Ethanol's place in low fuel prices

Everywhere motorists look, they are seeing low fuel prices.

I filled up my vehicle in Kansas over the weekend for $1.86 per gallon and was ecstatic. Today, the Nebraska state gas price average is $2.04. We haven't seen prices this low in several years.

Why are gas prices so low? We are seeing a glut of oil, both domestically and globally, that is pushing prices lower. Hydraulic fracturing in Texas, the Dakotas and Alberta, Canada, have boosted oil supplies.

So how is that affecting the corn and ethanol industries?

University of Illinois Extension ag economists Scott Irwin and Darrel Good emphasize that it's important not to look only at the price ratio between ethanol and CBOB gasoline, but "the marginal value of ethanol to blenders." Lately, that's been a bright spot in the ethanol market considering the surplus the industry's produced. As long as that remains the case moving forward, demand will likely continue to be strong.

Another scenario that could play out, Irwin and Good say, is if fuel prices fall enough to push ethanol above the breakeven point. Two things could happen in this scenario; first, if blending slows down, demand could fall, ultimately having a negative impact on the ethanol and, in turn, corn market. But, there's still the chance that the margin between the two fuel costs could widen beyond the breakeven point with no response, meaning the market would recover.

Will ethanol supply be affected? Bruce Babcock, an Iowa State University economist said that while the economy doesn't follow the ethanol plants' up-and-down profits, ethanol production helps support corn prices, jobs and communities. "When they turn plants on, they run pretty much at a constant level, whether margins are good or bad," he said. "So as long as ethanol plants are running, the jobs are there, the support and demand for corn is there, and supply of distillers grains is there." This is good for livestock producers as well who utilize the high-protein value distillers grains feed.

Even with lower fuel and corn prices, we can't forget that the ethanol industry directly generates jobs, increases Nebraska’s annual economic base and gives back in local and state tax revenues each year. It also:

• Gives consumers a choice
• Is renewable
• Reduces greenhouse gases
• And is still homegrown

Don't forget to check out our blog on the 10 reasons to use ethanol-blended fuel.

"PUMP" documentary on renewable fuels comes to Nebraska

Renewable fuels hit the big screen with a one-time screening of the documentary "Pump" at the Mary Riepma Ross Media Arts Center. The 88-minute film will be shown at 7 p.m. Nov. 12.

"Pump," narrated by Jason Bateman, explores America's dependence on oil and its effect on the economy. The documentary demonstrates how biofuels like ethanol offer consumers a cheaper, cleaner alternative to gasoline.

Following the screening, there will be a short panel discussion. Doug Durante, Clean Fuels Development Coalition executive director, and Dan Duncan, Nebraska Innovation Campus executive director, will discuss renewable energy and answer audience questions.

"Consumers aren't always aware of their fuel options at the pump and the impact their choice could have on the environment, economy and public health," said Todd Sneller, Nebraska Ethanol Board administrator. "We hope attendees leave the theater with a better understanding of biofuels and renewable energy."

"Pump" is being shown nationwide on a small scale and has received positive entertainment reviews.

"‘Pump' is quite entertaining, drawing together colorful archival footage, interviewed experts and ordinary folk, as well as sojourns to China (in the wake of its economic boom now the world's largest market for cars) and Brazil (whose shift to ethanol production brought prosperous energy dependence), in a lively, professional package," said Variety magazine.

"Pump" and the panel discussion are sponsored by the Nebraska Ethanol Board, Association of Nebraska Ethanol Producers and Urban Air Initiative. Admission is free and open to the public. Attendees should RSVP to rsvppump@gmail.com to receive free popcorn with admittance.
 

RFS is good for America, folks.

By Bob Dineen, president and CEO of the Washington, D.C.-based Renewable Fuels Association, article here

Nicolás Gutierrez’s call for an environmentally friendly solution to America’s reliance on foreign oil is easily answered by the very policy he rails against (“EPA should back away from biofuels policy,” June 18).

The Renewable Fuel Standard (RFS) has helped lower our nation’s reliance on foreign petroleum to 35 percent since reaching a high of 60 percent in 2005. Ethanol production has reduced finished gasoline imports from 600,000 barrels per day in 2005 to near zero today.

Numerous peer-reviewed analyses show that conventional ethanol reduces greenhouse gas emissions by 30 to 40 percent compared to gasoline. This has been realized over the past nine years without the conversion of a single acre of new grassland to cropland. Recent increases in corn acres have been achieved through crop switching, not through cultivation of new, non-agricultural lands. The environmental investigation conducted by The Associated Press has since been discredited for relying on muddled data that were attained through flawed methodology.

Contrary to Gutierrez’s assertions, the RFS does not noticeably affect consumer food prices. Food prices increased just 2.1 percent in 2013, lower than the 25-year average of 2.92 percent (1988–2012). Corn is only a minor ingredient in consumer grocery items. When consumers spend $1 on food at the grocery store, only 12 cents pays for the value of the farm products themselves while the other 88 cents pays for processing, energy, transportation, labor, packaging, advertising and other costs. Oil, however, has been proven to have a substantial effect. Last year, the World Bank found that, “Most of the contribution to food price changes from 1997–2004 to 2005–12 comes from the price of crude oil … ” In addition, the RFS contributes to the livestock feed sector through the generation of distillers grains. More than 35 million metric tons of this highly nutritious feed was generated in the 2012–13 marketing year, with 37.8 million expected in 2013–14. That is enough feed to produce six hamburger patties for every one of Earth’s 7.2 billion residents.

Indeed, the EPA must consider the economic benefits of the ethanol industry. The industry directly supports more than 86,000 well-paid jobs as well as 300,000 indirect and induced jobs. Last year, the industry added $44 billion to the nation’s GDP, raised $30.7 billion in household income and displaced 462 million barrels of imported oil — equal to the total amount of crude oil imported from Iraq and Venezuela.

