Ford Awakens from a Slumber; Post Office Rejects Ethanol

It seems that the reality of our situation is sinking in at Ford:

Ford’s trouble: $4 gas is here to stay

NEW YORK (CNNMoney.com) — Ford Motor Co. executives say they believe that $4 gas is here to stay, resulting in a fundamental consumer shift away from gas-guzzling SUVs and pickups and causing continued losses at its core North American auto unit.

The company said it expects gas prices to remain in the range of $3.75 to $4.25 a gallon through the end of 2009. And that expectation prompted the nation’s No. 3 automaker to announce deep production cuts for what has been its best selling and most profitable vehicles for several decades and could lead to more plant closings and job cuts down the road.

The company plans to ramp up production of smaller cars and crossovers: Ford Focus, Fusion, Edge and Escape, the Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX. These models generally cost less and have lower profit margins than the light truck models for which Ford is cutting production, such as the F-Series pickup, still the nation’s best selling vehicle.

I think that’s good news for everyone, except Ford shareholders and some Ford employees.

And a feel-good story about the ethanol industry:

Ethanol Vehicles for Post Office Burn More Gas, Get Fewer Miles

May 21 (Bloomberg) — The U.S. Postal Service purchased more than 30,000 ethanol-capable trucks and minivans from 1999 to 2005, making it the biggest American buyer of alternative-fuel vehicles. Gasoline consumption jumped by more than 1.5 million gallons as a result.

The trucks, derived from Ford Motor Co.’s Explorer sport-utility vehicle, had bigger engines than Jeeps from the former Chrysler Corp. they replaced. A Postal Service study found the new vehicles got as much as 29 percent fewer miles to the gallon. Mail carriers used the corn-based fuel in just 1,000 of them because there weren’t enough places to buy it.

“You’re getting fewer miles per gallon, and it’s costing us more,” Walt O’Tormey, the Postal Service’s Washington-based vice president of engineering, said in an interview. The agency may buy electric vehicles instead, he said.

Perhaps I should have said, “feel-good story for me.” After all, when corn-fueled cars are traded in for electric cars, that feels pretty good to me. In fairness though, I should point out that it does say that the ethanol-fueled vehicles they bought had bigger engines. Not sure why they went that route.

SUV for Sale: Cheap!

Some of the consequences of very high oil prices are pretty predictable. Homes way out in the suburbs are likely to lose value. Prices will rise across the board for goods and services. Airlines will struggle. And gas guzzlers will be much less attractive:

Gas costs deflate prices on used SUVs

High fuel prices are causing the value of used SUVs to plummet, often below what’s listed in the buying guides many shoppers use to negotiate with dealers. “The dealer is going to offer a price, and the customer is going to be ticked off,” says Tom Webb, chief economist for Manheim, operators of auctions where car dealers buy their used-vehicle inventories. “The guidebooks have not caught up to the market,” he says.

Webb’s figures show wholesale prices on big SUVs such as Chevrolet Tahoes, Ford Expeditions and Toyota Sequoias are down 17% from a year ago. Full-size pickups have fallen as much as 15%, Webb says.

Even though plunging values should make used SUVs bargains for buyers less concerned about fuel prices, that doesn’t seem to be happening. Used SUVs languished unsold an average 66.4 days last month, up from 48.6 days the year before, says CNW Marketing Research. “There are far more truck-based SUVs being traded in than customers to buy them,” says Mike Jackson, CEO of AutoNation, the largest new-car dealer chain.

Your Prius or Jetta TDI on the other hand? I may start buying up some of those as speculative investments. If people are trading in their SUVs, there is going to be a run on more fuel efficient cars - and they should hold their value, if not trade at a premium.

People have asked me for several years what I thought was going to happen with gas prices. I always tell them that the long-term trend is much higher, and you should plan accordingly. I have warned friends and family to embrace fuel efficiency, and I have tried to preach that message here. Now that gas prices are really hitting people in the pocketbook, looks like they are finally getting the message. But like many caught in the housing bubble, they waited a little too long and lost a lot of money. The lesson here? Pay attention to what I am telling you. Do you hear that, Mom?

