October 14, 2010

More Obama Vileness: Ethanol Bailout

Filed under: Corporatism, Food and Farms — Tags: — Russ @ 4:13 pm


Every day it’s just more and more.
Obama and his EPA are choosing today to double down on the already busted ethanol hand. We already know that ethanol neither conserves fossil fuels (because a large amount go into producing it) nor does it cut down on greenhouse gases (again on account of all the fossil fuels that go into it). Meanwhile it’s an environmental disaster in itself, wasting obscene amounts of water, further entrenching destructive monocropping practices, and indirectly driving rainforest destruction in South America. (Corn ethanol subsidies drive increased corn production which crowds out domestic soybean production, which drives expansion of soy production in Brazil, which crowds ranching into rain forest territory.)
I wrote about ethanol more extensively here and here.
Here’s a summary quote from one of those pieces:

As for the economics of aggrofuel, the CBO estimates that the diversion of corn to ethanol production was responsible for 10-15% of the big US food price runup in the year ending 4/08. The cascade of effect is typical: this diversion of food to fuel drove up the price of livestock feed and therefore of meat and dairy products, which in turn drove up the price of all foodstuffs.

This is just the tip of ethanol’s malevolent food price influence, which last year led directly to mass shortages, hunger, malnutrition, food riots, and state violence all around the Third World. While an American consumer may have the right to decide to pay more for food so he can continue filling the tank of his SUV, he has no such right to make that decision for his neighbor, let alone to starve the world poor. The moral economy of ethanol is even less sustainable than its fiscal, energy, and environmental economies. Yet so far the American government has chosen to subsidize all of these, to convey to a kept industry however much money and unaccountability is necessary to force zero minus one to equal two.

The ethanol industry is currently in a precarious position. It is not a capitalist but a feudal operation, 100% dependent on the rent-seeking opportunities afforded by government handouts, government-generated captive markets, and high oil prices. It needed all of these to turn a profit, and since oil prices plummeted last year, the business, which had bet contango on Peak Oil price effects and had been building new plants at breakneck speed, found itself overextended and unviable even with massive government assistance. One of the top producers, VeraSun, went into bankruptcy and the others are hurting.

So what can a parasitic industry do when one of its hosts is no longer available? It must seek to feed more on the other, in this case the government. Sure enough, what we’ve been seeing is a frenzy of anti-capitalist, anti-market, rent-seeking lobbying.

The main effort is to get EPA to increase the ethanol/gasoline blend wall from the current 10% to 15-20%. There is no economic or practical basis for this whatsoever, just as there no longer is even for the 10%, now that we know that corn ethanol’s energy and environmental promises were lies. Rational policy would dictate that we do away with the existing requirement, and with all ethanol RFS standards. But of course reason has no place in a corporatist system, which is based on distortions, riggings, and rackets. No one in industry or environmental circles wants this blend wall increase. Every kind of machinery maker fears that a 15% blend could damage its products (true to the system, the 2007 energy bill absolved the ethanol racket from any liability for engine damage from ethanol products, so any such damage would be completely externalized onto the consumer and product manufacturer).

What’s odd is how even the ethanol gang doesn’t bother trying to argue that a blend wall increase would benefit anyone but themselves. Clearly they’re simply so confident in their congressional (and presidential) flunkies that they think they can just demand whatever they want, at whatever cost (for everyone else).

So both the “industry” and the DoE are saying, “the free market was wrong before, and it’s wrong now; we must mandate a higher blend wall”. Perhaps by now we must suspect, where it comes to corn ethanol, the free market will always be wrong.

They’re also stepping up demands for more welfare, and for this to be extended into the indefinite future. The argument originally was that “first-generation” biofuels, i.e. corn ethanol, needed temporary government support. This would allegedly lead to a self-reliant first-gen industry and more importantly show the way toward the “second generation” of cellulosic ethanol which would be even more cost-effective and environmentally sound.

Yet today all of this is looking to be a lie. Corn ethanol remains unviable and a ward of the state. There are lots of plans on paper for cellulosic production plants, but no investors. The only money now available is coming in the form of government welfare. For example, one of the few projects still moving forward, Poet’s Emmetsburg plant, is funded so far only by close to $100 million in federal and state grants. They’re still waiting on a federally guaranteed private loan (that should give you an idea of how dubious these economics are: even with a fed guarantee no one wants to loan them money).

According to the 2007 energy bill, 100 million gallons of the biofuel mandate are supposed to come from cellulosic in 2010. It doesn’t look like they’re going to make it. The American Petroleum Institute thinks they’ll dribble out maybe 1-5 million. That’s how much all that government largesse is buying. As API’s cadre said, “We know how to make cellulosic ethanol. We don’t know yet how to make it economically.” (We’re still saying that for corn ethanol as well, and probably always will be.)

