GUSHER OF LIES - Book Review and Reply to Robert Bryce Pt 5
A Book That's Aptly Named for What It Is
By Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL
ETHANOL PRODUCTION RESULTS IN RISING FOOD COSTS
Next to the lie that food is being diverted from the mouths of starving children comes this beauty. Oh my God, but Bryce pulls the quotations out of the wood work for this one. He’s got studies and statistics and equations out the wazoo and then wraps it all up in a great big party-sized study conducted by The World Bank that says that food prices rose because corn prices rose and the corn prices rose because of ethanol demand.
The World Bank? I thought I remembered reading in Bryce’s book that he is leaning towards libertarianism and that he works for the Manhattan Institute for Policy. Yeah, he did write that, so what the heck is he doing relying on anything from The World Bank?
Oh, but wait, Bryce did use the Fidel Castro quote to support his position on morality. Okay, I see the connection, and it goes back to doublespeak. But hold that thought, THE WORLD BANK, I’ll get back to it in a few moments.
In the meantime, let me drop this little pearl on you: In 2008, when Bryce wrote GUSHER OF LIES, a $4 retail box of corn flakes cereal contained about 6 cents worth of corn. So if corn prices rose 50% there would be about 9 cents worth of corn. If the price of corn rose 100% there would be about 12 cents worth of corn. Hmm, 6 cents, 4 dollars, 6 cents, 4 dollars. Even if the supermarket made 100% profit, which they don’t, there would be the big difference between 6 cents and 2 dollars. No, the price of food did not rise because ethanol pushed the price of corn up too high.
Food prices increased during the time that Bryce refers to in his book because of “transportation costs.” Not because corn ethanol was being used by the delivery trucks and freight trains, but because of higher gasoline and diesel costs. The transportation costs, which were unrelated to rising corn prices and/or ethanol production, was the culprit.
Food costs also increased because of marketing costs which are related to packaging cost increases. One of the reasons for packaging cost increases is the higher printing costs due to inks costing more. The inks are manufactured from petroleum oil.
In the time period during which Bryce wrote GUSHER OF LIES oil prices were at all time highs. Gasoline and diesel prices were also at their highest levels. Anyone with half a brain and a modicum of business sense would have understood how the high transportation costs would affect retail prices. But no, not Robert Bryce nor all the economic experts that he interviewed for his book, he allowed himself to live in a bubble world where he must have been wetting his pants on a daily basis over the belief that that ethanol produced from corn was having devastating effects on food prices.
But yet, corn prices did rise during that time, and The World Bank originally said it was because of ethanol production. Or did they? Yes, they did. In the face of logic, they accused ethanol (they also could have pulled their heads out of the sand and taken a look at gasoline prices, but they like Bryce stayed indoors, so to speak).
In any event, The World Bank was wrong and in the summer of 2010, a couple of years after they told Robert Bryce and all the other good little oil industry toadies that corn prices rose because of ethanol production, they issued a retraction.
The rise in corn prices, according to the revised report from THE WORLD BANK was due to investor speculation, not ethanol producers pushing the prices up just so they could take all the corn-on-the-cobs out of the mouths of starving people. Here’s come excerpts from the report:
PLACING THE 2006/08 COMMODITY PRICE BOOM INTO PERSPECTIVE
John Baffes - THE WORLD BANK
Tassos Haniotis EUROPEAN COMISSION
“The 2006‐08 commodity boom was one of the longest and broadest of the post WWII period. The boom - and especially the 2008 rally, when crude oil prices peaked at US$ 133/barrel (up 94 percent from a year earlier) and rice prices doubled within just five months - has renewed interest in the long-term behavior and determinants of commodity prices, and raised questions about whether commodity prices have reversed the downward course that most of them followed during most of the past century. It has also produced numerous calls for coordinated policy actions at the national and international level to address food availability and food security concerns.”