Toyota Promises Plug-in Hybrid

Move over, Chevy Volt. You have some very serious competition:

Toyota Will Offer a Plug-In Hybrid by 2010

DETROIT — The Toyota Motor Corporation, which leads the world’s automakers in sales of hybrid-electric vehicles, announced Sunday night that it would build its first plug-in hybrid by 2010.

The move puts Toyota in direct competition with General Motors, which has announced plans to sell its own plug-in hybrid vehicle, the Chevrolet Volt, sometime around 2010.

Katsuaki Watanabe, the president of Toyota, announced the company’s plans at the Detroit auto show as part of a series of environmental steps.

Mr. Watanabe said Toyota, best known for its Prius hybrid car, would develop a fleet of plug-in hybrids that run on lithium-ion batteries, instead of the nickel-metal hydride batteries that power the Prius and other Toyota models.

Given Toyota’s experience, my money is on them to deliver before GM has the Volt ready for the mass market.

Despite its decision to step up its plug-in hybrid development, Toyota is not sure how much more consumers will want to pay for it, Mr. Lentz said. The Prius starts at $21,100. Some after-market companies are charging nearly that much to convert Prius models into plug-ins, he said.

Given that, it is more likely that Toyota would offer plug-in technology as an option on the Prius, at least in the short term, rather than switch all of its hybrids to plug-in models.

Ultimately, Toyota must determine “do people want to plug in their car?” Ms. Chitwood said.

Yes, I want the plug in my car! Sign me up. And as long as gas prices continue to stay high - which I think they will - a lot of others will sign up as well.

The Prius Tops the Explorer

Looks like people are beginning to respond to high gas prices:

Toyota Prius sales pass Ford Explorer

Americans bought more Toyota Prius hybrid gas-electric hatchbacks last year than Ford Explorer sport-utility vehicles, the top-selling SUV for more than a decade.

The change of fortune, buried in U.S. vehicle-sales data for 2007 and unthinkable a few years ago, will find an echo at this year’s Detroit auto show, which starts Sunday.

While Americans’ love for powerful gas guzzlers remains strong, a slowing economy and high gasoline prices are forcing buyers to lower their sights.

While Prius sales soared 69% last year, demand for the Explorer was less than a third of its 2000 peak.

As I have said before, we have fuel-efficient vehicles available now. Consumers just have to be convinced to buy them. High gas prices are starting to convince them. I think this is a more effective approach than forcing car makers to produce more fuel efficient vehicles via CAFE standards. I am not against higher CAFE standards, I just think addressing the demand side is more effective.

My current plan is to buy a Prius when I go back to the U.S. It doesn’t seem that any other option is even close. Is there anything else that can compete with the Prius on a fuel efficiency basis in the U.S. market?

Debunking Thomas Friedman

I am in Norway at the moment, but I ran across a story that I wanted to call attention to. It is the same thing I wrote about in The Problem with CAFE:

Debunking auto industry myths

NEW YORK (Fortune) — I hesitate to pick a fight with a two-time Pulitzer Prize-winner like New York Times columnist Thomas Friedman. On the critical issue of developing a national energy policy to lessen our consumption of imported oil, he’s been early, smart, and right.

But Friedman whiffed in his Times column yesterday, called “Et Tu, Toyota,” by hauling out one of the hoariest of urban myths: That forcing higher fuel economy standards on American car buyers is what’s needed to encourage more energy-efficient vehicles and make Detroit more competitive with its import competitors.

That’s wrong…and wrong. Forcing people to buy more efficient cars by ordering car companies to make them is like forcing people to lose weight by banning food companies from selling Big Macs and pizzas. The reason Americans consume so much gasoline is that they like their big pickup trucks, SUVs, and V-8 engines. The reason the automakers make them is because people want to buy them.

