In the internet era anyone with a computer, an internet connection, and a clever blog name can stand tall in reply, offering the common sense of the masses as an antedote to foolishness such as the column penned by Mr. Yael Aboulhalka’s of the Star’s ed board. Read his editorial here which calls for a 50 cents per gallon gas tax.

And read below some comments from the KCStar’s readership, …

From CZMdivemaster on January 4, 2009 - 2:24pm:

Yael T. Abouhalkah, man are you living on the same planet as the rest of us? The economy is tanking, many, many people are losing their jobs and you think now is the right time for a large gas tax? …

From sonofrogue on January 4, 2009 - 10:32am.

Now that gasoline prices have returned to “normal,” morons like alphabet want to raise the taxes on gasoline to encourage “conservation” and the search for alternative fuels like wind and solar. Please. Oil is, and will remain, the most effective energy source (next to nuclear) for years to come. Lets encourage alternative sources, but not sacrifice our economy again to crippling gasoline prices.

Establish an oil import reduction goal that strengthens energy security and
independence. Since nearly 90% of oil is used for transportation, propose a plan
that:

• Brings more fuel efficient and near-zero emission vehicles into the market;
• Increases the supply of domestically produced, low-carbon fuels;
• Minimizes the economic and technological uncertainties inherent in
deploying high efficiency vehicles and developing and using nonpetroleum
transportation fuels; and
• Reduces vehicle miles travelled and increases mass movement of people
and goods.

Reasonable people could quibble with fuzzy headed statements like “reduce miles travelled” … and even the dubious concept of “establishing an oil import reduction goal” but all should find great wisdom, for the first time in the past 8 or more years of energy debate, at the measured, reasonble, principled and REALISTIC tone of this energy plan outline.

Indeed, per the 2007 energy act, we are about to embark upon mandated widespread use of cellulosic ethanol in the next 13 months, … and there is still no such fuel commercially available.

Too bad we didn’t have these governors speaking up more loudly back then.

RFA ASKS INDY RACING LEAGUE TO RECONSIDER BRAZIL ETHANOL MARKETING AGREEMENT

Earlier this week, the Indy Racing League (IRL) announced it was partnering with Brazilian trade promotion agency APEX-Brazil, making the agency the official ethanol supplier to the IndyCar Series. The news appeared to be met with little fanfare, but now, the U.S.’ largest ethanol trade group is urging IRL to reconsider its decision and instead have the race cars run on domestically produced ethanol.

The multi-year deal names APEX-Brazil an official partner of the Indy Racing League and the Indianapolis 500, beginning with the 2009 season, and includes cooperation from UNICA, the Brazilian Sugarcane Industry Association, to identify those interested in supplying ethanol to the series.

According to IRL, they will need 120,000 gallons of E100 for the IndyCar series, 40,000 gallons of E85 for the Firestone Indy Lights and 50,000 gallons of biodiesel for support/transport each year.

“On behalf of America’s ethanol producers, I want to express my deep displeasure in the Indy Racing League’s decision to abandon homegrown ethanol as the league’s official fuel. How can you run the Indianapolis 500, a race so imbedded in the culture of this nation, on an imported fuel?” Renewable Fuels Association President Bob Dinneen wrote this morning to Terry Angstadt, president of IRL’s commercial division.

“For almost 100 years, the Indianapolis 500 has been a showcase for cutting edge vehicle technology. Held on Memorial Day, it has also come to be a time-honored event that serves to thoughtfully pay tribute to those Americans who gave their lives protecting our freedoms. The decision to bypass the more than 180 ethanol biorefineries across our country in favor of a tanker ship from Sao Paulo to be the official supplier of fuel for the IRL is an affront to America’s farmers who have worked to enhance economic opportunities for rural communities and all Americans who have fought and are fighting for our energy independence,” Dinneen continued.

IRL has made an exception to allow the Iowa Corn 250, held in June, to run on U.S.-produced ethanol, Dinneen noted. “This simply underscores the fact that American ethanol is available if the league is committed to supporting a homegrown energy source….On behalf of America’s ethanol producers, I strongly urge the IRL to reconsider its decision. At a minimum, you should use America’s homegrown renewable fuel to power the Indianapolis 500. As in Iowa, I am quite certain that the network of ethanol producers in the state of Indiana stand at the ready to supply the race with the fuel it needs,” he added.