The RFS is a proven success.

More blogs on the Renewable Fuels Standard:

• Predicament at the Pump
• After the EPA comments. What’s next?
• Podcast: Nebraska youth testifies in support of the RFS
• Big Oil Labels Family Farmers Extremists

After the EPA comments. What’s next?

We are now in a holding pattern from the Environmental Protection Agency (EPA) to hear about next steps concerning their proposed ruling to cut-back on the Renewable Fuels Standard (RFS).

The corn-industry had big push last month to send comments and letters to the EPA. In remarks submitted to the EPA, supporters of the RFS have chided the agency’s decision to cut the blending requirements. They point to ethanol’s role in boosting the agricultural economy and promoting financial growth through the creation of jobs, tax revenue and other benefits. Many worry lowering the federal mandate could harm that growth.

“The bottom line is that this proposal would have a devastating ripple effect on investment in ethanol plants, their production and the jobs they support — as well as the surrounding communities,” Dave Glasnapp, an investor in an ethanol plant in Gowrie, Iowa, said in a comment to the EPA according to an interview on Brownfield.

Soliciting public comment on a government proposal is a normal step in the regulatory process. After the comment period closes, the EPA reads those remarks and considers whether to make changes to its proposal before issuing a final rule.

Overwhelming number of comments

The large number and the tone of the comments on this proposal illustrate what’s at stake: billions of dollars and a clearer picture of the future of renewable fuels use in the United States. From Nebraska, over 6,000 total number of comments were submitted to the EPA. The over 212,000 number reflects actual comments submitted in both opposition and to keep the proposed ruling.  The bulk letters Nebraska Corn Board sent were counted as one until the EPA counts and reads each comment.

EPA is obligated to read each comment that was submitted before the comment period ended.  Comments received after the comment period will be noted but do not have to be read and taken into consideration of their final ruling. 

A change to the Renewable Fuel Standard would alter the blending requirements for renewable fuels including corn ethanol. In the past, the EPA largely followed the annual level requirements put in place by Congress, helping to drive new markets and spur demand for the renewable fuel. The proposed reduction — a move even some in the oil industry have called substantive — would shift the process to one that sets the requirements based on expected market demand.

So now that the comment period is closed, what’s next?

The EPA is on their own timeframe.  We are hoping they make a ruling by this summer on the 2014 requirements, and at the same time, release the 2015 requirements. 

The proposal by the EPA, which oversees the country’s Renewable Fuel Standard, would cut the fuel requirement in 2014 to 15.2 billion gallons of ethanol and other biofuels, 3 billion gallons less than Congress required in a 2007 law.

It would mark the first-ever drop in the Renewable Fuel Standard, which requires refiners to blend ever-increasing amounts of biofuels into the nation’s gasoline supply through 2022.

Next steps if their proposal is passed?

“That is a good question,” said Kim Clark, director of biofuels for the Nebraska Corn Board. “We, the corn-ethanol industry, are expecting the EPA to overturn their proposed numbers and not make any changes to the requirements.”

Predicament at the Pump

*By Diane Karr, CommonGround volunteer and farmer from Blue Hill, Nebraska

When I fuel up my vehicle, I use an ethanol blend without any second thoughts. But what if I wasn’t a farmer?

There are two main schools of thought right now on ethanol. While ethanol industry promotes it, the petroleum industry promotes fear of it.

A reduction in the Renewable Fuel Standard (RFS) has been proposed by the Environmental Protection Agency (EPA) and some members of Congress. The RFS is legislation that sets targets for blending ethanol with gasoline. The EPA is proposing a reduction of 1.4 billion gallons.

On one hand, the ethanol industry points out that the RFS decreases our dependency on foreign oil, that ethanol is a cleaner choice for the environment, and that the RFS provides strong economic support for the cities and farms in the Midwest.

On the other hand, the petroleum industry tells consumers that ethanol damages engines, raising corn is destructive to the environment, and agricultural subsidies hurt the poor. However, when we read between the lines, vehicles with improved fuel efficiency have led to decreased demand for gasoline. This has left the petroleum industry wanting to increase its market share and bottom line by reducing ethanol blend targets. If you are holding a petroleum company in your investment portfolio, this benefits you. It’s ironic that oil interests express concern for the poor while they boast record profits and unapologetically stick it to consumers at the pump!

All mudslinging aside, here’s what I know as a farmer:

• We’ve used ethanol for over twenty years in our pickup trucks and personal vehicles without any engine problems. None of our mechanics has ever advised against using ethanol blends.

• Corn production on our farm is not destructive or unsustainable. Most of the farmers I know practice similar methods to care for the land and water. (I’ll let you make up your own mind as to what kind of impact you think the petroleum industry has on the environment - such as 2010’s Deepwater Horizon oil spill.)

• 80% of the Farm Bill funds food stamps and nutrition. The remainder supports crop insurance, conservation, subsidies, and other programs. The main intent of agricultural subsidies is to provide economic stability in times of extreme weather or market risk. Connecting subsidies to the plight of the poor is questionable at best.

• Veterans groups are pro-ethanol.

As a corn farmer, I’m biased. However, we also raise soybeans, wheat, grain sorghum, alfalfa and cattle.  Although corn prices spiked in recent years, it’s when production is high and prices are low that the ethanol industry lends important stability to the market.

I truly predict that a reduction in the RFS would have a negative influence on the economy in the Midwest, which could ultimately impact other sectors of the economy nationwide which have been experiencing a somewhat shaky recovery. When the farm economy is weak, it deals a severe blow to all of rural America. During the 1980s Farm Crisis, we didn’t just lose farmers. We also lost small town businesses and population which eventually triggered a wave of school consolidations. When farmers can’t replace and update equipment, it affects manufacturing sector. The ripple effect reaches all consumers eventually. Ethanol production is a homegrown American industry that benefits our economy with thousands of jobs beyond just farmers. While domestic petroleum is considerable, there’s no denying that there are foreign firms who want you to use less ethanol.

