Gasoline is better than Liquid Natural Gas or Ethanol

Posted by PITHOCRATES - July 1st, 2011

Liquid Natural Gas and Subsidies

The problem with alternative fuels is that they all require subsidies.  That’s one thing gasoline never needed.  Because it was everything a consumer wanted at a price a consumer could afford.  But there’s a problem.  Although consumers like it, government doesn’t.  So they’ve been pushing ethanol to replace it.  And now liquid natural gas is making a comeback (see Goodbye gasoline? GM gives natural gas cars a boost by Edward McAllister posted 7/1/2011 on Reuters).

The United States has more natural gas than it knows what to do with – up to 100 years of supply, experts say – thanks to a new drilling technique called hydraulic fracturing which releases huge reserves of natural gas trapped in shale rock…

Drivers who fill up with natural gas at the pump saved up to $2 per gallon when gasoline prices hit $4 a gallon. (Graphic: here: r.reuters.com/get42s ).

First of all, the environmentalists are trying to shut down all fracking (busting open rock formations to release trapped oil and/or gas by pumping fluids into cracks and fissures).  They hate it as much as drilling for oil.  Because it’s environmentally unfriendly.  And contaminates the ground water.  Or so the environmentalists say.  New York State is sitting on a lot of natural gas in shale.  But getting that gas is on hold until the completion of environmental studies. 

And that $2 per gallon saving over gasoline?  Don’t count on it.  Because it takes more liquid natural gas (LNG) to go the same distance gasoline will take you.  LNG has only 65.7% of the energy content of gasoline.   Which means it will take 1.5 gallons of LNG to equal one gallon of gas.  Think of it this way.  Say you take a vacation that takes two full tanks of gas.  With LNG, it will take you three tanks.  So, yes, you’ll pay less per gallon at the pump.  But you will have to buy more gallons. 

For example, if you have a 14 gallon gas tank and gas is $4/gallon and LNG is $2/gallon, you’ll save $14 dollars to travel the distance that a full tank of gasoline will take you.  If gas falls to $3.50/gallon, the savings drop to $7.  If gas drops to $3/gallon, there is no savings.  Just the inconvenience of another stop at the filling station.  LNG is only a bargain when gas is closer to $4/gallon.  Or more.  Unless there’s something else to sweeten the deal.

Even if oil prices retreat again, some in the industry say natural gas will remain attractive due to its long-term abundance and the potential for government support…

Much hinges on politics. The Natural Gas Act launched in the House of Representatives in April proposes incentives for purchasing and building natural gas vehicles, replacing a previous bill whose sweeteners for users of the fuel have recently expired.

The proposed incentives include a 50 cent per gallon fuel credit, a purchasing credit that covers up to 80 percent of the extra cost of a natural gas vehicle, and tax breaks for building fuelling infrastructure. The bill has bipartisan support and some say it could pass this year.

Ah, yes.  Government support.  Which tells you one thing.  LNG is not a sweet deal.  If it were the government wouldn’t have to bribe you to use it.

Ethanol and Subsidies

The problem with government getting involved in the fuel business is that it politicizes the fuel industry.  If LNG was a value to the market the market would provide LNG.  But it doesn’t.  The same is true for ethanol.  It has no value in the market.  How do we know this?  Because it takes government subsidies to get it to the market (see Industry warns gas prices would rise 89 cents without ethanol posted 7/1/2011 on PolitiFact).

Those who favor rolling back ethanol subsidies argue that a roughly $6 billion subsidy is unsustainable given today’s rising national debt.

However, the ethanol industry, represented by a group called the Renewable Fuels Association, has made an aggressive counterattack, arguing that ethanol is vital to keeping a lid on gasoline prices — potentially a potent issue for Americans as gasoline hovers between $3 and $4 per gallon.

The trade group’s Metro station advertisement mirrors other information available on the group’s website. It says, “Ethanol reduced gas prices by 89 cents per gallon in 2010. Ethanol reduced the average American’s household gasoline bill by more than $800. If ethanol disappeared, gas prices could rise by as much as 92 percent.”