However, IRL spokesman John Griffin said all the league is doing is switching marketing partners from EPIC (Ethanol Promotion and Information Council) to APEX. “It is business as usual for us in the immediate future,” he said. In fact, UNICA said it initially plans to partner with a U.S.-based ethanol company to supply the IndyCar Series with corn-based ethanol.

IRL is “committed to its deal with APEX and are looking at this as [support for] ethanol, not sugarcane, not corn and not cellulosic-based ethanol,” Griffin said. “In all likelihood, we’ll be using American ethanol next year,” he added. Details for where APEX and UNICA would be getting their ethanol from in subsequent years hadn’t been determined yet, he noted.

-Rachel Gantz, rgantz@opisnet.com

Copyright, Oil Price Information Service

Thirteen different “late-model” cars were tested using gasoline that was 15% and 20% ethanol, Bodman said, and the results were “very encouraging.”

The feasibility of cutting gasoline even further to boost the ethanol content is important, Bodman said, because in a few years ethanol production will hit a growth ceiling in supplying enough fuel for 10% blends, also called E10.

“The E10 market will likely reach saturation in a few years,” Bodman said. “There are some parts of the United States, like the Midwest, where that has already occurred.” Tom Buis, president off the National Farmers Union, called the DOE study results “good news.”

Ethanol is made in the U.S. from corn, and a growing segment of the farm sector is fueled by ethanol demand. A higher ethanol blend in gasoline would mean stronger demand for the corn-based fuel by gasoline producers.

The results of e study released on Tuesday may be encouraging, Bodman said, but he also cautioned that much more research on a wider variety of vehicles is necessary.

We know this already, … there is experience in Brazil. The point remains not the technical feasibility running cars on ethanol, but the economic and financial costs of mandating ethanol use. Bottom line - cars can run on ethanol, but the economy can’t afford ethanol!!

We’ve just been alerted that despite House Democrats relenting on extending bans on offshore drilling and oil shale in the continuing resolution (CR) appropriations bill, Democrat Senate Leader Harry Reid has decided to sneak an extension of the oil shale ban through as Congress fights over the financial bailout.

Oil shale in America’s West is estimated to hold be between 800 billion and 2 trillion barrels of oil — that is more than three times the proven oil reserves in Saudi Arabia alone.

Here is the text of Reid’s proposed new ban on oil shale, that he is trying to add as an amendment to the CR or move seperately as a “stimulus” package, or we should say an anti-stimulus package if this is included.

Sec 1602 continues ban on oil shale. The language follows:

SEC. 1602. Notwithstanding any other provision of law, including section 152 of division A of H.R. 2638 (110th Congress), the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, the terms and conditions contained in section 433 of division F of Public Law 110-161 shall remain in effect for the 19 fiscal year ending September 30, 2009.
It would be an insult to all Americans if Senate Democrats worked to bailout Wall Street while damaging our future prosperity by banning development of vast energy reserves in oil shale.

The Forgotten Flaw in Biofuels Policy: How Tax Credits in the Presence of Mandates Subsidize Oil Consumption

Resources for the Future, June 9, 2008

 Harry de Gorter and David R. Just
Gasoline prices are at record highs, and there is widespread public confusion over the reasons why and who is really to blame. But the devil is all in the details. Here we will look at one aspect of the ongoing policy arguments over the effect of biofuel mandates on food prices and the environment. Far more corn grown in this country is now going toward fuel production, not food consumption, causing food prices to escalate around the world. And many recent studies argue that indirect land-use changes - resulting from farmers shifting from other crops to corn and taking land out of conservation to plant even more - may enhance greenhouse gas emissions. What is left out of the debate is a significant contradiction in current biofuel policy: tax credits subsidize petroleum-based gasoline consumption when used in conjunction with mandates. This has very important implications because the primary goal of biofuel policy is to reduce dependence on oil.