Until I’m convinced otherwise, a little ethanol at the pump never hurt anybody; but letting petroleum interests determine our opinion of it could be painful to us all in the long run.

*You can read Diane’s blogs, and other posts from farm women across Nebraska at CommonGroundNebraska.com!

Big Oil Labels Family Farmers Extremists

*as posted on NCGA’s Corn Commentary

A true David and Goliath battle is under way between the nation’s family farmers and Big Oil in the form of the American Petroleum Institute (API). And farmers in recent weeks bounced a big rock off the head of the petroleum behemoth. At issue is American ethanol.

For months the oil industry has been involved in a well-funded campaign of both public and covert efforts to undermine the growing role of sustainable biofuel like ethanol. They capped this massive misinformation campaign by leaning on the White House and EPA to propose a change to the Renewable Fuels Standard (RFS) that would reduce ethanol use by 1.4 billion gallons this year.

The bad news is the most recent slap in the face, if successful, has the potential to hammer farmers and the rural economy to the tune of more than 10 billion dollars.

Before this recommendation can be accepted EPA’s proposal must go through a formal public comment period. Thousands of corn farmers across the country have responded with a vengeance submitting comments urging the U.S. Environmental Protection Agency to retract its proposed 10 percent cut in the amount of corn ethanol in the 2014 Renewable Fuel Standard.

The volume of supportive comments coming from farmers as well as equipment dealers, bankers, school administrators and consumers who favor a fuel choice has been incredible so thanks to everyone who has taken the time to register your opinion.

The response has been so terrific that it tweaked API and in response they have launched yet another effort to remove any competition from the fuel marketplace. It takes the form of an annoying and deceptive “robo-call.”

On the pre-recorded action request API refers to those supporting ethanol as both a “special interest group” and as “extremists.” Since most those making the calls are farmers, I guess that means you. They also use the same old hackneyed and debunked arguments saying ethanol leads to higher food prices and damages car engines.

If being called an extremist makes you a little angry fight back. If having one of the world’s most prosperous industries try to increase their profits at your expense….fight back.

Corn growers: Click here to send a public comment to the EPA.

Non-farmers: Click here to customize and send a public comment to the EPA.

We have until January 28th – 5 days – to submit these comments. Take 2 minutes and comment now. This is important to not only corn famers, but to Nebraska’s overall economy.

It's not crazy to care about America's energy future.

Currently, our dependence on oil is more than a little crazy -- half of it comes from other countries! Of course, oil companies think this is okay, since they're raking in the profits. But it's ordinary Americans who are getting hit the hardest.

Domestically produced, all-American renewable fuel can free us from our dependence on oil.

Across the country, farmers, entrepreneurs, and consumers are finding ways to use renewable fuel. Even the U.S. Navy is boosting its fuel efficiency and increasing its use of other renewable fuels.

It's not crazy to care about America's energy future -- we need a stronger, cleaner America.

Watch this video to see how much one supporter believes in the importance of renewable fuel -- there might be a tattoo involved -- and then share it with your friends and family so they too can help us in our quest for independence from oil.

September is Renewable Fuels Month!

Food price increases second lowest in 20 years. Still blame ethanol?

Food prices rose just 1.8% in 2012, the second-lowest annual rate in the last 20 years, according to recently released consumer price index (CPI) data, Geoff Cooper, VP of Research and Analysis for the Renewable Fuels Association shared recently.

The new data demonstrates the absurdity of the alarmist rhetoric coming from Big Food about the impact of ethanol and the Renewable Fuel Standard (RFS) on consumer food prices. Indeed, annual food inflation has averaged 2.8% since the RFS was first enacted in 2005, compared to a 25-year average (1988-2012) of 2.92%.

Other interesting facts from the December CPI:

• Food inflation in 2012 was barely higher than general inflation, which totaled 1.7% for the year.
• Prices for “food at home” (i.e., groceries) in 2012 were just 1.3% higher than in 2011.
• Prices for “food away from home” (i.e., restaurants) were 2.5% higher, indicating that restaurants marked food prices up at nearly twice the rate as grocers.
• Prices for cereals and bakery products were just 0.8% higher.
• Meats, poultry, fish and egg prices were just 1.5% higher in 2012, less than the overall food inflation rate and the general inflation rate.
• Pork prices were actually lower in 2012 than in 2011.
• Spending on meats, poultry, fish and eggs comprised about 2% of overall expenses for the average American family.
• Prices for dairy and related products increased just 0.5% last year.

Use these facts the next time Big Food and Big Oil sound their bogus alarm bells about “skyrocketing” food prices and the effects of the RFS on food prices.

Podcast: Big oil's E15 'research' has big faults

In this podcast, Dave Nielsen, a farmer from Lincoln and member of the Nebraska Corn Board, calls out the poor research put out by big oil and American Petroleum Institute in their latest attempt to discredit E15, a 15 percent ethanol blend.

They claimed the research they performed on a few carefully selected engines was better than EPA’s own work and other independent research. "A quick look, however, shows this to not be the case at all," he said.

"In fact, it was so poorly done, the manager of the U.S. Department of Energy’s vehicle technologies program wrote a blog post calling it out and listing several key scientific problems," Nielson said.

He goes on to point out they tested eight engines, but tested only three engines with straight gasoline. Of those three, one failed their own test. "That seems rather interesting to me, that one of three engines failed the test when no ethanol was used," he said.

