Ethanol Lobby Concerned Over Misinformation

Ethanol Lobby Concerned Over Misinformation

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Last week the Renewable Fuels Association (RFA) issued a press release in which they complained of “exaggerations” and “false information” related to claims by Brazil’s ethanol industry:

“Fuzzy Math” and Brazilian Ethanol: The Numbers Don’t Add Up

(April 15, 2010) Washington – In its newly launched public relations campaign, the Brazilian ethanol industry (UNICA) is making exaggerated and in some cases false claims about the benefits of its product over American ethanol. Most glaringly, Brazil asserts its product is always cheaper than that of the U.S. This is simply not true. A comparison of recent ethanol prices clearly shows that E10 (10% ethanol/90% gasoline) made with American ethanol would be 7 cents less at the retail level than E10 made with imported Brazilian ethanol.

If you have spent much time following the RFA, the irony of their press release is almost beyond words. The pot and kettle comparison comes to mind, but seems a bit weak given the RFA’s own claims. More on that in a bit.

“The back-of-the-napkin price comparisons on the “Economic Advantages” section of UNICA’s new web site are quite deceptive and disingenuous,” Cooper said. “By omitting the last 16 months of ethanol pricing data, UNICA is providing readers with the false sense that Brazilian cane ethanol is always cheaper than U.S. grain ethanol. As real data from the market clearly shows, U.S. corn ethanol has been considerably cheaper than Brazilian ethanol for most of the last year – a fact UNICA has apparently intentionally ignored.”

Let’s take that claim first. It is in fact true that today, corn ethanol is selling for less than sugarcane ethanol. But before we take today as representative of the future, one may want to ask why that is. The reason is that corn prices are presently moderate, but also because natural gas supplies are viewed to be ample due to lots of shale gas discoveries. These discoveries have had a moderating affect on gas prices. A couple of years ago when gas prices shot up, it was killing the corn ethanol crowd. Multiple corn ethanol companies cited high gas prices when they filed for bankruptcy:

Pacific Ethanol Files for Bankruptcy and Seeks DIP Financing From Its Prepetition Lenders

Pacific Ethanol, like other ethanol producers that filed for bankruptcy before it, was adversely affected by volatility in corn, natural gas and ethanol prices.

This, you see, is corn ethanol’s dirty little fossil fuel secret. They can claim to be competitive right now because the fossil fuel they are most reliant upon is far below the highs of previous years. They should send a great big thank you note to the natural gas industry for enabling them to be competitive just now.

However, this points to another issue. Corn ethanol prices are closely tied to two commodities: Corn and natural gas. Presently the prices of both are favorable for corn ethanol economics. Sugarcane ethanol is primarily tied to the price of one commodity: Sugar. And over the past year, sugar prices have been extremely high. (As stated before, the sugar industry uses bagasse for power, and is thus not subject to the volatility of the natural gas market).

So then the question becomes whether volatility will be worse in the future on ethanol that is tied to two commodities, or ethanol that is tied to one commodity. It may be that sugar prices are higher from now on, and that sugarcane ethanol’s cost advantage has forever disappeared. But my bet is that as fossil fuel supplies deplete, the corn ethanol industry is going to struggle with high natural gas prices, and we will look back on the present situation as an anomaly.

Back to the RFA’s press release. I have searched for their debunking of fellow corn ethanol lobbying organization (there seem to be quite a few of those) Growth Energy’s recent ad campaign:

Ethanol group launches $2.5 million TV ad buy

“It’s a multi-million dollar campaign to get the facts to the people who have only heard one side of the story until now,” said Tom Buis, CEO of Growth Energy, at a press conference Monday. “We are going on offense and we are going to tell the real story.”

Come on, Tom. One side of the story? Nobody, anywhere can say anything about corn ethanol without you guys going on the offensive and putting out the sort of misinformation in this ad. For example:

One of the spots, titled “America’s Sensible Fuel,” notes “ethanol has contributed $0 to the governments of Iran, Saudi Arabia and Venezuela,” while a separate spot called “America’s Peace Fuel” notes “no wars have ever been fought over ethanol.”

So then have your trucks and tractors been converted such that they no longer use petroleum? Further, doesn’t a lot of oil go into making the vehicles (tires, plastics, paints, etc.)? It isn’t an exaggeration to say that $0 has gone from your industry to Saudia Arabia, it is factually incorrect. Of course the U.S. doesn’t import oil at all from Iran, so you are right on that point. No U.S. oil refinery uses Iranian oil either. But you should probably do some fact-checking before you spend $2.5 million to make factually incorrect statements.

So the RFA seems to have overlooked this one, but how about their own claims? Let’s look at their page:

Ethanol Facts: Energy Security

There is a lot of misinformation on the page, but this is probably the most egregious:

FACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil.  It also saved American consumers and taxpayers $32 billion, an average of more than $87 million a day.

Your source on this is John Urbanchek, a consultant to the ethanol industry. You pay him, and he gives you answers that you like. The claim here is that 9 billion gallons of ethanol – 214 million barrels (but with an energy content equivalent to 118 million barrels of oil) somehow magically displaced 321 million barrels of crude oil. Of course as I have pointed out, Mr. Urbanchek’s funny math breaks down when you look at the actual data on oil imports. Mr. Urbanchek’s answer simply does not jive with reality. Yet here you are touting this absurd conclusion, while complaining about misinformation from another organization.

Misinformation indeed. I think the RFA should get their own house in order before accusing someone else of misinformation. I know the nature of lobbies is to present the most one-sided story you possibly can, but then understand that this makes you look especially hypocritical when you start hurling accusations at others.



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    Ethanol Lobby Concerned Over Misinformation

    Ethanol Lobby Concerned Over Misinformation

    Join the forum discussion on this post

    Last week the Renewable Fuels Association (RFA) issued a press release in which they complained of “exaggerations” and “false information” related to claims by Brazil’s ethanol industry:

    “Fuzzy Math” and Brazilian Ethanol: The Numbers Don’t Add Up

    (April 15, 2010) Washington – In its newly launched public relations campaign, the Brazilian ethanol industry (UNICA) is making exaggerated and in some cases false claims about the benefits of its product over American ethanol. Most glaringly, Brazil asserts its product is always cheaper than that of the U.S. This is simply not true. A comparison of recent ethanol prices clearly shows that E10 (10% ethanol/90% gasoline) made with American ethanol would be 7 cents less at the retail level than E10 made with imported Brazilian ethanol.

    If you have spent much time following the RFA, the irony of their press release is almost beyond words. The pot and kettle comparison comes to mind, but seems a bit weak given the RFA’s own claims. More on that in a bit.

    “The back-of-the-napkin price comparisons on the “Economic Advantages” section of UNICA’s new web site are quite deceptive and disingenuous,” Cooper said. “By omitting the last 16 months of ethanol pricing data, UNICA is providing readers with the false sense that Brazilian cane ethanol is always cheaper than U.S. grain ethanol. As real data from the market clearly shows, U.S. corn ethanol has been considerably cheaper than Brazilian ethanol for most of the last year – a fact UNICA has apparently intentionally ignored.”

    Let’s take that claim first. It is in fact true that today, corn ethanol is selling for less than sugarcane ethanol. But before we take today as representative of the future, one may want to ask why that is. The reason is that corn prices are presently moderate, but also because natural gas supplies are viewed to be ample due to lots of shale gas discoveries. These discoveries have had a moderating affect on gas prices. A couple of years ago when gas prices shot up, it was killing the corn ethanol crowd. Multiple corn ethanol companies cited high gas prices when they filed for bankruptcy:

    Pacific Ethanol Files for Bankruptcy and Seeks DIP Financing From Its Prepetition Lenders

    Pacific Ethanol, like other ethanol producers that filed for bankruptcy before it, was adversely affected by volatility in corn, natural gas and ethanol prices.

    This, you see, is corn ethanol’s dirty little fossil fuel secret. They can claim to be competitive right now because the fossil fuel they are most reliant upon is far below the highs of previous years. They should send a great big thank you note to the natural gas industry for enabling them to be competitive just now.

    However, this points to another issue. Corn ethanol prices are closely tied to two commodities: Corn and natural gas. Presently the prices of both are favorable for corn ethanol economics. Sugarcane ethanol is primarily tied to the price of one commodity: Sugar. And over the past year, sugar prices have been extremely high. (As stated before, the sugar industry uses bagasse for power, and is thus not subject to the volatility of the natural gas market).

    So then the question becomes whether volatility will be worse in the future on ethanol that is tied to two commodities, or ethanol that is tied to one commodity. It may be that sugar prices are higher from now on, and that sugarcane ethanol’s cost advantage has forever disappeared. But my bet is that as fossil fuel supplies deplete, the corn ethanol industry is going to struggle with high natural gas prices, and we will look back on the present situation as an anomaly.

    Back to the RFA’s press release. I have searched for their debunking of fellow corn ethanol lobbying organization (there seem to be quite a few of those) Growth Energy’s recent ad campaign:

    Ethanol group launches $2.5 million TV ad buy

    “It’s a multi-million dollar campaign to get the facts to the people who have only heard one side of the story until now,” said Tom Buis, CEO of Growth Energy, at a press conference Monday. “We are going on offense and we are going to tell the real story.”

    Come on, Tom. One side of the story? Nobody, anywhere can say anything about corn ethanol without you guys going on the offensive and putting out the sort of misinformation in this ad. For example:

    One of the spots, titled “America’s Sensible Fuel,” notes “ethanol has contributed $0 to the governments of Iran, Saudi Arabia and Venezuela,” while a separate spot called “America’s Peace Fuel” notes “no wars have ever been fought over ethanol.”

    So then have your trucks and tractors been converted such that they no longer use petroleum? Further, doesn’t a lot of oil go into making the vehicles (tires, plastics, paints, etc.)? It isn’t an exaggeration to say that $0 has gone from your industry to Saudia Arabia, it is factually incorrect. Of course the U.S. doesn’t import oil at all from Iran, so you are right on that point. No U.S. oil refinery uses Iranian oil either. But you should probably do some fact-checking before you spend $2.5 million to make factually incorrect statements.

    So the RFA seems to have overlooked this one, but how about their own claims? Let’s look at their page:

    Ethanol Facts: Energy Security

    There is a lot of misinformation on the page, but this is probably the most egregious:

    FACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil.  It also saved American consumers and taxpayers $32 billion, an average of more than $87 million a day.

    Your source on this is John Urbanchek, a consultant to the ethanol industry. You pay him, and he gives you answers that you like. The claim here is that 9 billion gallons of ethanol – 214 million barrels (but with an energy content equivalent to 118 million barrels of oil) somehow magically displaced 321 million barrels of crude oil. Of course as I have pointed out, Mr. Urbanchek’s funny math breaks down when you look at the actual data on oil imports. Mr. Urbanchek’s answer simply does not jive with reality. Yet here you are touting this absurd conclusion, while complaining about misinformation from another organization.

    Misinformation indeed. I think the RFA should get their own house in order before accusing someone else of misinformation. I know the nature of lobbies is to present the most one-sided story you possibly can, but then understand that this makes you look especially hypocritical when you start hurling accusations at others.



    Visit the original post at: Energy News


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