Reducing greenhouse gas emissions and local air pollution as well as improving farm incomes and stimulating rural development are oft-stated complementary policy goals. However, any beneficial effects on energy security and the environment stemming from the new Renewable Fuel Standard (RFS) could be completely offset by current tax credits. (The RFS is part of the recently passed Energy Independence and Security Act that mandates the use of 36 billion gallons of renewable fuel in the United States by 2022.) And this issue is not just a domestic issue: many countries employ both biofuel mandates and tax credits simultaneously.

Here’s an explanation for how, under the mandate, the tax credit effectively subsidizes gasoline consumption. Consider first how the tax credit would work by itself. To take advantage of the government subsidy, blenders of corn-based ethanol and petroleum-based gasoline bid up the price of ethanol until it is above the market price of gasoline by the amount of the tax credit (57 cents per gallon if we include state tax credits). If the price premium over gasoline is less than 57 cents per gallon, then blenders will make excess profits from the government subsidy by pocketing the difference. Competition among blenders will ensure that there is no “free money left on the table” such that the price of ethanol exceeds that of gasoline by the full 57 cent per-gallon tax credit.
Now consider the case where the ethanol price is determined by the renewable fuel mandate and there is no tax credit. The pump price for blended gasoline is a weighted average of the higher ethanol price and the gasoline price. Consumers must now pay a higher price for blended gasoline (for a given amount of ethanol use) than when only the tax credit was in place. (It’s important to set this policy exercise in context: the actual market price of gasoline is determined separately by world supply conditions and only indirectly affected by ethanol policy in the United States.)

Now re-introduce a tax credit, this time along side the mandate. If the mandate is binding, the related ethanol price premium exceeds the tax credit and there is no incentive this time for blenders to bid up the price of ethanol (unlike before when the tax credit was the only policy). Instead, to take advantage of the ethanol subsidy offered to them by the government, blenders will offer a lower fuel price to consumers. This is because ethanol market prices cannot decline because they are determined by the binding mandate. Blenders will therefore compete for the government subsidy by reducing in their fuel price the implicit price paid by consumers for gasoline until there is no free money left on the table. The price paid by consumers for gasoline declines until the per-unit subsidy on ethanol is exactly exhausted on an adjusted per-unit basis of gasoline consumption. This increases gasoline consumption and thereby the market prices of both gasoline and oil.

The intended effects of the tax credit are reversed: there are increases in gasoline consumption (and thus in greenhouse gas emissions), oil prices, and wealth transfers to the Middle East. Meanwhile farmers are worse off than if there was no tax credit. Farmers are, indeed, making record profits because the price of corn is so high, but ethanol prices have not changed. Higher oil prices (due to the gasoline consumption effect of the tax credit), however, adversely affect farm input costs.

What if the tax credit is binding and the mandate is dormant? In other words, what if the ethanol price premium (with a mandate only) would be lower than the current tax credit? In this case, the hypothetical ethanol price premium with a mandate only would represent the implicit subsidy on gasoline consumption due to the tax credit because the tax credit is not allowing the mandate to bind. Furthermore, the mandate could easily be increased to generate the same desired level of ethanol consumption as the tax credit is currently generating. In this way, one obtains the same level of ethanol consumption but with no taxpayer costs.

Using a mandate alone has an additional advantage: for the same level of ethanol consumption, a mandate generates a higher consumer price paid for gasoline and so further enhances energy and environmental policy goals. The policy implication is clear: eliminate the tax credits and save billions of dollars in taxpayer costs. Otherwise, the tax credit is working against all the policy goals relating to energy security, environmental protection, and rural prosperity.

May 7, 2008; Page A18

Speaking of energy (see here), we can’t help but give more attention to a recent press release from some of the Senate’s leading liberals. Charles Schumer, Byron Dorgan, Bernie Sanders, Bob Casey and Mary Landrieu are demanding that President Bush tell OPEC nations to increase their oil supplies or risk losing arms deals with the United States. The Senators say U.S. consumers need the price relief that only increased oil production can bring.

Yes, that Senator Schumer and that Senator Dorgan, both of whom voted against increasing U.S. oil production because they couldn’t abide drilling across 1% of Alaska’s wilderness. Yes, that Senator Casey, who has called for mandatory reductions in emissions of carbon dioxide. At least Senator Landrieu of Louisiana has fought to allow more offshore drilling in the Gulf of Mexico.