That’s exactly what I have argued. Fuel efficient vehicles are not in short supply. But the demand is not there. This is not a supply-side problem; we have to work on increasing demand for efficient vehicles. Ramp up demand, and the supply of vehicles will come.

Some of the points that Friedman makes to buttress his arguments are misleading. He praises Japan and Europe for auto fleets that have much better mileage standards than the U.S. without mentioning the fact that driving conditions are different - try steering a Lincoln Navigator through a medieval village in Italy - and gasoline taxes in those countries are so high that people are willing to squeeze into small cars. Start charging American drivers $8 a gallon and they’ll switch to small cars in a New York minute.

Exactly. Friedman has entirely missed the point on why autos here in Europe are so much more fuel efficient. If gasoline was 2 bucks a gallon here, I suspect things would be a bit different. And the puzzling thing to me is that a couple of years ago, in an interview with Grist, Friedman seemed to clearly understand the issue:

Q. Besides a gas tax, what other methods for reducing energy dependence would you propose?

A. I’d focus on two other things: I would begin building more nuclear power, and I’d have a carbon tax on coal and all high-emission energies that would raise their cost and make wind and solar much more cost-efficient.

Q. What about regulatory initiatives like CAFE standards?

A. That to me is captured by the [gas] tax because that makes hybrids a necessity and forces Detroit to convert large amounts of its fleet to hybrid technology – you drive the CAFE issue using a different mechanism.

But Friedman appears to have forgotten that logic, judging from his most recent article. Back to the CNN article:

American manufacturers DO build fuel-efficient cars but Americans don’t buy them. Ford (Charts, Fortune 500) is currently offering cut-rate financing on the 2008 Escape Hybrid, while GM (Charts, Fortune 500) is subsidizing the smallest car in its lineup, the Chevy Aveo. And GM can brag all it wants about having more models - 30 of them - than any other manufacturer that get more than 30 miles per gallon on the highway, but it gets precious little credit for it in the marketplace.

It has been argued here before that if the government wants to be serious about improving fuel economy, all it has to do is boost the tax on gasoline. The revenue generated could be rebated to lower-income drivers who are truly disadvantaged or invested in mass transit. The auto companies aren’t going to argue for such a tax because it would give them a black eye with consumers. And the government won’t do it either, because of its anti-tax bias. But Friedman, using his column as a bully pulpit, could argue for such a tax with impunity. And it would be a whole lot more effective than perpetuating the old myth about the ignorant luddites in Detroit who are withholding the small, fuel-sipping cars that Americans really want to buy.

I think Friedman is a guy who is really passionate and concerned about our energy policy. But he has gotten ahead of himself at times. He was on the ethanol can save us bandwagon early on, but it looks like he now he is exclusively on the sugarcane ethanol will save us bandwagon. I agree, sugarcane ethanol is a lot better than corn ethanol, but it helps to understand the scale of our oil consumption, so one can appreciate the scale of the ethanol production that would be required to displace it.

OK, back to meetings. Now, if I can figure out how to publish. For some reason, all the instructions for my blog are in Norwegian. I am having to guess at what Innlegg, Innstillinger, Mal, and Skriv mean. This keyboard is also unfamiliar. Some of the keys are out of place, and it also has letters like æ, å, and ø. Let’s see if “Publiser Innlegg” gets this published.

The Ultra-Light Loremo

Over the weekend, I happened onto a link for a German car that is being designed for an amazing 157 miles per gallon (1.5 l/100 km). The car is called the Loremo, an ultra-light, two-cylinder, 20-horsepower, turbo-diesel with an price tag of about $15,000 U.S.

The Ultra-Light Loremo

After poking around a bit, I found that there is a history of ultra-light vehicles, but they have not sold well:

Driving On The Light Side

In 1999, German carmaker Volkswagen launched the Lupo 3L TDI in Europe, a no-frills subcompact that got 100 km on 3 L of gas. Volkswagen built 29,500 Lupo 3Ls and then last year yanked the car from the market. “It was too frugal,” says Hartmut Hoffmann, a product spokesman for VW. “Customer interest faded.”