In conclusion, Nielsen said, "I can’t wait for E15 to become available in Nebraska later this year, and I hope you’ll fill up with it, too."

Nebraska Corn Kernel podcasts are also available on iTunes! Click here to subscribe.

Ethanol saves you more than $1 per gallon

Research results were released this week showing that America’s growing use of domestically-produced ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon in 2011.
The updated research was conducted by economics professors at the University of Wisconsin and Iowa State University.  The 2011 results, which are up from an average impact of $0.89 per gallon in 2010, were released today by the Center for Agricultural and Rural Development (CARD). The new analysis, an update to a 2009 peer-reviewed paper published in Energy Policy by professors Dermot Hayes and Xiaodong Du,  also found gasoline prices have been reduced by an average of $0.29 per gallon, or 17%, from 2000-2011 thanks to  the growing use of ethanol.

Three primary factors are responsible for ethanol’s more robust price benefit at the pump in 2011: 

• Higher oil and gasoline prices
• Higher ethanol inclusion
• Ethanol being priced at a larger-than-normal discount to gasoline

In a release from the Renewable Fuels Association, Bob Dinneen, President and CEO said, “While it’s hard to imagine that gas prices could be even higher than they are now, this study clearly underscores that the current pain at the pump would be far worse without ethanol.”

Dinneen continued, “Because ethanol makes up 10% of our gasoline pool today, it significantly reduces demand for oil and puts downward pressure on gas prices. From coast to coast and border to border, ethanol is helping save consumers money.  In these times of high unemployment and sky-high gas prices, ethanol is one America-made solution that is providing some respite for battered American families trying to make ends meet.”

Key conclusions derived from the report include:

• In 2011, ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon.
• Regular grade gasoline prices averaged $3.52 per gallon in 2011, but would have been closer to $4.60 per gallon without the inclusion of more than 13 billion gallons of lower-priced ethanol.
• The average American household consumed 1,124 gallons of gasoline in 2011, meaning ethanol reduced average household spending at the pump by more than $1,200.
• Since 2000, ethanol has kept gasoline prices an average of $0.29 per gallon cheaper than they otherwise would have been.
• Based on the $0.29-per-gallon average annual savings, ethanol has helped save American drivers and the economy more than $477 billion in gasoline expenditures since 2000 – an average of $39.8 billion a year.

What’s even more exciting about the upcoming year is that you should see even more savings per gallon with the approval of E15. Stay tuned!

Read more about the above research here.

Biofuels helping U.S., Western Hemisphere become energy self sufficient

A year ago, a report by BP noted that the United States’ dependence on foreign oil peaked in 2005 and increased fuel efficiency and the increased use of biofuels like ethanol will further drive down that dependence and the use of oil overall through 2030.

BP came out with an updated report this week and reaffirmed that thinking – but expanded it to say that among energy importing regions, North America, with growth in biofuel supplies and unconventional oil and gas, will turn today’s energy deficit (mainly oil) into a small surplus by 2030.

This does not mean we'll have cut the cord from oil. Instead, that the volume of oil imports in the U.S. would fall significantly, at least in BP's estimation.

Bob Dudley, BP's CEO, said U.S. oil imports have dropped by about one-third since peaking in 2005 and are likely to be half of today’s level in 2030. "The U.S. now produces over 50 percent of the liquid fuel it uses – as opposed to importing the majority, as was the case a few years ago," he said in a speech.

In the report's downloadable booklet (.pdf), BP noted that the import share of oil demand and the volume of oil imports in the U.S. will fall due to rising domestic shale oil production and ethanol displacing crude imports.

When looked at on a hemisphere-basis, the Western Hemisphere may become "almost totally energy self-sufficient" by 2030, as the growth in biofuels production (like ethanol) and oil and gas supplies all expand.

This is how The Guardian reported it: "In a development with enormous geopolitical implications, a large swath of the world taking in North and South America would see its dependence on oil imports from potentially volatile countries in the Middle East and elsewhere disappear, BP said, although Britain and western Europe would still need Gulf supplies."

BP said renewables, including biofuels, will continue to be the fastest growing sources of energy globally, rising at an annual clip of more than 8 percent, much quicker even than natural gas, the fastest growing fossil fuel at about 2 percent a year over the period to 2030.
While BP said biofuels growth will still be "very robust", it did scale it back some due to "more modest expectations of penetration of next generation fuels." (Certainly something that can be worked on.)

The report focuses a great deal on growth markets, especially India and China. In fact, BP predicts that energy demand will soar by 39 percent by 2030 thanks to huge growth in emerging markets like those.

BP said such growth in the rest of the world, principally Asia, will depend increasingly on the Middle East in particular for its growing oil requirements. It said the oil cartel OPEC will grow its market share as a result, reaching 45 percent by 2030 – a level not approached since the 1970s. (Will that have an impact on global stability?)

While oil will continue to lose market share through 2030, BP said the demand for hydrocarbon liquids will still reach 103 million barrels per day in 2030, up by 18 percent from 2010.

This means the world will still need to bring on enough liquids – oil, biofuels and others – to meet that forecast 16 million barrel per day of extra demand by 2030 and replace declining output from existing sources. Where should that focus lie? 

Also see:
Biofuels driving down dependence on foreign oil
Big Oil defends tax breaks, massive profits
How many (other) enviromental groups are in bed with big oil?

In victory for ethanol, low carbon fuel standards ruled unconstitutional

The California Air Resources Board made a few changes to its low carbon fuel standard this month -- finally recognizing that some of the dirtiest oil on the planet, such as oil from tar sands, should perhaps not be considered on par with other oil sources.

This was an important change because the ARB the rules as they were essentially said tar sands oil was "cleaner" (had a lower carbon score) than renewable ethanol. Absurd anyway you look at it.

In fact, the ARB has mostly ignored any carbon intensity in oil -- instead only focusing on the carbon intensity of biofuels, including a shaky (at best) theory on land use change put out there by an "environmental" lawyer. Certainly that was a bit carbonated, which is why so many had a problem with it (see links below), and why ethanol groups filed a lawsuit in 2009.

(Of course Big Oil wasn't a fan of ARB's change, but that isn't a surprise since the original rules gave oil a free pass.)

Yet the whole thing may be moot because the lawsuit – filed December 24, 2009 – was answered yesterday by a judge in a Federal District Court in Fresno, California. His conclusion: California's low carbon fuel standard is unconstitutional and in violation of the Commerce Clause of the U.S. Constitution.

In a joint statement, Renewable Fuels Association president and CEO Bob Dinneen and Growth Energy CEO Tom Buis said: "The state of California overreached in creating its low carbon fuel standard by making it unconstitutionally punitive for farmers and ethanol producers outside of the state’s border. With this ruling, it is our hope that the California regulators will come back to the table to work on a thoughtful, fair, and ultimately achievable strategy for improving our environment by incenting the growth and evolution of American renewable fuels."

RFA and Growth Energy filed the lawsuit and asserted that the California low carbon fuel standard (LCFS) violated the Commerce Clause by seeking to regulate farming and ethanol production practices in other states. They said the Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct.

The court found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct. As a result, the court issued an injunction. The judge also ruled that the ARB failed to establish that there are no alternative methods to advance its goals of reducing greenhouse gas emissions to combat global warming.

The ARB can, of course appeal.

Related pieces/history:

• Data shows Nebraska farmers are growing more on less
• Scientists concerned with California's Low Carbon Fuel Standard 
• California fuel regulations will have significant impact on Nebraska’s economy 
• Schwarzenegger pumps E85, but is ARB following the science? 
• ‘Theory’ on indirect land use change gets weaker 
• Distillers grains is a great value in livestock, poultry feed (accounting for DDGS as part of land use/greenhouse gas) 

Blender’s credit set to expire

By Kim Clark, Ag Program Manager for the Nebraska Corn Board

The end of the year is quickly approaching along with Christmas and the end of VEETC (Volumetric Ethanol Excise Tax Credit), or the blender’s credit. This time last year, we didn’t know if VEETC was going to be extended another year, but it came down to the December 31 deadline and Congress extended VEETC for one more year, and now it will be expiring at the end of the year on December 31.

The blender’s credit or VEETC, is a $0.45 per gallon of ethanol credit for blending with gasoline. The credit began to give big oil companies an incentive to blend ethanol with gasoline. It is commonly misunderstood who receives the blender’s credit. It is NOT ethanol plants, but the companies that blend the ethanol with gasoline to be sold at gas stations where you fill up your vehicle.

In order to keep the prices down at the pump, this savings is reflected in the price when you fill up your vehicle. Hence, passed onto you – the consumer.

With VEETC expiring at the end of the year, what does this mean for the price of ethanol blended fuel at gas stations beginning in 2012?

Below are some charts that show the average prices at the pump in October this year in Nebraska. The first chart shows the average prices at gas stations with VEETC available while the second chart shows the average prices to be paid at the gas station without VEETC. These are the prices will more than likely be seen the beginning of 2012.

Chart 1: Average October prices at gas stations with VEETC


Chart 2: Average October prices at gas stations without VEETC

Now, if we really did see prices at the pump similar to the prices in Chart 2, ethanol blended fuels are still cheaper, but with the mileage loss when using E85, it isn’t economical to use E85 based on this price.

Fortunately, there are a few more factors that play into the prices consumers pay at the pump. One main factor is the price of oil and the price of gasoline. Based on these two factors and their future’s price for January 2012, the chart below (Chart 3) is an estimate of prices at gas stations based on the current futures market. These prices fluctuate daily so this is only an estimate.

Chart 3: An estimate of January gas station prices based on the price of oil and ethanol in the third week of November.


The prices in Chart 3 are based on the futures prices. These prices are comparable to the prices we saw in October because the ethanol futures are $0.46 per gallon lower than gasoline. Remember, this is only an estimate based on the current futures market.

Why was there such a sharp decrease in ethanol price compared to a couple months ago? The answer to the question is somewhat complicated, but in short, companies are blending ethanol with gasoline this year to take advantage of the blender’s credit and storing it to be used in 2012 leading to an additional supply of ethanol blended fuel with a low demand.

There is nothing wrong with taking advantage of cost savings, especially since the price is being reflected at gas stations. As I am writing this blog, the futures market for oil and ethanol are the main contributing factors to the price of ethanol blended fuel at gas stations, but other factors also play a role.

In the next blog, I will discuss how the price at the gas station affects consumer, specifically flex fuel vehicle owners.

Read other blogs about VEETC and the importance of ethanol in Nebraska:

• Not extending ethanol tax credit would cost Nebraska nearly 14,000 jobs
• Podcast: VEETC important to support jobs in rural communities
• Strong ag economy brings jobs, opportunity to rural Nebraska 
• Ethanol worth billions to Nebraska economy
• Why limited options for flex fuel?
  

FREEDOM film promotes ethanol

Last week, the screening of the documentary film, FREEDOM, was in Lincoln, sponsored by Green Plains Energy and The Joslyn Institute for Sustainable Communities.

The film focused on the use of ethanol as the most sustainable fuel for transportation –the energy that is in the biggest demand. These important points were covered in the film:

• Ethanol does not require more energy to make than it yields.

Argonne National Laboratory research has shown that corn ethanol delivers a positive energy balance of 8.8 megajoules per liter. The energy balance from second-generation biofuels using cellulosic sources is up to six times better, according to a study published in Biomass and Bioenergy Journal.

• Ethanol does not take food away from humans.