All of these Senate Democrats are willing to accept greater carbon emissions, as long as we can also outsource jobs in the petroleum industry to Middle Eastern dictatorships. The Senators do aver that “some of us have concerns in general about arming this region to the teeth,” but apparently cheap fossil fuel buys a lot of peace of mind.

A special word of concern about Mr. Sanders: He is the only avowed socialist in Congress, but the Vermonter appears to be losing his religion over $122-a-barrel oil. By signing this letter, not only is he officially recognizing the law of supply and demand; he’s also proposing a more crassly commercial trade of guns for oil than anything we’ve ever heard from the most candid realpolitician.

To top it off, the Senator whose Web site proudly proclaims that the first bill he introduced was to combat global warming now wants more fossil fuels ready for burning. We hope his friends are closely watching Mr. Sanders, in case he blows a gasket over all of this cognitive ideological dissonance.

With national security on everyone’s mind and the average retail price of gasoline nearing an inflation-adjusted high of $3.40 a gallon, analysts have touted Brazil as an example the United States should follow on the path to “energy independence.”

Unfortunately, the analysts and the public they mislead seem to misunderstand both the substantial differences between energy markets in the United States and Brazil and the underlying reason for Brazil’s success. On the latter point, Brazil’s success is often attributed to its thriving ethanol market, but this is at most only a small part of the story.

Indeed, the untold story is more complicated and the one lesson Brazil could teach the U.S. - to increase its domestic oil production - flies in the face of demands made by environmental lobbyists on the Democratically controlled Congress.

In 2006, according to the Energy Information Administration (EIA), ethanol made up about 48 percent of the fuel used by gasoline-powered passenger vehicles in Brazil, but when considering both gasoline- and diesel-powered vehicles, ethanol supplied only 20 percent of the total fuel consumed by automobiles and trucks on Brazilian highways.

Though in absolute terms the United States now produces more total ethanol than Brazil, as a share of transportation fuel - less than 3 percent of the fuel used in cars and trucks - we still lag far behind our southern neighbor.

And it is unlikely, absent imposing a huge price increase on drivers and doing horrific damage to the environment, we can ever reach a goal of ethanol providing 20 percent of our fuel supply. Why?

First, Brazil uses much less gasoline and diesel than the U.S. While Brazil consumes 20 billion gallons of ethanol, gasoline and diesel combined each year, of which 4 billion is ethanol, the United States uses 182 billion gallons a year - more than ninefold as much. To put this in further perspective, for ethanol to displace just 20 percent of current automobile fuel in the U.S. we would have to produce almost double the total amount of fuel Brazilian vehicles use in a single year or almost triple the entire world’s production of ethanol in 2006.

Second, Brazil has a major comparative advantage over the United States in producing ethanol. Its climate is suited to growing sugar cane, which requires half as much land as corn per gallon of ethanol produced. Also, sugar cane-based ethanol provides 8 times or 800 percent more energy than the fossil fuel used to make it, while America’s corn-derived ethanol by the most generous calculations provides only 30 percent more energy than is used to produce it. Further, production costs in Brazil are far lower than in the United States because labor is cheaper and Brazil’s ethanol infrastructure is more developed.

While Brazil’s embrace of ethanol doesn’t have much to teach the United States, its policies regarding domestic oil and gas production do provide an instructive lesson, if only Congress would listen. In the 1980s, despite huge subsidies Brazil began experiencing ethanol shortages, learning firsthand that ethanol production alone would not lead to energy independence. As a result, it started promoting policies to boost domestic oil production. Indeed, increased production and new oil discoveries played the biggest role in liberating Brazil from dependence on foreign energy.

Brazil increased domestic crude oil production an average of more than 9 percent a year from 1980 to 2005, to 1.6 million barrels of oil per day. Most notably, in 2007, Brazil announced a huge oil discovery off its coast that could increase its 14.4 billion barrels of oil reserves by 5 billion to 8 billion barrels, or 40 percent.

By contrast, from 1980 to 2005, U.S. crude oil production fell an average of about 2 percent a year or 40 percent overall, from 8.6 million barrels of oil per day to 5.2 million.