“The increasing interaction between the price movements of energy and nonenergy commodities during the boom focused attention on the impact of growing demand for biofuels, including for maize - based ethanol (mainly in the US) and oilseed - based biodiesel production (mainly in Europe). During the boom, maize and crude oil prices moved in tandem, pointing to an emerging new and fixed relationship between them. Obviously, maize and its use for ethanol moved into the picture as significant factors affecting price developments. But how much impact was there, and was there a similar one in oilseeds, resulting from their use for biodiesel?”
“Concluding Remarks - Numerous factors have contributed to the recent commodity boom, and have been analyzed extensively in the literature. Yet their relative weight continues to be an area of contention. In this paper we examined three key factors whose role has been somewhat controversial: speculation, the growth of demand for food commodities by emerging economies and the role of biofuels. We conjecture that index fund activity (one type of “speculative” activity among the many that the literature refers to) played a key role during the 2008 price spike. Biofuels played some role too, but much less than initially thought.”
Unfortunately, The World Bank retraction did little towards taming the false accusations that ethanol production has resulted in higher prices; false accusations that continue right up until today three years after the retraction and some five years after the publication of Bryce’s book. I think there’s at least 3 reasons: Like all initial explosive reports in the media, retractions are never covered with the same vigor. Second, the oil industry’s public relations propaganda war chest is so large that they were able to buy the story off. And third, because the excuse that corn and ethanol is causing the prices to rise was such a great way for snack food manufacturers to explain why they increased their prices that they just haven’t let go.
By the way, the three reasons are my own conjecture, as an authentic media expert with more than 40 years of extensive hands-on experience in every facet of marketing, advertising, production and sales.
A new report from The World Bank, which was just issued last month in May 2013 confirms that the primary driver in rising food prices is the cost of crude oil.
LONG-TERM DRIVERS OF FOOD PRICES
The World Bank Development Prospects Group & Poverty Reduction and Economic Management Network
"CONCLUSIONS AND FURTHER RESEARCH
This paper uses a reduced-form price-determination model on 1960-2012 annual data of five food commodities (maize, wheat, rice, soybeans, and palm oil) to assess the relative contribution of various factors to their respective price changes. The factors include crude oil prices on the supply side, stock-to-use ratios, three macroeconomic indicators (exchange rate movements, interest rates, and inflation), and income on the demand side. The paper concludes that food commodity prices respond strongly to energy prices, stock-to-use ratios, and (in a mixed manner) to exchange rate movements. With a few exceptions, interest rates and income growth do not matter. Yet, crude oil prices mattered the most during the recent boom period because they experienced the largest increase."
However, let me turn the tables on those who are overly concerned with the use of corn for ethanol and how corn syrup and corn starch prices might cause the rising prices of snack foods, soft drinks and candy. We are in the midst of a national obesity epidemic. Perhaps we shouldn’t be eating so much junk food. It would be better for the health of all the non-starving humans if we didn’t eat so much crap. I think if Robert Bryce needs a crusade to get involved with, this would be the one because this really has a worthwhile moral cause.
EROEI, it’s almost like a space alien’s name. Robin Williams could have used in on his old TV show. But of course, it means Energy Returned On Energy Invested. This is sort of the equivalent to the financial community’s ROI, Return On Investment. Ultimately, both EROEI and ROI are used to tell you if you’re wasting your time.
Here’s a simple illustration, if you need one: Say you want a really good bowl of fruit salad for lunch. You could go to COSTCO and buy a bunch of fruits that you take home, cut up and eat. Or you can go to COSTCO and buy one of their ready-made fruit salad bowls. The ready-made costs a little more than the individual fruits, but you save all the cutting time and you only have edible bits, not all the wasted pieces.
You have to make a decision. You ask yourself if it’s worth your time to go through the effort of cutting the fruit, particularly the pineapple. You determine what your time is worth and then add that pro-rated dollar amount to the cost of the fruit and then you can compare which gives you better value.
So the oil industry used EROEI to make a case for why it’s not worth the effort to create an alternative fuel to gasoline. To help do this, the oil industry hired two university professors to create the study. One professor, a professor of entomology (the study of bugs) is named David Pimentell, he’s from Cornell (a prestigious Ivy League school) and the other is Tad Patzek, who was a professor of geology at University of California at Berkeley (also a very prestigious school). By the way, Robert Bryce describes Tad as a personal friend. It’s really not important, but Bryce mentions it in the book, so I figured I should do it too.