Renewable Fuels Association president Bob Dineen sums it all up: “The government needs to step in right now to help these companies.”

Any entrenchment of corn monoculture is also an ongoing socioeconomic disaster, as America continues to commit suicide by further driving out smaller, more diverse farming. For our prosperity, for our democracy, for our freedom, and for our literal survival (that is, if you and yours need to eat), America needs millions of new farmers, and very soon. But our elites’ premeditated murder of democracy, and soon our biological destruction, continues apace.
This benefits only the ethanol racket, Big Corn, and the techno-ghouls who leech off ethanol-study grants. Meanwhile it’s so stupid that even the likes of Big Oil and Big Auto oppose it, and their reasons, however self-serving of course, are nevertheless true. A higher blend wall is likely to slowly corrode engines. In order that the ethanol racket can survive, you’ll end up with a damaged car, and perhaps damage to anything you use which runs on gasoline. There’s even trials that show a 15% ethanol blend in something like a chainsaw can actually cause it to spring to life while supposedly not on full power, like some crazed machine out of a Stephen King story. But this is no fairy tale.

The ruling, which was requested by ethanol producers, was widely expected but is the subject of heated debate over whether E15 is safe for cars and other gasoline-powered devices. Fuel sold today typically contains as much as 10 percent ethanol, but automakers and other critics say that a higher blend of ethanol could corrode engines.

The agency said Wednesday that government testing found the blend would not damage the engines in cars with a model year of 2007 or later — about one in seven cars on the road — and would not cause unacceptable increases in air pollution. The agency is still testing cars for the 2001 to 2006 model years and expects to issue a ruling on those as soon as next month.

How picayune is that pitch? “We think it won’t harm engines earlier than 2007.” Not exactly a ringing safety endorsement, is it? BTW, the 2007 energy bill absolved the ethanol manufacturers from liability for such damage. So when ethanol destroys your car, you’ll be left trying to collect from……..?
(An obvious implication of this is that widespread deployment would hasten the obsolescence of pre-2007 cars, exactly at the time more and more of us are going to be needing to make older cars last as long as possible. This is intentional on the government’s part. So it wouldn’t surprise me if this is meant to be a kind of back-door Mandate to buy a new, E15-approved car.
And as the lobbyist vermin says in the piece, the racket views this as just “the first step”. The original EPA demand was for a 20% blend.)
Obama’s EPA is of course full of lies about how they had no choice but to do this, and how it’s going to be for our good. The elites always know better.

Gina McCarthy, the E.P.A. assistant administrator for air and radiation, said that the decision advanced an important national goal of reducing oil consumption. The federal government would like to see Americans use 36 billion gallons of alternative fuels by 2022, including 21 billion from advanced biofuels beyond the corn-based ethanol that is prevalent now. Currently, the industry says it can produce about six billion gallons of corn ethanol a year.

This flunkey’s lies are contradicted by her master’s love affair with offshore drilling and BP. We know Obama wants to go back to business as usual where it comes to oil consumption. That’s why his “stimulus” centerpiece was the scam cash-for-clunkers, which of course was never meant to get rid of clunkers (on the contrary it moved plenty of new ones), but to prop up the personal car itself during a rough patch.
The piece affects some uncertainty as to the timing of the decision, but then gives the obvious short-term political answer.

It was not clear why the agency made an announcement on one group of cars when a decision on another group is coming in a month or two, but analysts suggested that election-year politics played a role.

Kevin Book, an analyst at ClearView Energy Partners, a research firm, said that in the midterm Congressional elections in three weeks, “there are nine at-risk Democrats from the top 10 ethanol producer states. If you’re fighting for every seat in a midterm election, you can’t afford to wait until the rule is finished.”

But Ms. McCarthy said the agency was obligated to respond to a petition by an ethanol producer group, Growth Energy. It had originally intended to reply this summer.

I’m not sure why that’s supposed to help Democrats. Corn state Republicans are just as ardent in their ethanol whoring. The whole policy is, after all, a Bush/Republican initiative based in the 2005 energy bill and supplemented by the 2007 bill. So it’s bipartisan all the way.
While I hope the Democrats get zero credit for this at the ballot box in the self-destructive farm states (where voting for industrial agriculture is of course voting for their own liquidation), I do hope that anybody who still has any doubts about Obama and the Dems will add this to the list of Obama’s freely chosen, unforced criminal actions. Despite the lies in the piece, Obama’s EPA had total freedom to reject this demand emanating from a few scumbags. They freely chose to side with scum and against the people. 
The most depressing thing about this is how typical it is of a terminal kleptocracy. It absolutely refuses to cut a single criminal loose, even such an obnoxious, sniveling one as the ethanol racket. The system just keeps piling crime on crime, waste on waste, destruction on destruction. Every single step, down to the smallest details, is in exactly the opposite direction from reason, sanity, practicality, morality, freedom. This is a system committed to murder-suicide, to consuming as much of what still exists as it possibly can in the flames of its own self-immolation.