In 1997, Ford announced plans for what it called the P2000, which promised to be 40% lighter than conventional family sedans. And in 2002, Opel, the European subsidiary of General Motors, unveiled the Eco-Speedster, a sleek, low-riding sports car that gets 2.5 L of fuel to 100 km. But none of the manufacturers ever intended to offer their ultralight cars for sale.”

But with fuel prices at historic highs, all that may be about to change. CEO Heilmaier says 10,000 people have signaled interest in buying a Loremo since March, when a model was shown at the Geneva auto show. That’s not bad for a car that hasn’t even been driven yet. The first drivable prototype is to be built this year, and Sommer expects to go into production of the first 5,000 to 10,000 cars in 2009 and ramp up to 100,000 by 2012. If consumers are finally ready to embrace radical fuel efficiency, then Sommer and his team will have truly nailed it.

Let’s just hope it all works out per the design. Personally, I think that’s a good looking car. If fuel prices stay high, they will probably fly out of the showrooms.

The Problem with CAFE

As I have been reading reports of the current debate over the pending energy legislation, it occurred to me that there is a fundamental problem with the approach to CAFE standards. The Washington Post reported on the issue in today’s edition:

Senate, House Turn Focus to Energy Bills

Senate Majority Leader Harry M. Reid (D-Nev.) said after a speech to the Center for American Progress yesterday that the increase in auto-fuel efficiency requirements, known as the corporate average fuel efficiency (CAFE) standards, would be the most controversial part of the Senate package. It orders auto companies to hit a 35-mile-per-gallon target by 2020 and improve mileage 4 percent a year after that.

“I know that the auto industry is still wavering on this issue,” Reid said. “I met with the CEOs of the big three automakers last week, and here is what I told them: The debate on raising CAFE standards should be over. It will happen. And perhaps if they had joined us instead of fighting us these last 20 years, they might not be in the financial mess they’re in today.”

So what’s the problem? Isn’t raising CAFE standards a good idea? On the surface, yes. And I absolutely agree that our fuel efficiency in the U.S. is terrible and must improve. But the problem I see is that this attempts to address the issue in the same way that windfall profits’ proposals attempt to address the issue of high gas prices. There are plenty of high fuel efficiency cars on the market now. The problem is, people aren’t demanding them. They want their SUVs and big trucks. What people are really after here is a free lunch. They think increasing CAFE standards will make everyone else drive a fuel-efficient vehicle. Or, they think this will result in a dramatic boost in the fuel efficiency of those trucks and SUVs.

I see the point made by the auto industry, because this will force them to make vehicles that people aren’t demanding. This is incredibly inefficient legislation. There are other ways to increase the demand for fuel-efficient vehicles, rather than forcing auto makers to increase the supply (that doesn’t happen to be in demand). What this may do is restrict the supply of inefficient vehicles, thus boosting prices for them. And a secondary effect may then be that people will turn to more fuel-efficient vehicles. But it is an incredibly convoluted way to achieve that goal.

As I said, this is analogous to the windfall profits’ measures that have been debated. People see this as a free lunch. The oil companies will be punished by having some of their profits taken away, thus somehow resulting in lower prices for all (as the companies respond to this punishment?) It is legislation aimed at the wrong problem. Oil companies make big profits because there is high demand for their product. And fuel efficiency is low because there is high demand for trucks and SUVs. The current legislation being debated won’t change that.

There is no free lunch. Increasing CAFE standards is not going to increase the public’s desire to drive fuel efficient cars, nor is it going to result in a 35 mpg Ford Expedition.

GM Revives the Electric Car

Years after GM killed the electric car, they are bringing it back. They introduced a new electric car, the Chevrolet Volt, at the North American International Auto Show in Detroit this weekend. Here is what the car looks like:

GM’s New Chevrolet Volt

The only problem is that they still haven’t invented the battery that will run it. This is expected to come in 2010 or 2012. Forbes recently wrote an article on the car. Some excerpts, explaining why this is an improvement over GM’s earlier efforts:

The Chevy Volt is driven by electric motors powered by lithium-ion batteries that are charged by plugging the vehicle into a standard 110-volt socket. But the vehicle has a small gasoline-powered generator on board that can charge the battery on the fly when it gets low. GM calls the generator a “range extender” in an effort to eliminate the biggest drawback to the automaker’s early efforts at electric vehicles–a range of 80 miles or so.

On comparisons to PHEVs (my favorite site on PHEVs is here):

Though the Volt concept is similar to what is known as a plug-in hybrid, an extremely fuel-efficient powertrain being pushed for by environmental groups, it differs in some important respects. A plug-in hybrid, like a traditional hybrid-electric vehicle, has a gasoline motor and electric motor working in tandem to power the vehicle. A plug-in hybrid, however, has a larger battery that can drive the vehicle for longer stretches of time and can be charged by plugging into an electrical outlet.

The Chevy Volt, however, is never powered by mechanical energy–it has no transmission. It is always powered by electricity. The on-board motor is a tiny, 3-cylinder generator that supplies electricity when the battery runs low.

And, addressing the fact that GM dropped the ball on this long ago:

Meanwhile, Toyota, Honda and Ford have sold hundreds of thousands of hybrid electric vehicles collectively, and GM has sold just a handful. It seems hard to imagine now, but General Motors not long ago produced the most environmentally friendly automobile in the world: the electric vehicle called EV-1. Not Toyota, not Honda–General Motors.

What especially burns people inside GM: It had some elements of hybrid technology on the road before any other company. GM’s EV-1 was powered by sophisticated electric motors, and its nickel-metal hydride battery was recharged through regenerative braking. The battery in Toyota’s now-iconic Prius is nickel-metal hydride, it is charged with regenerative braking and it powers electric motors.

GM swears it has learned its lesson. The Chevy Volt, or a vehicle like it, could vault the company back to the front of the technology pack. If, of course, GM can figure out a way to build the thing.

As a fan of transportation electrification, this is a promising development. Of course some caution is warranted, since “the batteries aren’t invented yet”, but it is good to see GM getting back into this arena. Even though you can buy a PHEV in some other countries, PHEVs are presently only available in the U.S. by modifying existing hybrid vehicles (details here). And I firmly believe that in the coming years, the world is going to have to move toward electrification, because liquid fossil fuels will become more scarce/expensive, and biofuels can’t scale up enough to replace our current motor fuel consumption.

CAFE Loophole

The ethanol bubble has been bursting a bit lately. I don’t say that with glee, because I hate to see people lose money, especially when it was due largely to misleading claims. (I say that even though 95% of the hate mail I get comes from ethanol investors). I hope the end of the irrational exuberance we have seen in the ethanol market will lead to a more fact-based look at which technologies are needed to replace or supplement fossil fuels, and what technical challenges must be overcome before that happens.

There are certain things we can do to help ethanol along that I completely agree with. Because of the great potential, I think we need to heavily fund cellulosic ethanol research. I think we need to encourage the pursuit of closed-loop ethanol processes, like the one E3 Biofuels is building. I have no problem with making most vehicles flex-fuel. I do have a problem with requiring E85 pumps at some percentage of gas stations. We can’t even produce enough ethanol to roll out E10 nationwide, so why force gas stations to put in a lot of E85 infrastructure when we can’t possibly produce the E85 to justify the expense? I also have a problem with forcing oil companies to pay for the pumps. If ethanol producers insist on E85 pumps, they should be required to pay for their installation, since they are the ones who will primarily benefit from E85 sales.

While I support the production of more flex-fuel vehicles, the CAFE loophole for flex-fuel vehicles is appalling. The government regulates fuel efficiency in the U.S. with Corporate Average Fuel Efficiency, or CAFE standards. When the average fuel efficiency falls below a certain level for a car manufacturer, they must pay a penalty. This provides an incentive for auto makers to produce fuel-efficient vehicles.

However, there are a couple of loopholes that have limited the effectiveness of the standard. One is that light trucks have an exemption that allows them to get worse fuel efficiency without being penalized. Because SUVs are classified as light trucks, there is an incentive for the auto maker to produce SUVs. The good news is that the government recently passed legislation to close the loophole. The bad news is that it doesn’t take place until 2011, meaning we have 5 more years of gas-guzzling SUV sales to contend with.

While this loophole is being closed, another is being opened. Did you wonder why automakers have embraced E85? Have they suddenly gone “green”, and therefore E85 just seems like the right thing to do? No. By making flex-fuel vehicles, they are able to exploit another loophole in the standards. This loophole has recently been reported on in the press. Car and Driver was the first to bring this to my attention in Tech Stuff: Ethanol Promises. The article explains:

With fewer than 600 stations selling E85 fuel in 37 states, why have GM, Ford, and DaimlerChrysler been cranking out these flex-fuel vehicles by the millions?

The answer is the mandatory Corporate Average Fuel Economy (CAFE) standards. Federal law requires that the cars an automaker offers for sale average 27.5 mpg; light trucks must achieve 22.2 mpg. Failure to do so can result in substantial fines. However, relief is available to manufacturers that build E85 vehicles to encourage their production.

The irony here is that although E85 in fact gets poorer fuel economy than gasoline, for CAFE purposes, the government counts only the 15-percent gasoline content of E85. Not counting the ethanol, which is the other 85 percent, produces a seven-fold increase in E85 mpg. The official CAFE number for an E85 vehicle results from averaging the gas and the inflated E85 fuel-economy stats.

Consumer Reports recently weighed in with The Ethanol Myth. On the CAFE issue, they reported:

GM’s advertising says, “Energy independence? The answer may be growing in our own backyard,” and has coined the slogan “Live green, go yellow,” referring to the corn from which most U.S. ethanol is made. DaimlerChrysler, Ford, and GM have said that they plan to double production of FFVs and other biofuel vehicles to 2 million by 2010.

The FFV surge is being motivated by generous fuel-economy credits that auto-makers get for every FFV they build, even if it never runs on E85. This allows them to pump out more gas-guzzling large SUVs and pickups, which is resulting in the consumption of many times more gallons of gasoline than E85 now replaces.

With the loophole in place, their motto should be “Live green, go yellow, consume more fossil fuels.” By all means, build flex-fuel vehicles. But close this loophole, which may very well result in much higher gasoline consumption in the future.

More Ethanol Critics Emerge

I am in the process of writing a pro-ethanol story (no, that’s not a typo). However, before I do, I want to highlight a pair of anti-ethanol articles that were just published. Thanks to Robert Schwartz for bringing these to my attention. The first article echoes many of the arguments I have made here on E85, and the second article discusses arguments I have made regarding Brazil’s “miracle”. It warms my heart to see that these arguments are picking up steam.

The first comes from Car and Driver, and is entitled Tech Stuff: Ethanol Promises. The article opens by explaining that, like it or not, ethanol is going to increase its market share as a result of government mandates:

The 551-page Energy Policy Act of 2005, signed last August, includes many sops to a blur of special interests, but one single provision rang the bell for automakers, greenies, and farmers, and for a broad coalition of ordinary motorists who were hoping for something, anything, to bring down gasoline prices; starting in 2006, the average gallon of “gas” will contain 2.78-percent ethanol.

Congress has made to the petroleum industry an offer it can’t refuse. It’s called a mandate. And it’s a mandate that keeps on giving, at least to the farm states, as it ratchets up the ethanol quota, nearly doubling it over the next six years — from 4.0-billion gallons in 2006 to 7.5-billion in 2012.

The article goes on to examine a number of ethanol claims. On ethanol as an oxygenate:

With a bare-faced mandate for ethanol in place, the previous sham, the oxygenate requirement, is hereby deleted. MTBE (methyl tertiary butyl ether) was the first choice of oxygenates, but since it contributed to ground-water contamination, ethanol became the fallback. However, feedback-fuel-metering systems, which self-adjust to operate at a fixed mixture regardless of fuel composition, became the norm roughly 20 years ago. As a result, the benefits of the oxygenate rule have decreased as newer vehicles’ fuel systems have replaced the older, more primitive ones. Today, as any engine engineer will testify, the rule has virtually no pollution benefit and has become nothing more than a backdoor mandate for the ethanol industry and corn farmers.

On the potential for ethanol to reduce dependence on fossil fuels:

Not in our lifetimes. In 2004, the U.S. consumed 100 “quads” (quadrillion BTUs) of energy. Of that, 86 quads were from fossil fuels. And of that, 40 quads were petroleum. About 18 of those petroleum quads were refined into gasoline. If we continue to use gasoline at no more than the 2004 rate — a fair assumption if prices stay high — the ethanol mandate by 2012 will stretch those 18 quads of gasoline with five percent by volume of ethanol, or 0.6 quad, give or take due to rounding. Remembering that we use 86 quads of fossil fuels, ethanol would displace a mere 0.7 percent of that.

Hmm. Where have I heard this argument before? The article continues to hammer that point home:

A recent study published by the University of California Berkeley looks at six different ethanol studies, brings the assumptions up to date, and makes other adjustments the authors think are appropriate. It concludes that only 5 to 26 percent of the energy in today’s corn-based ethanol is “new.” The other 74-to-95 percent represents the recycling of fossil-fuel energy to produce ethanol.

Even if we accept the most favorable assumption, that 26 percent of its energy is new, that represents only about 0.16 quad. Of the 18 original petroleum quads that went into gasoline, that means ethanol would comprise less than one percent. And compared with the total of 86 quads of fossil-fuel energy used in America, ethanol would replace less than two-tenths of one percent.

On the potential for ethanol to cut oil imports:

If we assume that the ethanol in gasoline in 2012 is used entirely to displace imports, and we again make the most favorable assumption that 26 percent of the energy is renewable, it would reduce imports by about 1.4 percent.

On ethanol’s ability to mitigate global warming:

Ideally, ethanol would be efficient enough as a fuel to power ethanol-production factories. But it’s nowhere close. With today’s technology, the carbon dioxide released by the fossil fuel used to produce ethanol towers over the amount recycled.

Switching from gasoline to ethanol would have an “ambiguous effect” on greenhouse gases, according to the Berkeley study, with reported values ranging from a 32-percent decrease to a 20-percent increase. It concluded that a 13-percent reduction was likely per BTU.

The U.S. Department of Energy was less optimistic, concluding that E85 produces only a four-percent reduction in carbon dioxide. In the near term, ethanol has no chance of mitigating global warming.

On ethanol subsidies:

Ethanol needs a mandate to find its way into our gas tanks for one simple reason. Made from corn as it is now, it costs more than gasoline.

Its true cost today is hidden by a broad blanket of agricultural subsidies, but we know the federal government puts up 51 cents per gallon. That alone will cost taxpayers more than $4.1 billion in 2012. And some states kick in an extra 10 cents, or 20, or more with credits, tax reductions, and other incentives.

On cellulosic ethanol:

If cellulosic ethanol were easy, it would already be on the road, because the government has been seriously funding research for about 30 years.

I believe cellulosic ethanol has great promise, but like they said, it hasn’t been easy. We can’t count on it as a silver bullet.

On E85 fuel efficiency:

We did a comparison test of two fuels, regular gasoline (87 octane) and E85 (100 to 105 octane). Our test vehicle was a flex-fuel 2007 Chevrolet Tahoe 4WD LT powered by a 5.3-liter V-8 hooked to a four-speed automatic transmission.

We tested acceleration using both fuels and our standard procedures, then we measured fuel economy at steady speeds of 30, 50, and 70 mph around a 2.5-mile oval test track, three runs at each speed that were averaged to produce the numbers you see in the accompanying charts. The fuel-economy results were calculated using the vehicle’s onboard computer.

