GoodFuels

Waiting for Word on Waiver

The ethanol industry is holding its collective breath today as the highly-anticipated decision by the Environmental Protection Agency on whether to grant a partial waiver of the Renewable Fuels Standard will be announced Thursday afternoon.

EPA Administrator Stephen Johnson and Principal Deputy Assistant Administrator Robert Meyers will hold a press conference at 1 pm eastern time to officially answer the request from Texas Governor Rick Perry to cut the RFS ethanol blending requirements by 50 percent.

According to the Houston Chronicle, Gov. Perry sent a letter to Johnson this week responding “to challenges to his request filed with the environmental agency after the public comment period ended July 23. Fifty-five pages accompanied the letter.”

In his letter, Perry acknowledged that corn, diesel and crude oil prices have “retreated” in the past month. But, he wrote, “the fundamental problems adversely affecting our well-being remain and could worsen when those prices begin to escalate again, as they probably will.”

“This view is contrary to what would seem to be conventional wisdom and as espoused by the proponents of the ethanol mandates who claim that ethanol is suppressing the price of gasoline at the pump. But it is true nonetheless.”

Gotta love that - contrary to conventional wisdom but true nonetheless - because two “experts” say so. But, as Mark Twain once said, truth is more of a stranger than fiction.

We await the decision of the judges.

If EPA Grants Waivers, Repercussions Would be Swift and Painful

As the Environmental Protection Agency reviews congressional requests to relax rules mandating the use of ethanol, something the politicians haven’t thought about is what will happen if the rules are relaxed.

What mainstream media doesn’t get, from the Los Angeles Times to TIME magazine, is that it will guarantee that $5.00 gasoline occurs within a month of an announcement to grant Governor Perry’s request that the Federal ethanol mandate be cut in half. Crude oil prices would race toward $175 per barrel as the world’s largest petroleum consumer ramps up its appetite for oil.

Chinese demand growth? That’s nothing compared to how much more oil the U.S. will be consuming this year. Our analysis shows that $5.00 gasoline will just be the beginning. Prices in California, within one month would reach $5.75 per gallon and heading to $6.00 per gallon by summer’s end. The rest of the country will follow. We would see gasoline prices at about $6.00 nationwide by September 30.

U.S. refiners would suddenly be faced with finding roughly 320,000  and 350,000 (see update below) barrels or 13.8 million gallons of gasoline per day immediately. These events are definite if the EPA acts. In addition, it logically follows that Congress would lower or remove the tariff on Brazilian ethanol.

Big Oil will be on the road to eliminating a competitor, and Congress will be feeling the pressure to drill everywhere.

UPDATE: My apologies for the typos in the original post; here’s what we published in our newsletter this week. The mistake was found internally early this week and corrected. However, the error was not corrected in the word file that was used to create this entry. The sentence has been updated to reflect the proper numbers.

It obviously does not change the analysis about where retail prices would move, as the numbers above are what we used to estimate supply pressures on U.S. refiners. If anyone would like to see a copy of the newsletter,  just drop me a line at  tom [at] oilintel [dot] com.

(more…)

Livestock Alignment

I was disappointed to see the National Cattlemen’s Beef Association align itself with the anti-ethanol “Food Before Fuel” campaign that was officially launched today.

As an “agriblogger,” the beef cattle industry is among our many clients. We blog for the Cattlemen’s Beef Board annual and summer meetings and the Missouri Beef Industry Council has been our client since we started the company four years ago. I can tell you that not all cattle producers agree with the general policy of the NCBA regarding ethanol production. One industry member told me that it is “not in their best interest” to oppose ethanol because “we know what it’s like to be the target of misinformation campaigns” and the agricultural industry should stick together and show a united front for an industry that has long-term benefits for rural communities and America in general.

In fact, their official policy statement reads:
NCBA’s producer-members support our nation’s commitment to reduce dependence on foreign energy, and efforts to develop forms of renewable energy. This commitment is creating both opportunities and challenges for our nation’s agricultural producers. NCBA supports research and development of renewable fuels that may provide additional benefits for the livestock industry.

However, they were opposed to increasing the RFS and support sunsetting the existing blending tax credit (VEETC) and the ethanol import tariffs as scheduled and not allowing for renewal in their current form.

As you read the list of groups aligned with the Grocery Manufacturers Association, one that is notably missing is the pork producers. This is interesting because 70 percent of their production costs are feed and they have been hit exceptionally hard by the higher feed costs. They also are less able to use DDGs than cattle producers.

(I have been corrected on this. The NPPC is indeed on the list, apparently they were just left off the press release that went out, for some reason. That makes Bryan Black’s comments all the more interesting.)

When I attended World Pork Expo last week, I heard the president of the National Pork Producers Council talk about the issue.

“This is not specifically an ethanol problem,” said Bryan Black, a hog farmer from Ohio. “The world demand for grain, the total energy price crisis and shortages of grain across the world have led to this situation and we are not pointing the finger at any one particular one.”

The livestock industry’s alignment with the GMA group is literally biting the hand that feeds them. I hope they change their mind.

GMA launches anti-ethanol campaign

It’s official: the Grocery Manufacturers of America have launched a PR effort aimed at reducing the renewable fuels standard, according to Bloomberg News, via the Houston Chronicle.

According to the article, GMA and its partners want to push the idea that “rising corn-based ethanol production is pushing food costs higher.”

Adding industry muscle to fight a federal requirement to about double ethanol production to 15 billion gallons by 2015 may slow the increase, helping company profits and easing consumer prices, said grocery association chief Cal Dooley.

“We are calling on Congress to step back and re-evaluate our biofuels policy, which is distorting the marketplace and harming the environment and consumers,” Dooley, a former Democratic congressman from California, said in an interview before the campaign was officially unveiled today.

Preying on American consumers when marketplace confidence is low is not admirable. GMA is clearly conspiring to further its own agenda with no regard for the skyrocketing price of gasoline.

As we all know, removing ethanol from gasoline blends will increase gasoline prices even further. Who wants $6/gallon gasoline?

USDA Rural Development Secretary Speaks Out

Hello and welcome to my first post here on Good Fuels. I’m attending the Corn Utilization and Technology Conference in Kansas City, MO. We’re going to be having some sessions that will focus on biofuels so I hope to have more to come. In the meantime, our USDA Under Secretary for Rural Development, Tom Dorr, provided the keynote address.

He told attendees that include corn growers as well as industry and university personnel that there are challenges ahead like the recent Grocery Manufacturers Association attack on ethanol. He says that’s making it difficult to get the facts out to the media. He said that no good deed goes unpunished and that we’ve had the good side of the cycle and now we’re going to have to suffer through the other side. He says it’s difficult to fight a well financed opponent that’s less inclined to deal with facts as opposed to dealing with emotion.

Before his keynote I did a short interview with Sec. Dorr which you can listen to here:

During his speech he made a great statement about the misinformation campaign that’s going on which he says “is unfortunate and it is destructive and I resent it, not only as a farmer but also as a policy person.”: