Then again, the one source I for that fact that I cite in the article is the EPA's own attorneys, who were arguing their case before one of our Court of Appeals.

5. As for the gentleman who suggested that there is room for choices in fuels, I could not agree more. We should do more research to make that a reality.

6. On the subject of which study was done that either proves or disproves the energy equation on ethanol, I've read both Dr. Pimental's papers and the more recent one by Alexander Farrell. The later paper suggests that ethanol is slightly positive on the energy scale, but Farrell points out that this is partially because of the byproducts from the process, from which one should subtract the energy used for those salable products. It doesn't change the fact that once ethanol is used in gasoline, the vehicle's fuel efficiency dives. Farrell also believes that the real answer for ethanol is cellulosic technology. The President mentioned that exact same thing in his State of the Union Address, days after Farrell's paper was published. (We have been working on this issue since Project Independence in 1974, and we still havent found a way to refine ethanol by using cellulosic technology in any sort of cost effective manner. However, should that technological breakthrough happen, I am capable of reversing my position -- but future technology is not the issue I addressed this week.)

7. I feel I did present both sides of the controversy: I cited two studies and two conclusions -- and then added that Brazils 31-year quest for energy independence had created an ethanol market. But nothing is going to change one fact: Use the E85 ethanol blend; if you think you're paying too much for fuel now, watch what your bills jump to then. (Or even with the 10% drop in mileage you get with less ethanol in the gasoline.)

8. While I have no proof on this comment concerning Bill Gate's investment, one would think that the 51-cent per gallon direct tax credit would be a strong reason to move into ethanol.

9. Finally, as for some who suggest that Peak Oil is around the corner, maybe not. In Dr. Hubert's time, the commonly held view was that the world started with 2 trillion barrels of recoverable oil. In the late nineties, the United States Geological Survey put that number closer to 3 trillion barrels. Now the head of Shell Canada has suggested that the Canadian Tar Sands holds 2 trillion recoverable barrels. Add into that mix the fact that the Rand Corporation released a study last August that claims the Green River Formation in Western Colorado likely has one trillion recoverable barrels and suddenly Peak Oil doesn't look like it is going to happen anytime soon. This is not to be confused with the end of cheap oil, which may well happen in our lifetime.

Thanks to everyone for caring enough about the issue to write.

Ed Wallace

570 KLIF AM Dallas

Fort Worth Star Telegram

Ed Wallace holds a Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA. His column heads the Sunday Drive section of the Fort Worth Star-Telegram, and he is a member of the American Historical Society. The automotive expert for KDFW Fox 4 in Dallas, Wallace hosts the top-rated talk show Wheels, Saturdays from 8 a.m. to 1 p.m. on 570 KLIF AM in Dallas.

[Gewehr98]

I don't buy their slant, and as one of those corn farmers, can poke gaping holes in a lot of it.

Just for example, this is hilarious:

E85 selling for 37 cents per gallon less than regular gasoline, when the USA Today article reports that at many stations in the Midwest E85 is actually selling for 13 cents per gallon more than ordinary gas.

But this assertion misses the entire point of my column: If you dont like paying $3 a gallon for gasoline, then use E85 where available -- and your effective costs for fuel, because of the dramatically reduced gas mileage youll get, will make that $3 per gallon more like $4.

$2.99/gallon E85 right across the street from me.  Gasoline is $3.99. That's a $1.00/gallon difference right there. My 2001 E85 truck does NOT suffer from the much-ballyhooed 25% loss in fuel economy, thanks to the fact that it's configured straight from GM for either type of fuel. At worst, I suffer 15% degradation in mileage. There's an onboard fuel composition sensor telling the engine to adjust ignition and fuel injection timing  to take advantage of the 105-octane E85.  It's also why I have a 383 stroker high-compression engine in my 1953 Chevy pickup, using the higher octane fuel as it was intended.  Using the E85 still gives me a better miles/dollar figure, and that was well before the difference went to $1.00/gallon.  I'm looking right now to convert one of my Harleys to the stuff, as a matter of fact.

I will continue to disagree with those who think ethanol is causing their grocery prices to skyrocket, their marriages to end in divorce, and all forms of pestilence to spread unabated through these United States. Yes, I live in the corn belt, and sell corn to the E85 distilleries, keeping my family's farm from bankruptcy. That's business, which is still legal, last I heard. However, somebody has an agenda, and it's not to wean ourselves off of imported oil, is it? Of note is Ed Wallace's final statement, which portends the end of cheap oil.  Hello, McFly?   

[Firethorn]

[tongue_in_cheek]I see no reason why that won't scale up.[/tongue_in_cheek]

Interesting stuff, but not really new.  We have one user - who OWNS a corn farm, who finds it more economical than gasoline.  That's okay.  It even makes a fair bit of sense, especially given that he raises cattle as well.

What I want to point out is that MOST ethanol advocates, those that want to see the majority of vehicles being E85, see corn as, at most, a stepping point.  They're fully aware that not enough corn can be grown.

That's where you hear about cellulostic ethanol - which can convert the entire plant into ethanol, not just the ear.  I think the figure is something like 2-3 times the ethanol per acre.  Not to mention that you can switch to the easier to grow switchgrass.

That's without getting into even fancier production methods involving bacteria or algae in trays located in the desert.

Personally, I'd go for a combined approach.  Pure electric vehicles in the cities, biodiesel trains with third rail power in busy corridors and yards.  Biodiesel trucks.  For outside the cities, plug-in hybrids with a ethanol burning engine for long distance travel.

[Gewehr98]

Speaking of weeping and gnashing of teeth over corn and food prices, wait until the flood waters here in Wisconsin and Iowa recede later on.

The crop damage estimate so far ain't pretty.  Some of our fields are well over the corn plants, and I just pray it dries out soon enough to not kill them.  Crop insurance only goes so far. 

[roo_ster]

So, your claim is that diverting 27% of a food product into non-food uses won't cause that product, other products that require it as an input, and other substitute products to rise in price?

That proposition is not supported by the sources I cited in my 16:29:33 post.  You know, the sources from USDA & GOA & the USDA's chief economist.  Mash the links and you might find the data of interest.

If you were to mash the links, you might find things like the following:

As long as corn is the primary feedstock for ethanol in the U.S., however, sustained increases in ethanol production will eventually require major adjustments in the corn market.

One possibility is that ethanol producers will secure the additional corn they need by competing with other buyers in the marketplace and bidding up the price of corn. Already, there are signs that this is happening in the spot and futures markets. According to the USDA projections (released in February 2007), the share of ethanol in total corn use will rise from 14 percent in 2005/06 to 31 percent in 2016/17. A comparison of the 2007 projections with the 2005 Baseline suggests that much of the increased use by ethanol producers will be diverted from potential exports; the 2007 projections suggest much higher use for ethanol and lower exports than the 2005 Baseline. Corn may also be diverted from feed use.

Here is another source of USDA data:
http://www.ers.usda.gov/publications/oce071/oce20071c.pdf

Crop Prices and Farm Program Costs
Increased demand for corn to produce ethanol leads to higher prices for corn and other crops, which, in
turn, results in smaller government outlays under current farm commodity programs.  For example, with
the prices projected in this report, program costs for price-sensitive marketing loan benefits and counter-
cyclical payments for feed grains are minimal, even with stochastic considerations included.   
In contrast, higher market prices result in increases in CRP rental rates and overall costs for the CRP. 
Government costs for crop insurance also increase because of higher market prices for several of the
major insured commodities.  Additionally, government tax revenues are reduced due to higher total
blender tax credits for biofuels.

Here is a report on projected feed costs put out on 12JUN2008:
http://usda.mannlib.cornell.edu/usda/current/FDS/FDS-06-12-2008.pdf
Its subtitle is, "Higher Feed Grain Prices Expected"

Tighter supplies and record corn prices are forecast to lower feed and residual use in
2008/09 by 150 million bushels to 5.15 billion. Food, seed, and industrial use (FSI)
for 2008/09 is unchanged this month at 5.36 billion bushels. FSI remains at record
levels due to increased ethanol production, currently forecast to utilize 4.0 billion
bushels of corn in 2008/09, up 1.0 billion bushels from 2007/08.  Exports in
2008/09 were reduced 100 million bushels to 2.0 billion due to expected higher
foreign production.  Ending stocks are expected to drop to 673 million bushels, the
lowest since 1995/96 ending stocks of 426 million bushels.

[thebaldguy]

My family members who come to visit us in Minnesota from Wisconsin buy their gas here as it's cheaper by 10-15 cents per gallon. My brother in law was the first to notice that his mileage went down. He got better mileage driving here with Wisconsin gas than he did driving home with Minnesota 10% ethanol fuel.

I guess I don't have a problem with a 10% or less ethanol blend. I do see E85 ethanol fuel disappearing in the next few years. I remember reading that the only reason E85 flex fuel vehicles are being made is because the Feds are subsidizing the manufacture of E85 cars. Consumer Reports magazine did a test, and they really didn't see many benefits. Corn prices are way up, and even with federal subsidies I think the cost will outweight the benefits. The US might be better off turning the corn into whiskey and using whiskey profits to purchase oil.

By the way, with corn prices so high, are we still paying farmers to not grow corn?

[ilbob]

What subsidies are there to big oil?

Before I go looking it up and documenting it, you'll have to agree that a tax credit is, in fact, a subsidy.  If we can't agree on that, I'm not going to the trouble.

If you are refering to oil depletion allowances, it is no more a subsidy than is depreciation. It is a legitimate cost of doing business.

[karandom]

This is my first post on APS, so here goes.



Gewehr, the point that concerns me is similar to that of jfruser's.  We are now turning large amounts of corn into fuel.  Its pretty simple in my mind.  Ethanol puts a new demand on corn.  Higher demand increases market price, just as jfruser pointed out.  The basic argument would then be the supply of corn would increase to equalize prices.  However, by producing more corn less of other crops are harvested, increasing price elsewhere.  Since food is a major staple it is a contributing to real inflation, high food prices are very bad for people in the US (especially the poor).

You also mention the small amount of corn in Corn Flakes and other foods.  I realize that we directly consume very little (comparatively) corn.  However, corn is primarily used as feed for livestock.  As corn prices rise, it becomes more expensive to feed the animals.  These prices are then passed onto the consumer through higher meat prices.  I realize fuel cost play a large role as well, but I think it is important to realize corn based ethanol is not, in my opinion, a viable solution to our oil problems.  I think we would be much better served spending our tax money on things like bacteria produced bio fuel, wind, solar, nuclear energy, and cars with better fuel economy.  Corn ethanol gets too much money and support for what it contributes. 


Another problem with ethanol is in the marine industry.  Just like the airplanes someone mentioned, many boats fiberglass fuel tanks actually collapse with ethanol fuel in them.  Outboards run worse, consume more fuel and in general hate ethanol.  This is firsthand knowledge from me since I work in the marine industry. 



I hope I didn't ramble too much.