We began the test with the Tahoe running on E85 fuel and later drove the SUV until its tank was as empty as we dared, and in that way we were able to flush the tank of almost all the ethanol. Then we refilled the tank with regular gasoline and repeated our procedures. All testing was done in two-wheel-drive mode. The results are shown here.

Differences in acceleration times were insignificant (although GM says E85 improves horsepower by as much as three percent). On the downside, the fuel economy on E85 was diminished more than 30 percent in two of the three tests, about what we expected. The EPA’s numbers suggest that fuel economy worsens by 28 percent on E85 compared with regular gas. On any Tahoe equipped with a 5.3-liter V-8, the E85 flex-fuel feature is a no-cost option, but running E85 reduces the driving range from roughly 390 miles a tank to about 290.

Again, I read a very similar argument recently.

On why E85 has been embraced by car makers:

With fewer than 600 stations selling E85 fuel in 37 states, why have GM, Ford, and DaimlerChrysler been cranking out these flex-fuel vehicles by the millions?

The answer is the mandatory Corporate Average Fuel Economy (CAFE) standards. Federal law requires that the cars an automaker offers for sale average 27.5 mpg; light trucks must achieve 22.2 mpg. Failure to do so can result in substantial fines. However, relief is available to manufacturers that build E85 vehicles to encourage their production.

The irony here is that although E85 in fact gets poorer fuel economy than gasoline, for CAFE purposes, the government counts only the 15-percent gasoline content of E85. Not counting the ethanol, which is the other 85 percent, produces a seven-fold increase in E85 mpg. The official CAFE number for an E85 vehicle results from averaging the gas and the inflated E85 fuel-economy stats.

There is a lot more to the article. I encourage everyone to read the rest of it. It reiterates many points I have made here, and some that I haven’t (like the CAFÉ scam mentioned above).

The second article is much shorter. It is Alternative Fools: E85. After the opening bit, I was getting ready to write an e-mail to the author to set him straight. He began:

The United States has pledged to kick the oil habit before. But this time we mean it. Better yet, we have a solution that doesn’t require any of that furrin’ hybrid and diesel technology: E85. Produced from corn and other products grown in good old American soil, this 85 percent ethanol blend enables American-as-apple-pie small block V8s to burn less gasoline than a Prius. If every car, truck, and SUV were E85 now, why we could tell the Arabs to shove it!

Yes, I read it too fast to recognize the irony. But it became apparent soon enough:

While 186 million Brazilians burn the equivalent of about 10 billion gallons of gasoline each year (40 percent of it ethanol), 296 million Americans burn 150 billion gallons of gasoline each year (3 percent of it ethanol). In other words, if America really wants to be like Brazil, we should cut gas consumption use by 90 percent. Hint: not many Brazilians drive full-size SUVs. Otherwise, we’ll need ten times as much ethanol as Brazil to match the Brazilian fuel mix.

That was the major message in my article on Brazilian ethanol. We consume far too much for ethanol to be able to save us.

Virtually all vehicles on the road today can already burn ten percent ethanol, commonly known as “gasohol.” In other words, existing cars can probably use all of the ethanol we can produce through at least 2018. So why do we need new, E85-capable vehicles and new E85 pipelines and pumps in 2006? Well, they do seem to make Corn Belt congressmen and their constituents happy. They help GM deflect criticism. And, perhaps best of all, an E85 Tahoe gets a CAFE rating of 33.3 miles per gallon. You see, this rating is calculated based on the very shaky assumption that E85 (only 15 percent of which is gasoline) will be used half the time. As a result, GM can sell more V8-powered vehicles without incurring fines. Without this loophole, it would have to actually sell more fuel efficient vehicles if it didn’t want to pay up.

Again, I have been asking the same questions. This E85 push is silly. There is no way to produce enough ethanol to justify the rush to E85. This is about politics and pandering, not about responsible energy policy.

There is more to the article. Give it a read, while I finish up my pro-ethanol essay.

RR