Unfortunately, EROEI is not necessarily as straight forward as using ROI. For example, you can say, “I invested $1,000 dollars in a savings account that paid 5% interest (we wish) and at the end of the year when you withdraw the money you have $1,050. So your ROI was $50. Simple.
But, as I said it’s not that straight forward with EROEI. Here’s what I mean, let’s say that in going through the COSTCO salad bowl scenario that you didn’t own any knives. So you buy the fruit, take it home, realize you don’t have any knives, jump back in the car drive back to COSTCO, buy a knife, drive back home and cut your fruit up. Obviously your EROEI would be way off. The cost of the extra time, the fuel, the cost of the knife; all has to get added in. And in this scenario if the cost of the un-cut fruit and your time originally computed to a lower cost than the ready-made bowl, after all the extra trouble and expense it would have been a negative EROEI compared to buying the ready-made fruit salad bowl.
So if you have a situation where someone with an agenda wants to prove that his thing is better than the other guy’s thing you could easily do a real hatchet job on the other guy by adding in extra things and extra steps. You can also complicate the outcome by purposely choosing items and materials that are too expensive or redundant. Then, if the entire process was conducted under the cloak of secrecy without the other guy or at least an objective observer witnessing the process and having some input as which materials he would use and how he would go about doing the job, you can imagine how problematic the results of the EROEI test could be.
Robert Bryce delves into the subject of EROEI with great enthusiasm; perhaps because his buddy Tad is involved. Bryce uses a shell game analogy, like the one I used many pages ago. Needless to say, my use is much better, but what else did you think I would say.
Anyway, Bryce also titles this section of the book “Corn Ethanol’s Enron Accounting.” If the first thing that came to your mind is “doublespeak,” great, you’re catching on. As you can expect, Bryce uses lots of equations and figures that are immaterial because as I showed earlier, the process that led to the figures is incorrect.
However, my friend Robert Rapier makes another appearance in GUSHER OF LIES (figuratively speaking) and Bryce uses him to help prove the EROEI point that he is going after. I especially like the part when Bryce calls Rapier a “very clever engineer…who writes on of the best blogs on energy and the energy business.” I concur. You may want to go back to the first page of this document to remind yourself of what I said about Rapier and to watch, again, the video he produced just a few months ago where he advocated the production and use of ethanol in order to become energy independent.
The “tuchas afen tish” (remember that means Bottom Line), is that the EROEI studies conducted by Pimentell and Patzek show that the EROEI for ethanol is wildly negative. In other words, they say that producing ethanol to replace gasoline is a waste of time. They say it takes more energy to make ethanol than the amount of energy that the ethanol will put out. Moreover, their studies claim that ethanol is far more environmentally hazardous then anyone ever thought, and that it might even cause greater pollution than gasoline.
As I implied a bit earlier, the Pimentell-Patzek studies were hatchet jobs because they calculated in extraneous materials, they under-estimated crop yields, they over-estimated other aspects of farming (either intentionally or because the information they used was out-of-date), they exaggerated possible worst case agricultural scenarios, they created deceptive algorithms to calculate and compare statistics, and they purposely ignored certain other aspects of oil refining and gasoline production that make gasoline EROEI horribly negative.
Perhaps the most shocking item that Pimintell and Patzek left our in their gasoline EROEI calculations are the hundreds of thousands of American military personnel (past and future) who were killed or wounded to protect and defend the oil industry’s status quo. I’m sure they never calculated in the cost of continually treating those service personnel who sustained long-term and life long injuries. Then there are the accidental deaths of oil industry workers (past and future). Then there’s the destruction of beaches, and the loss of employment for those non-oil industry workers who live near the oil disasters, and then – as in the case of the Gulf of Mexico fiasco – the destruction of millions(?) of birds and fish.
Then you’d have to figure in all the energy expended in making every bullet, every gun, every tank and cannon and jet and ship and pair of shoes worn by our men and women who are being used to protect the oil industry. These are all a part of the cost of doing business oil-style.