Now that this subsidy is threatened, the ethanol industry is going on the offensive.  They used some scientific studies for their claims.  Studies they funded.  And they played fast and loose with the facts.  That 89 cents saving per gallon was during the spike in oil prices when gas was around $4/gallon.  Over the decade (2000-2010) the savings was only 25 cents.  But it wasn’t even that much.  Because, like LNG, ethanol doesn’t have the same energy content as gasoline.  It only has 71.7% of gasoline energy.  Which means you need 1.4 gallons of ethanol to equal one gallon of gas.  So when you add ethanol to gas you’re just taking a lot miles out of every gas tank.

PolitiFact goes into more detail and gives Renewable Fuels Association a rating of ‘barely true’ for the accuracy of their advertisement.  They’re not lying.  But they are certainly misleading you.  Because of their selective use of facts and figures.  Which is the point.  Honesty doesn’t sell ethanol.  If you want people to buy it you just can’t tell the whole truth.

The Great Corn Con

And there’s a good reason why they aren’t telling the whole truth.  Because if people understood what was going on in the corn industry, they’d be furious.  Because they’re not saving the planet.  Or cutting our dependence on foreign oil.  No.  The only thing the corn subsidies are doing is making farmers rich.  And making people hungry (see The Great Corn Con by Steven Rattner posted 6/24/2011 on The New York Times).

Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.

But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.

Using corn for fuel only increases the price of corn.  And anything that uses corn.  Like food.

Corn is hardly some minor agricultural product for breakfast cereal. It’s America’s largest crop, dwarfing wheat and soybeans. A small portion of production goes for human consumption; about 40 percent feeds cows, pigs, turkeys and chickens. Diverting 40 percent to ethanol has disagreeable consequences for food. In just a year, the price of bacon has soared by 24 percent.

So it’s the high price of corn that’s making chicken and hamburger more expensive.  Remember that when you’re shopping for your next BBQ.  Or buying ingredients for that next meatloaf.  Just pick up some extra breadcrumbs to make that hamburger go farther.  It’s not all bad, though.  Sure, we’ll eat less.  But they’ve been saying we’re too fat anyway.  So perhaps a little malnutrition will help get us to a healthier weight.  The important thing to remember is all the good that will come from our sacrifice.  Like using less foreign oil.

Here is perhaps the most incredible part: Because of the subsidy, ethanol became cheaper than gasoline, and so we sent 397 million gallons of ethanol overseas last year. America is simultaneously importing costly foreign oil and subsidizing the export of its equivalent.

That’s not all. Ethanol packs less punch than gasoline and uses considerable energy in its production process. All told, each gallon of gasoline that is displaced costs the Treasury $1.78 in subsidies and lost tax revenue.

So we’re subsidizing the ethanol industry to produce ethanol to use instead of gasoline made from imported oil.  And paying a pretty price to do this.  And then we’re not using the ethanol for the reason we subsidized it in the first place?  The American taxpayer is paying higher taxes so we can provide a cheaper fuel for other countries?  While we still import the expensive foreign oil?  You know what you call this?  Government.

Govern against the Will of their Constituents

When government stayed out of the oil business gasoline was cheap and plentiful.  Didn’t need any subsidies.  And you didn’t have to bribe manufacturers to build a gasoline powered car.  Also, government didn’t have to subsidize the fuel dispensing industry either.  The oil companies built refineries, pipelines and gas stations everywhere.  If there was a road there was a gas station.  If there was a city there was a car dealership selling gasoline-powered cars.  It all worked.  As if by magic.  With no help from the government.

Ethanol and liquid natural gas have never worked.  Despite government spending billions in trying to make them work.  The problem?  The market just doesn’t want them.  Like a dog that doesn’t want to swallow a pill.  You can do whatever you want.  Hold his mouth shut.  Stroke his throat.  Whatever.  He’s just going to spit that pill out once you let go.  And consumers have been spitting back every attempt to put us in alternative fueled vehicles.  We just don’t want them.

But government does.  Because they profit from them.  The corn lobby goes to Washington with cash.  And politicians like cash.  So much so that they will repeatedly govern against the will of their constituents.  And they don’t care if their policies increase the price of food.  Because they’re rich.  They can afford it.  Thanks to those lobbyists.  And those nice salaries and benefits courtesy of the taxpayers.  We may be eating meatloaf made with more bread than meat, but they’ll be enjoying fine corn-fed steak.  Along with some nice corn-fed bacon.

All men are created equal?  Our elected representatives apparently didn’t get that memo.

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