Only 1 percent of all corn grown in this country is eaten by humans as sweet corn. The rest is No. 2 yellow field corn, which is used in animal feed, food supplements and ethanol.

• Ethanol does not emit more greenhouse gases than gasoline.

A 1996 EPA study analyzing sources of air pollution confirmed that gasoline vehicles and non-road equipment are the largest contributors to vehicular gaseous hazardous air pollutants. However, another study showed ethanol reduces tailpipe carbon monoxide as much as 30 percent and tailpipe particulate matter emissions by 50 percent. Also, the Journal of Industrial Ecology at Yale University published a study in 2009 that found that greenhouse gas emissions are reduced by up to 38-59% when using ethanol as a transportation fuel.

• Ethanol can be made from waste.

Cellulosic ethanol can be made from agricultural waste and biomass such as corn cobs and stover, wheat straw, wood, energy crops & even municipal waste.

• Ethanol is cleaner burning.

Compared to gasoline, ethanol reduces every single tailpipe emission (CO; CO₂; smog; particulates; NOx and SOx) because ethanol contains 35% oxygen and results in a higher temperature burn.

• 12 billion gallons of ethanol were produced in Canada and the US in 2010.

This will grow to 36 billon gallons by 2020. Currently, the ethanol industry replaces 364 million barrels of imported oil each and every year in the USA and Canada.

• There are 8 million flex fuel vehicles already on the road, which is 3% of US vehicles.

We’re adding 800,000 to 1 million new flex fuel vehicles each year. There are already over 2,200 E85 and ethanol blender stations with over 60 E85/blender stations per month being installed.

• Ethanol creates jobs and is good for the economy.

A major study by the Windmill Group identifies 645,000 jobs created by ethanol in the USA and $92 billion.
After the film, they had a three-member panel including:

• Todd Becker, CEO of Green Plains
• Cecil Steward, Pres/CEO of The Joslyn Institute
• Lt. Gov Rick Sheehy

There was good discussion and interaction from the attendees. Lt. Gov. Sheehy was first to boast on Nebraska’s great position being the best situated for corn, ethanol and livestock production. The ethanol industry in Nebraska produces 2 billion gallons per year, which escalates into job creation, new technology and co-products to be used by livestock.

The discussion of first-, second- and third-generation biofuels was an important topic and Todd Becker explained how corn’s role is so important in that. In corn-ethanol production, one-third of the kernel is the starch used to make ethanol fuel, one-third is protein that is passed through to use in distillers grains to feed livestock, and the last one-third goes into CO₂. The role of second-generation biofuels comes into play in using the CO₂ to grow algae, for example, which is then able to make food, feed and fuel again.

For more on the film, watch the teaser below or go to www.thefreedomfilm.com.

Busting the 5 Myths of Ethanol: Myth #4

If you have fueled up your vehicle lately you have probably noticed that gas prices have gone down a little. According to AAA, gas prices have fallen by nearly 22 cents since last month, making it $3.56 for a gallon of regular gasoline.

Unfortunately, for many this is still too high and is more expensive than what drivers were paying for last year when gas was only $2.72. However, drivers who drive FFVs (Flex-Fuel Vehicles) have the option of using E85, which is currently only $3.01. That is almost half a dollar cheaper than regular gasoline. Though E85 is a much more affordable and cleaner burning fuel compared to gasoline, there are still many misconceptions about the fuel.


One of the misconceptions about ethanol is how it is produced.

Some groups believe ethanol uses too much water, therefore not making it a viable alternative compared to gasoline.

This takes us to today’s myth, which is ethanol requires too much water to produce. This myth is FALSE and ethanol actually requires less water to produce than it did a few years ago.

Today, producing one gallon of ethanol only takes 2.7 gallons of water, which is slightly less than the amount of water that is used to produce a gallon of gasoline. Most of the criticism about ethanol’s consumption of water comes from the need of irrigating feedstock crops in drier climates. Still, many don’t realize that the majority of ethanol produced in the Midwest comes from rain-fed crops. Over the last 10 years, the number of dryland acres of corn crop has increased about 10%, meaning we are using less water to irrigate the corn.

Not only has ethanol reduced the amount of water it uses, but studies have also shown that ethanol is not toxic and would not pollute our ground water if it were ever spilled. Studies have shown that ethanol is a biodegradable fuel and would dissolve in water. A majority of people don’t realize that ethanol can be found in beer, bourbon, and other alcoholic beverages.

Once again we have proven that ethanol is an efficient fuel, a fuel that continues to reduce the amount of water it uses in production. We also don’t have to worry about this fuel polluting our valuable resources like water, unlike oil. So if you are driving a flex-fuel vehicle, make sure to stop in and fill up with E85. Not only are you supporting an industry that is providing you with an alternative fuel, but you are also supporting America’s hardworking corn farmers and their families!

Be sure to check back on Friday, July 7 to bust our final myth about ethanol. If you would like more information about Nebraska Corn Farmers or the ethanol industry, visit the Nebraska Corn Board website!

Does Ethanol Really Have a Future? Why yes it does!

By Lance Atwater, NCB Intern

Today, everyone is feeling the squeeze at the pump. What happened to the good ole days when gas was only $0.31 a gallon? Unfortunately, we aren’t seeing those 1960 prices anymore, and probably never will. Today, according to AAA, the average price for a gallon of regular gas is $3.75. That is a dollar more than what we were paying for last year, which was $2.71.

Now, it seems like what we currently are paying for is a lot, and it is, but did you know we could actually be paying for a lot higher gas prices if it wasn’t for ethanol? A study done by economists at Iowa State University and the University of Wisconsin shows that ethanol actually reduces gas prices by $0.89 a gallon. That is almost an entire dollars worth! When calculating this out, gas prices would actually be $4.64 if it was not blended with ethanol! If you think we have it bad now, just imagine if you saw this price at the gas pump!