  1. I also give dishonorable mention to this headline.

    JPMorgan Chase Profit Rises as Loan Provisions Fall.

    I look at that and think of the TARP, and what Obama and Bush promised – “to get banks lending again”.

    That was their proclaimed premise for the whole Bailout, wasn’t it?

    Comment by Russ — October 14, 2010 @ 4:19 pm

  2. With respect to Presidents Bush and Obama, that is generally the pitch.

    “We’re going to have take from you and give to them, because, it will, of course, ultimately benefit you.

    This is nothing less than “trickle down” rhetoric meant to disguise the fact that one is, in fact, simply being trickled on.

    Comment by Edwardo — October 14, 2010 @ 8:32 pm

    • That’s the only trickle which ever does come down.

      Comment by Russ — October 15, 2010 @ 3:12 am

  3. Hello Russ,

    I’ve been reading your essays for quite a while, especially enjoying your analysis of the Federalist Papers. This piece has inspired me to add my personal experiences to your observations on the ethanol scam.

    A neighboring office suite in my building is occupied by a registered lobbyist for the alternative fuels industry. One of the very same ilk you describe. During our periodic hallway conversations I’ve tried to convince him of the thermodynamic impossibility of producing ethanol from corn as an economically viable gasoline substitute/supplement. He doesn’t care.

    Having spent the first (1st) half of my life as a research biochemist, I’m amazed that the ethanol “gig” has reached such commanding heights. Having called the Comptroller of Maryland (who collects the excise tax on gasoline/ethanol at the pump in my state, I learned that it was the EPA who is the force behind the fuel blend. The representative at the Comptroller’s office also told me that ethanol apparently cannot be piped, it must be transported by truck with risk of fire in the case of an accident.

    Although I don’t have a chain saw, my lawnmower doesn’t work smoothly using the ethanol/gasoline blend unless I add a “stabilizer.” I speculate that water vapor from the atmosphere is adsorbed by the ethanol (hygroscopic characteristic) causing the engine to run rough.

    My 2004 automobile doesn’t like the ethanol blend either. The mileage performance has deteriorated. My mechanic advised me that the engine wasn’t designed with ethanol in mind. For sure, I don’t want to buy a new car!

    Comment by Joyce — October 15, 2010 @ 12:07 am

    • Thanks, Joyce. That’s some excellent information. I think I forgot to mention the infrastructure/transportation issue – there’s so much to criticize here.

      I can readily believe that the EPA is to ethanol what the SEC or OCC is to the banks – an alleged “regulator” who’s really an empowered lobbyist and activist within. Once again we see corporatism in its purest strain.

      In the course of my writing this the idea first crystallized, which I touched on in the piece – this has the makings of becoming another Odious Mandate.

      I’m glad you liked the Federalist pieces. I think I zeroed in on the most important ones, the seminally anti-democatic anti-federalist arguments, although thanks to Orwellianism before that term even existed, the anti-federalists were able to grab the term “federalist” and force the opposite onto the advocates of real federalism.

      Comment by Russ — October 15, 2010 @ 3:11 am

  4. Hi Great informational Blog!

    I have been working in Bio Fuels in Africa since 2008 I am posting to warn people about “Dr” Peter McHendry who has taken over R3,000,000 from investors into his Global BioDiesel, Omnium investment Trust, Akula Trading 227 PTY compaines.

    He is also responsible for a Voulenteer Scam “Great Earth Safari” and Christian Ski – He ran away from America after his property there was forclosed

    full details including contact numbers for the Police in South Africa can be found here;


    We cannot let the BioFuel Industry get tarnished by people like “Dr” Peter Mc Hendry

    Comment by Joe — October 23, 2010 @ 2:28 pm

  5. […] biofuels very soon, perhaps right after the election.”   Obama, of course, has been aggressively pro-ethanol so far.   Pollan’s a typical case. He spent eight Bush years calling for bottom-up food […]

    Pingback by NOW Obama’s Going to do Good Stuff! (Michael Pollan version) « Volatility — November 8, 2012 @ 2:30 am

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