The Oil Drum | DrumBeat: June 20, 2006

142 comments on DrumBeat: June 20, 2006

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Robert Rapier on June 20, 2006 - 9:13am

Given that Pacific Ethanol is down 30% in 2 weeks and 50% in a month, I wonder if Keithster has any more investment advice for us? Is there another bubble he recommends that we all hop on?

Looks like some investors are finally starting to wise up. You are going to have a tough time profitably making ethanol that far outside the Midwest - unless of course you charge $6/gal for it. There is a reason that they position ethanol plants within 50 miles of corn supplies.

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odograph on June 20, 2006 - 9:19am

Someone here at TOD turned me on to The Truth About Cars. They had an article yesterday:

Alternative Fools: E85

... nope, it doesn't look like ethanol is getting a totally free ride.

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Robert Rapier on June 20, 2006 - 11:11am

Someone e-mailed me that article last night. That guy must read TOD. :) It combined elements of my E85 article with the article on Brazil, and even mentioned what you had stated that inspired the E85 article: It makes far more sense to roll out E10 everywhere than to push for E85 everywhere.

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Oil CEO on June 20, 2006 - 12:25pm

That guy is great. Thanks for reminding me. I have to bookmark that site.

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Reed on June 21, 2006 - 2:19am

Oil CEO,
I just caught your comment back at the oil shale thread. I left a reply for you. Amazed!

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GliderGuider on June 20, 2006 - 3:03pm

I was just reading that article and ran across the phrase "186 million Brazilians" and thought to myself, "Gee that's an awfully big number."

I assume by now everyone has heard the Bush joke that spawned that thought...

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Robert Rapier on June 20, 2006 - 5:26pm

Here is a bit from today's OPIS report:

While ethanol continues to grab the public interest as it is seen in national headlines and mainstream media spot values continue to rise for the blending component. And while West Coast ethanol values are strong they pale in comparison to prices being seen on the East Coast.
Spot ethanol on the East Coast today was seen trading from $5.50-5.75/gal and based on current RBOB values in the New York Harbor the huge price of ethanol is adding some 29cts to the price of finished gasoline, based on a 10% blend.

I guess ethanol does have a useful purpose after all. It is going to force us to conserve even faster due to it being mandated. Of course I don't think this is what the administration had in mind when they mandated it. The good news is that the amount we require in our gasoline will increase over the next few years, which will drive prices ever higher and force us into conservation mode.

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AlanfromBigEasy on June 20, 2006 - 5:37pm

Per my understanding, only pollution non-attainment areas (polluted cities) have to add ethanol. So Baton Rouge & Houston see a price hike due to ethanol, New Orleans and rural areas do not. California got at exemption from the ethanol requirement.

Correct ?

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Robert Rapier on June 20, 2006 - 7:21pm

This is true, but there are a lot of non-attainment areas, especially in the northeast. California did get an exemption, but I read that a lot of producers already had contracts in place to supply or purchase ethanol. Give it some time, and ethanol will probably start to disappear from California markets.

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Robert Rapier on June 20, 2006 - 7:24pm

Well, I should add that this WAS the case. Per the new energy bill, a certain percentage of ethanol is mandated into the gasoline pool period. I don't know how this breaks down though (i.e., if it will mostly be in the non-attainment areas).

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AlanfromBigEasy on June 20, 2006 - 7:40pm

And Iowa.

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Robert Rapier on June 20, 2006 - 7:46pm

And Minnesota. I think they are trying to go to 20%. Perhaps the Minnesotans will meet the mandate for the rest of the country, and we won't be forced to buy the stuff. :) They will be paying $5/gal for ethanol and getting worse gas mileage, while I continue to avoid the stuff like the plague.

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Jamie on June 20, 2006 - 12:00pm

An interesting announcement from BP and Dupont I have not heard of biobutanol before so does anyone know what it is and how this relates to the ethanol debate?

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Nick Rouse on June 20, 2006 - 1:11pm

I had not heard of it before but there is a good explanation here. The claims for it are that:-

It runs on present gasoline vehicles unmodified at equal or greater mileage.
It is much less prone to absorption of water removing the need for special storage tanks and pipelines.
Can be made from the same feedstocks as ethanol at greater yield.
Produces useful amounts of hydrogen as a by-product.
Is cheaper to produce than ethanol.

All these claims are from a company promoting its patented process to make the stuff and extrapolating from a pilot plant so due caution is needed in accepting these claims.

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jokuhl on June 20, 2006 - 1:34pm

This Link References RR's numbers on lines 13 and 22

Pure Energy Systems
http://peswiki.com/index.php?title=Directory:Butanol&curid=3716&diff=20327&oldid=20318
"Butanol as a biofuel (http://www.lightparty.com/Energy/Butanol.html) - Butanol solves the safety problems associated with the infrastructure of the hydrogen supply. Reformed butanol has four more hydrogen atoms than ethanol, resulting in a higher energy output and is used as a fuel cell fuel."

I suspect this might be a familiar site to some of you here, is it responsibly run?

Bob Fiske

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Robert Rapier on June 20, 2006 - 2:21pm

Butanol is potentially a better motor fuel than ethanol. I did write an essay on bio-butanol a couple of months ago:

Bio-butanol

Butanol has some significant advantages over ethanol, and probably has a better EROI because it is a less polar molecule than ethanol. Of course, we still won't be able to produce enough to make much of a dent in our oil consumption.

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JN2 on June 20, 2006 - 1:59pm

More discussion on BP/Dupont bio-butanol at Green Car Congress.

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Drum Roll on June 20, 2006 - 12:25pm

Not sure if this has already been posted elsewhere, but...

Even the Wall Street Journal has come against the current ethanol hype. In an editorial in the 6/17/2006 Weekend edition of the WSJ they discuss why imitating Brazil won't work for the US, and they also cite research by Cornell's David Pimental and Berkeley's Ted PatzekCornell's that indicates that it takes more than a gallon of fossil fuel to make one gallon of ethanol.

Here is a link:

http://online.wsj.com/article/SB115049715522182863-email.html

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Robert Rapier on June 20, 2006 - 2:17pm

Even the Wall Street Journal has come against the current ethanol hype. In an editorial in the 6/17/2006 Weekend edition of the WSJ they discuss why imitating Brazil won't work for the US...

Ah, they are just riding on our coat tails:

Lessons from Brazil

and they also cite research by Cornell's David Pimental and Berkeley's Ted Patzek Cornell's that indicates that it takes more than a gallon of fossil fuel to make one gallon of ethanol...

Sadly, any article mentioning Pimentel is immediately discounted by ethanol proponents. They consider him discredited, so when he is cited they don't believe the article is reliable.

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tstreet on June 20, 2006 - 11:06pm

Do you think that he has been discredited? He and Patzek certainly have not changed their views. Are we supposed to believe that the ethanol lobby and the USDA has more credibility

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Robert Rapier on June 21, 2006 - 8:44am

No, I don't believe he has been discredited. I think he did use some outdated data that left him open to criticism. But I think his methodology was correct.

However, if you want to make any headway with an ethanol pumper, best to avoid Pimentel's name. That is the quickest way to have them dismiss your arguments out of hand. That doesn't mean they are correct in doing so, but my objective is to have them listen to my arguments.

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