We can clearly tell what it would be like if gas wasn’t blended with ethanol, but lately there has been people and groups saying ethanol has no future. One of the hot topics is whether ethanol should receive subsidies or not. There is no doubt our country needs to make cuts to reduce its debt, but cutting out subsidies for alternative energies may not be the best solution.

When looking at the amount of subsidies that the ethanol industry receives compared to the oil industry, ethanol receives very little. The oil industry receives between $130-280 billion while the ethanol industry only receives $17 billion. Why should we cut ethanol subsidies when, 1) it receives a much smaller amount of subsidies compared to the oil industry, and 2) it actually reduces the cost of gas at the local pump. We sure don’t see oil subsidies reducing the price of gas! Not only does ethanol reduce gas prices, but it also helps reduce the amount of emissions that vehicles give off.

Now, when talking about support, we aren’t just thinking about subsidies because honestly subsidies are not what keeps the ethanol industry going. This industry needs support from the auto manufacturers who make the flex fuel vehicles and most of all the industry needs support from the consumer. When consumers invest in ethanol, they are not only investing in this industry but they are also investing in our country’s economy. However, that is not always the case with oil. When we invest in oil, our money ends up going to economies overseas.

Ethanol has a future, and don’t let anyone tell you different. With ethanol we aren’t just reducing emissions and the costs of energy, but we are also insuring that our country will someday be energy independent.

Check out other recent blog posts about ethanol:
Ethanol plays key role in fuel supply, helps lower prices
Saudi prince wants cheaper oil so you stay hooked and forget about ethanol
Finding the solutions to feed, fuel the world
A myth is still a myth when it comes to corn and ethanol, food and fuel

Saudi prince wants cheaper oil so you stay hooked and forget about ethanol

In case you missed it over the weekend, Saudi Prince Al-Waleed bin Talal said on CNN Sunday that he wants oil prices to drop – not because he's worried what $100 oil is doing to the our economy but because he's worried the United States and Europe might push more quickly toward alternatives.

"We don't want the West to go and find alternatives, because, clearly, the higher the price of oil goes, the more they have incentives to go and find alternatives," he said on CNN, which noted Talal is listed by Forbes as the 26th richest man in the world. He's the grandson of the founding king of modern Saudi Arabia.

Talal said he'd like the oil price to be somewhere between $70 and $80 a barrel rather than the current price of more than $100 a barrel. Gee, what a swell guy....let's work keep oil prices "low" so Americans keep sending us checks while spending billions on their military to keep oil shipping lanes open for us.

Perhaps Talal read a report from BP that said the United States’ dependence on foreign oil peaked in 2005 and increased fuel efficiency and the increased use of biofuels like ethanol will further drive down that dependence and the use of oil overall through 2030. BP's report said the import share of oil and gas to the U.S. will fall to levels not seen since the 1980s, do in part to ethanol, which BP noted displaces oil imports. (Here's a more recent Reuters piece that cites the Energy Information Administration noting similar points.)

Biofuels like ethanol are already displacing foreign oil and reducing the amount of expensive oil in most gas tanks across the country – and obviously it's gotten the attention of Big Oil. One recent study said if ethanol production came to a halt, the estimated gasoline price increase would be of "historic proportions," ranging from 41 to 92 percent. At today's prices you'd be looking at $5.60-$7.60 per gallon gas without ethanol.

Should we follow Talal's wishes and just stay hooked on oil? Or should we continue to push to diversify our fuel supply with alternatives like ethanol and biodiesel? Should we have policies that favor Big Oil, Talal and his cronies? Or policies that favor growing renewables and support our own economy?

Big Oil defends tax breaks, massive profits

Big Oil was called before Congress yesterday to talk about high gas prices – but they spent their time defending the billions in tax breaks/credits/subsidies the industry gets courtesy of U.S. taxpayers. While mostly for show, the testimony was important to put Big Oil on the record in saying that after a century it apparently still needs government tax breaks to be successful.

While it is generally believed a bill to eliminate a stack of these tax breaks won't make it anywhere, Big Oil felt it needed to defend itself and, not surprisingly, everyone was on the same well-oiled page. ExxonMobile's CEO called the tax proposal "misinformed," "discriminatory" and "counterproductive." (Exxon, fyi, had profits of $11 billion in the first quarter of this year.)

I wonder what he has to say about incentives for the biofuels industry? And how are biofuels suppose to work their way into the system when like Big Oil controls the markets, dollars and reaps so much in terms of a tax advantage?

Of course the American Petroleum Institute (which supports tar sands oil but files lawsuits to prevent increased use of biofuels) is running TV ads trying to scare Americans into believing that "now is not the time to raise energy taxes" – and without directly saying so, essentially arguing that eliminating tax breaks for Big Oil is the same thing as raising taxes. Yet immediately eliminating the Volumetric Ethanol Excise Tax Credit (VEETC) for biofuels would do EXACTLY the same thing!

The difference is, Big Oil essentially has a monopoly on our fuel supply. Biofuels like ethanol are helping to change that. It will take time and perseverance – and the continued defense of myths and outright lies perpetuated online – but dropping the push for biofuels would be a giant step backward for the United States.

Yesterday, the Nebraska Corn Board distributed a news release that dealt a bit on the subject.

It noted that oil is in everything one way or another – from gas tanks to packaging to transporting to fabric to food – and high energy costs also significantly increase the cost of production no matter what’s being produced, from widgets to breakfast cereal.

“We’ve had very high oil prices for much of this year, and we’re all seeing it at the pump,” said Kim Clark of the Nebraska Corn Board. “Yet we’re also seeing the impact of higher energy costs in every transaction in every store because high oil prices have an impact at every step in the process for just about everything we buy. It’s taking dollars away from families and slowing our economic recovery.”

High oil prices also mean soaring profits for global oil companies – Exxon saw profits rise to $11 billion, up 69 percent from last year. Shell was up 22 percent, Chevron up 36 percent, ConocoPhillips jumped 43 percent and even BP, which is still paying for the massive oil spill in the Gulf, saw gains of 16 percent and $7.2 billion in earnings. Profits rival those in 2008 when oil hit $147 and Exxon earned more than $45 billion, more than any publicly traded company in history.

“Despite massive profits year after year, many of which go overseas, the oil industry continues to fight to keep U.S. tax breaks, tax credits and other subsidies, some of which have been in place for nearly a century, not to mention the military cost of keeping shipping lanes open,” Clark said. “How many decades do these companies need government support? Certainly we should consider the oil industry well established and able to stand on its own.”

At the same time, the oil industry and its many offshoot organizations continue to bemoan any incentives for biofuels. “They promote many myths and misinformation about biofuels like ethanol, and that is unfortunate because biofuels are our only hope of diversifying the fuel supply and producing more energy here at home,” Clark said. “Instead of being part of the solution, they continue to promote false ideas that only make us more dependent on oil, even if that oil comes from the Middle East.”

A myth is still a myth when it comes to corn and ethanol, food and fuel

And the myths continue...

Food prices are increasing at the grocery store because of ethanol, the uprising in Egypt occurred because of ethanol, ethanol is taking away from our food supply, there would be fewer hungry people in the world if we didn't use ethanol.

We’ve heard it all before (except the Egypt one, but you get the gist). These are just a few of the myths about corn and ethanol in circulation.

It’s notable, of course, that a recent uptick in all this nonsense began about the same time oil prices began to rise – it wasn’t that long ago oil was $60. It has gradually been inching up but topped $100 today for a while, fueled in part by the continued unrest in oil rich regimes around the world.

And, as noted by the LA Times, this run-up in prices will impact all of us and nearly everything we purchase (notably, food).

Does that remind you of 2008?

For a while in 2007-08 (and again recently), some folks tried to blame ethanol and corn for increasing food prices. Yet like before, corn prices plays a relatively minor role in the grand scheme of things. A bit part not even worthy of side kick status.

Remember the World Bank “correction”? Or FAO?  Or USDA? All concluded that corn prices and ethanol were but a footnote to the real juggernaut to any increase in food prices three and four years ago.

In the end, at least for ethanol, it’s about food AND fuel. While this tends to get lost among the handy sound bites, we need to talk about how food and fuel are being made from the same bushel of corn grown by America’s farmers.

Ethanol companies use about 3 percent of the world’s grain supply for ethanol production and approximately 36 percent of the U.S. corn supply (a corn supply that has grown considerably since 2000 – ethanol doesn’t use more corn from the same-sized pie every year…the pie is getting bigger!).

However, corn ethanol plants also produce distillers grains, a great protein feed for hogs, beef and dairy cattle and poultry. Feeding distillers grains to livestock decreases the amount of other feed ingredients, such as ground corn, corn silage, soybean meal, some hays and other forage, in feed. Although the ethanol industry may use 36 percent of the U.S. corn grain supply, when you add in the millions of tons of distillers grains they also produce to feed livestock, the figures change.

Even countries around the world are catching on – exports of dried distillers grains reached an all-time high in 2010 and will be even higher this year.

The value of corn in food
The Food & Fuel page over at NebraskaCorn.org includes some good points as to the impact of corn prices on some basic foods.

AT $6 corn, a box of corn flakes contains about 8.6 cents worth of corn but the box sells for about $4.00. A gallon of milk costs $2.99. Of that price, dairy farmers receive about 90 cents and about 19.3 cents is attributable to corn. A 2 liter bottle of soda, which contains high fructose corn syrup, contains about a dime’s worth of corn.

Often times packaging (oil) and shipping (again, oil) is considerably more costly than the value of the corn in the box, jug or package.

Reminds me that even the “tub” that holds popcorn at the movie costs more than the popcorn in it. Remember that?

Also remember that even BP acknowledged that biofuels are driving down our dependence on foreign oil. The sooner we get over the ethanol myths and move on the sooner we'll be less reliant on unstable parts of the world for our energy needs.

Other posts of note:

• Food vs. fuel: A false and dangerous premise
• Can we calculate the true cost of our dependence on oil?
• 'Oil will hit $150 again'
• Oil cartel: Oil is too cheap
• Our stable oil supply?

Misinformation in the news leads to restless farmers

By Don Hutchens - executive director, Nebraska Corn Board

Well the troops (corn farmers) are getting restless and tired of having corn ethanol blamed on the national syndicated newscasts like FOX, CNN, MSNBC and others. I have received a number of calls from not only Nebraska corn farmers, but from Kansas as well this week, asking, “Where do they get off on blaming corn/ethanol for higher food prices, or for starvation, or for contributing to the conflict in Egypt?” I sure cannot disagree with their premise. It seems that the oil lobby, the Grocery Manufactures and a few other misinformed groups are gaining in the headline battle.

Today was somewhat of the frosting on the cake (I hope that frosting contained HFCS), when one article went to the extreme in blaming the conflict in Egypt on corn ethanol. They were accusing ethanol because of the demonstrations of their food prices going up. I have to say, I think most readers are smarter than the author gave them credit.

One of the signals the conflict in Egypt should send to all of us in the U.S. is that being less dependent on foreign oil would be a good thing. We have the ability here in the U.S., and in other countries, to grow more grain on fewer acres with fewer resources. Now we need more farmers, like the ones that have called our office this week, to communicate to the FOX, CNN, MSNBC and other news sources that they need to be more fair and balanced, and share the other side of the story.