Okay, okay, I’m not playing fair; I’m using tragically true but typically side-line aspects of oil EROEI. Of course, I don’t know how you can overlook the deaths of thousands of Americans, but the oil industry does. I should be comparing apples with apples, even though Pimentell and Patzek used bad information and irrelevant factors, such as farming equipment that is un-necessary.
See, one of the things that Pimentell and Patzek did was to try and reinvent the wheel, so to speak, even though the wheel has been with us for thousands of years. Here’s what I mean; they started with a zero–based budget as if America had no farmers. They even calculated into the energy equation the energy required to build some of the equipment that’s used in farming. Not only were the tractors they selected unsuitable for the job because they were too large and cumbersome, but they ignored the fact that almost all corn farmers already own the equipment necessary to grow corn or other products (now you can see where I was going with my fruit cutting example – if you already had an everyday knife that you use you wouldn’t add in the cost of the knife when you purchased it, nor would you calculate in the time and energy it took for the knife maker to make the knife). They stacked the deck against ethanol. To be fair, P&P should have calculated in every aspect that goes into what it takes to get the gasoline to the pump, and that would have been to add in all of the costs for war, and every single item right down to the energy it takes to make the zippers on the pants worn by our military service personnel.
Alright, you have my take on what Pimentell and Patzek did. Consider some examples of studies that studied the Pimentell-Patzek studies. The first of which comes from Tad Patzek’s own school, UC Berkeley. It was a study completed in 2006 after the Pimentell-Patzek studies and it was conducted by UC Berkley’s Energy and Resources Group. Here’s some highlights of the results
Ethanol can replace gasoline with significant energy savings, comparable impact on greenhouse gases
“The analysis, appearing in this week's issue of Science, attempts to settle the ongoing debate over whether ethanol is a good substitute for gasoline and thus can help lessen the country's reliance on foreign oil and support farmers in the bargain.”
“Dan Kammen and Alex Farrell of the Energy and Resources Group at UC Berkeley, with their students Rich Plevin, Brian Turner and Andy Jones along with Michael O'Hare, a professor in the Goldman School of Public Policy, deconstructed six separate high-profile studies of ethanol. They assessed the studies' assumptions and then reanalyzed each after correcting errors, inconsistencies and outdated information regarding the amount of energy used to grow corn and make ethanol, and the energy output in the form of fuel and corn byproducts.”
“Kammen estimates that ethanol could replace 20 to 30 percent of fuel usage in this country with little effort in just a few years. In the long term, the United States may be able to match Sweden, which recently committed to an oil-free future based on ethanol from forests and solar energy. Kammen last year published a paper, also in Science, arguing that even Africa could exploit its biomass to build a biofuel industry that could meet energy needs for the poor and develop a sustainable local fuel supply, a future much better than using fossil fuels.”
“The goal of the UC Berkeley analysis was to understand how six studies of fuel ethanol could come to such different conclusions about the overall energy balance in its production and use. Farrell, Kammen and their UC Berkeley colleagues dissected each study and recreated its analysis in a spreadsheet where they could be compared side-by-side. The team said it found numerous "errors, inconsistencies and omissions" among the studies, such as not considering the value of co-products of ethanol production - dried distillers grains, corn gluten feed and corn oil - that boost the net energy gain from ethanol production. Other studies overestimated the energy used by farm machinery.”
"The assumptions made by some of the authors were not based on the best data, or were just a little bit too convenient, and had a strong impact on the results," Kammen said.”
Included in the UC Berkeley review were the following:
Thermodynamics of the Corn-Ethanol Biofuel Cycle Patzek, T.W., Critical Reviews in Plant Sciences 23(6), 519-567 (2004).
Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower David Pimentel and Tad W. Patzek, Natural Resource Research, 14(1), 65-76 (2005).
Josh Tickell, an award-winning documentary film maker has produced several full-length films that address energy issues. In “Freedom,” the film that Josh and his wife Rebecca produced in 2011, Josh interviews David Pimentell on the subject of ethanol EROEI. Click the window below to watch a short video clip from the movie:
Another study, conducted by the United States Department of Agriculture, was presented in 2007 at UC Berkeley – what a coincidence - by Roger Conway, Office of Energy Policy and New Uses at the United States Department of Agriculture (USDA). The report showed huge discrepancies in the figures that Pimentall and Patzek used to arrive at their conclusions versus the figures used by USDA’s efforts to conduct their own studies on ethanol vs. gasoline EROEI. The USDA studies were significantly more favorable towards ethanol production.
A Michigan State University study conducted by Bruce Dale, Professor of Chemical Engineering, found that the Pimentell-Patzek methodology is flawed. The measurements of BTU are irrelevant and that the net energy of ethanol is actually higher than gasoline (in other words, EROEI for ethanol is positive, while the EROEI of gasoline is more negative).
In 2011, Forrest Jehlik, Research Engineer, Argonne National Laboratory responded to what he felt are the 5 most prevalent myths about ethanol. He said that ethanol does not take 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…”
In October 2009, David Blume traveled to Cornell University to conduct a workshop on permaculture. While there he paid a call on David Pimentell and was able to record the conversation. In the more than 20-minute long conversation Pimentell agrees and acknowledges that many of the conclusions that were drawn in the studies he conducted are now incorrect, or could be rendered incorrect given advances in farming and ethanol production – advances that already had been proven by the time of this conversation in 2009, which was just a year or so after Bryce wrote GUSHER OF LIES. These were also advances that had largely taken place since the publication of the Pimentell-Patzek study just 4 years prior. Bryce’s book and his later work, such as the article that appeared in TheDailyBeast towards the end of 2012, make no allowance for the possibility of improvements that could affect the conclusions of the Pimentell-Patzek study, and Bryce seems to have not permitted any bothersome details about improvements to have interfered with the conclusions that his book set in stone. You can watch the entire video by clicking on the window below. The video is not quite as good as the quality in the Josh Tickell video clip, but the message comes across loud and clear.
In as much as it is now nearly 4 years after the taping of this conversation and advances in farming and ethanol production have continued, it would be intriguing to hear what an updated Blume-Pimentell conversation would sound like.
Nonetheless, it clear that it’s not the ethanol industry that’s been using Enron Accounting it’s Bryce and Pimentell and Patzek and everyone else fronting for Big Oil. You, know, just a little more of the ol’ doublespeak.
ROBERT BRYCE, CHAMPION OF MTBE
Why should it have surprised me that Bryce would devote a section in his book to defending methyl tertiary-butyl ether (MTBE) and blaming ethanol? It shouldn’t have, after all look how many decades it took to get the world to agree that cigarette smoking is harmful. And look how long it took for everyone to acknowledge that tetra-ethyl lead is poisonous. Not-so funnily enough, in 1974 Vice President Joe Biden (then just a senator – yes, he has been on the public dole for more than 40 years) stated in congress, “In my opinion, lead from auto emissions does not constitute a public health hazard.” I guess Bryce figures that if we can have a stupid congressman who works his way to first in line for presidential succession that being a stupid author is no big deal. Congratulations, Robert, you’ve made it to the front of the stupid line.
When the gasoline industry was finally faced with the mandate that they clean up their act – to get the lead out, figuratively and literally, they had two choices: The first was to go back to the original formulation that cured the ills of low octane gasoline, which was to blend in ethanol. The second choice was to pick another poison (they had such good luck for than half a century with tetraethyl lead), so MTBE was it.
Bryce writes, “…due to some leaking underground storage tanks, MTBE-BLENDED gasoline was also causing some groundwater problems. And those leaks led to lawsuits over the refiners’ use of the additive.” Some? Some groundwater problems, as if it was a couple of isolated incidents. Well, those very few number of spills is still with us today. Fresh water lakes and ponds and reservoirs that were contaminated with MTBEs still have MTBE’s in them years after outlawing its use in gasoline.
Some estimates are that it has taken $30 billion to clean up the more egregious MTBE damage. Guess who gets to pay for that? You and me. Sounds like another subsidy to the oil industry that they get to ignore..
Bryce continues, “Like MTBE, ethanol is a good oxygenate. But it creates big problems for oil refiners because it increases the volatility of gasoline.”
Volatility in this instance relates to evaporation. So this sounds like Bryce is saying that because ethanol evaporates too quickly, or more quickly than MTBE, the gasoline industry chose MTBE over ethanol.
Interestingly, the Institute for Occupational Safety and Health, located near Bonn, Germany, describes MTBE as “very highly volatile, with a boiling point of 55 degrees centigrade.” The same institute labels ethanol as “highly volatile with a boiling point of 78 degrees centigrade.” Consequently, it looks like MTBE would evaporate more quickly than ethanol. Therefore if the problem for the refiners was that ethanol was too volatile, then they should have considered MTBE as too, too volatile.
I’m not a chemical engineer; I’m not any kind of engineer; I don’t even have a Lionel model train engineer cap and whistle any longer. So I could easily be wrong on my interpretation of the statistics I just presented. If so, okay Robert now you have something to bash me with; have at it.
But if I’m not reading the stats incorrectly, then it sounds like Bryce did the ol’ doublespeak thing again: blame ethanol for gasoline’s problem.
However, let’s not quibble over a few temperature points, volatility – that is, quick evaporation - and easy solubility with water is one of ethanol’s benefits. If there’s a large ethanol spill, clean up is relatively simple. In addition, the ethanol fumes are not explosive. On the other hand, large gasoline spills often require specialized clean-up assistance and the lingering fumes can explode even after the liquid is removed.
So again, I say if my understanding of the chemistry involved is puerile there’s a good reason for it, I don’t understand chemistry. Let the verbal and textual whipping begin. But if I’m not wrong, and my childish understanding of the chemistry is even close to being correct, then you Mr. Bryce have lots to apologize for.
The peculiarities in the use of MTBE gets even stranger regardless of the volatility issue because Methyl tertiary-butyl ether is manufactured via the chemical reaction to methanol and isobutylene. Methanol is an alcohol. Ethanol is an alcohol. The primary difference between the two is the raw materials from which they are derived. In fact, methanol could be used as a direct replacement for ethanol as a replacement for gasoline.
From my perspective, as I am not an ethanol producer or a farmer, nor am I paid by either the ethanol industry or the farming industry, I personally would be just as happy if we substituted all gasoline and diesel fuels with methanol fuel. But then why do that because there are many more ethanol producers then there are methanol producers. We might as well just use ethanol and support our American farmers.
Incidentally, for those of you keeping score, methanol rates at about 57,000 BTUs and isobutylene rates as about 95,000 BTUs. If you combine them and average it out it is 76,000 BTUs. If you recall from the earlier discussion on the irrelevancy of BTUs that ethanol rates at 76,000 BTUs. Now I’m not saying that the mere combining of methanol and isobutylene is how you manufacture MTBE, but isn’t it strangely coincidental that the oil industry would go to all that bother to make something that rates no more BTUs than ethanol?
So if a chemical reaction in the combining of methanol and isobutylene was so attractive to oil refiners as the secret ingredient in gasoline that reduced engine knock and increased octane, then why not just cut out all the BS and go straight to methanol, or ethanol?
I believe the answer is that the oil industry didn’t want to share any of the glory with the ethanol industry; that’s glory spelled: P R O F I T. Because in the manufacture of MTBE the methanol that is used comes from CNG (compressed natural gas), which is an oil refining by-product, instead of making the methanol from biomass, agricultural and timber waste, or solid municipal waste. The people in the oil industry must have figured that giving any kind of “nod” to ethanol was too much acceptance, and so they figured they could pass off a dressed up pig of an additive with some chemical formula mumbo-jumbo.
In the rush for profits (profits are okay) and to choose anything that would work, except ethanol, the oil refiners chose a carcinogenic substance. Thank you very much, oil industry for your continued “concern” for the public’s health. And thank you, Robert Bryce, for all you’ve done on the public’s “behalf” to repay the Saudis and Emiratis for their kindness.