This is one lesson we could learn from Brazil’s push for energy independence: make oil production a priority. And the United States has significant reserves: the government estimates Alaska and the Outer Continental Shelf could contain more than 100 billion barrels of oil combined - more than 4 times as much as current U.S. reserves.

New domestic oil production will do far more to alleviate America’s dependence on foreign oil supplies than even the most efficient production of ethanol. Tapping this oil only requires Congress to remove legislative barriers to domestic production - no subsidies, no mandates.

Brazil has been sending a message concerning energy since the 1980s, but apparently Washington has selective hearing.

D. Sean Shurtleff is a graduate student fellow and H. Sterling Burnett is a senior fellow with the National Center for Policy Analysis.
 

“Taking these together — the environmental damage, the human pain of food price inflation, the failure to reduce our dependence on oil — it is impossible to avoid the conclusion that food-to-fuel mandates have failed.” - Lester Brown and Jonathan Lewis

Ethanol’s Failed Promise
By Lester Brown and Jonathan Lewis
Washington Post, Tuesday, April 22, 2008; A19
The willingness to try, fail and try again is the essence of scientific progress. The same sometimes holds true for public policy. It is in this spirit that today, Earth Day, we call upon Congress to revisit recently enacted federal mandates requiring the diversion of foodstuffs for production of biofuels. These “food-to-fuel” mandates were meant to move America toward energy independence and mitigate global climate change. But the evidence irrefutably demonstrates that this policy is not delivering on either goal. In fact, it is causing environmental harm and contributing to a growing global food crisis.
Food-to-fuel mandates were created for the right reasons. The hope of using American-grown crops to fuel our cars seemed like a win-win-win scenario: Our farmers would enjoy the benefit of crop-price stability. Our national security would be enhanced by having a new domestic energy source. Our environment would be protected by a cleaner fuel. But the likelihood of these outcomes was never seriously tested, and new evidence has shown that the justifications for these mandates were inaccurate.
It is now abundantly clear that food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources.
Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm. Here in the United States, farmers are pulling land out of the federal conservation program, threatening fragile habitats. Increased agricultural production also means increased fertilizer use. The National Academy of Sciences reported last month that meeting the congressional food-to-fuel mandate by 2022 would lead to a 10 to 19 percent increase in the size of the Gulf of Mexico’s “dead zone” — an area so polluted by fertilizer runoff that no aquatic life can survive there.
Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. As Time magazine reported this month, huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest “carbon sink.” And when the forests are cleared and the land plowed for farming, the carbon that had been sequestered in the plants and soil is released. Princeton scholar Tim Searchinger has modeled this impact and reports in Science magazine that the net impact of the food-to-fuel push will be an increase in global carbon emissions — and thus a catalyst for climate change.
Meanwhile, the mandates are not reducing our dependence on foreign oil. Last year, the United States burned about a quarter of its national corn supply as fuel — and this led to only a 1 percent reduction in the country’s oil consumption.
Turning one-fourth of our corn into fuel is affecting global food prices. U.S. food prices are rising at twice the rate of inflation, hitting the pocketbooks of lower-income Americans and people living on fixed incomes. Globally, the United Nations and other relief organizations are facing gaping shortfalls as the cost of food outpaces their ability to provide aid for the 800 million people who lack food security. Deadly food riots have broken out in dozens of nations in the past few months, most recently in Haiti and Egypt. World Bank President Robert Zoellick warns of a global food emergency. The immediate necessary step is a major increase in global food aid. But beyond that, America must stop contributing to food price inflation through mandates that force us to use food to feed our cars instead of to feed people.
Taking these together — the environmental damage, the human pain of food price inflation, the failure to reduce our dependence on oil — it is impossible to avoid the conclusion that food-to-fuel mandates have failed. Congress took a big chance on biofuels that, unfortunately, has not worked out. Now, in the spirit of progress, let us learn the appropriate lessons from this setback, and let us act quickly to mitigate the damage and set upon a new course that holds greater promise for meeting the challenges ahead.
Lester Brown is founder and president of the Earth Policy Institute. Jonathan Lewis is a climate specialist and lawyer with the Clean Air Task Force.