Non-ethanol Fuel
David R. Kotok
Cumberland Advisors, April 22, 2015
I stopped at a local Sarasota Sunoco gas station yesterday to fill up my car. A sign read “Non-ethanol fuel for sale here.” The pump was off to one side and did not have an automated payment mechanism. But it was there, and that is something new in and of itself.
The price difference between the non-ethanol fuel and the ethanol 10% or more fuel, at roughly the same octane rating, was $0.37 per gallon. So I was offered a market-based, apples-to-apples comparison in terms of price and octane.
My Hyundai dealer says that buying the non-ethanol fuel will extend the life of my car’s engine. I drive a Genesis and like the car a lot. The dealer recommends paying the higher gas price in exchange for better-operating machinery. Others who have boats or mowers say the same. They despise ethanol because it is caustic to their machines. I cannot find a single person who says ethanol improves operating efficiency or engine durability.
As I filled the gas tank with non-ethanol fuel, I asked myself, “Is this price differential also a metaphor for the subsidy that the United States of America and its taxpayers have been providing to the ethanol political lobby for years?” Some of the ethanol subsidies were direct cash payments as high as 51 cents per gallon. Some have been eliminated, but other forms of ethanol mandates still exist. Does the $0.37 per gallon price difference reflect an embedded industrial complexity that has now more or less permanently altered the pricing structure?
If every sort of ethanol subsidy were repealed and there were zero subsidies in any form, would ethanol exist? It appears that the answer is no.
This is not the first time my car has been filled with non-ethanol fuel. It will not be the last time, either. I’m not opting for non-ethanol fuel to protest a lousy policy, although that might be an acceptable motivation. I’m electing to use non-ethanol fuel because it is better for my automobile.
I believe that ethanol is one of the sickest political diseases fostered by the United States, with impacts throughout the world. Our federal budget statistics show that billions of dollars have been expended to subsidize ethanol. Our politicians campaign early in Iowa out of fear for the Iowa corn farmer. Those scurrilous politicians will do whatever they can to placate farmers who are looking for preservation of ethanol policy so they can enjoy a subsidy paid for by the rest of us.
So here is a three-part challenge. First, consult the person who maintains your vehicle’s engine and ask about the perils of using ethanol-laced gasoline. Satisfy yourself that those perils are real.
Second, consult with those who in the past few years have gone hungry because of what has happened with food prices due to our American ethanol policy. The impacts may not be as extreme today, but they have been in the past. In my personal experience in Zambia with a Global Interdependence Center worldwide food and water program, I saw maize-based economies suffer huge food-price inflation caused by the ethanol policy created in Washington, DC. At its peak, the ethanol policy of the US starved millions of poor people around the world.
Third, let’s look for truth in politics. Now I immediately admit that this is a tough thing to find. But we have a clear metric now. Let’s see what the presidential candidates say when they visit Iowa. Will they talk about ethanol policy or be silent? Will they support subsidies to fatten the “Ag” giants at the expense of the rest of us? We have a metric now.
My gas tank is filled with non-ethanol fuel. It cost me $0.37 per gallon more than the ethanol fuel. My engine runs better, and I now have a reminder at the gas pump to think about my vote and actions as a citizen. And I have a metric to measure the actual cost difference and the translation of a macro-subsidy to the retail price of ethanol vs. non-ethanol gasoline.
At least I now have a choice and can avoid ethanol toxicity. In years past I had no choice.
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David R. Kotok, Chairman and Chief Investment Officer, Cumberland Advisors
“If every sort of ethanol subsidy were repealed and there were zero subsidies in any form, would ethanol exist? It appears that the answer is no.”
Actually, even in an environment where ethanol is punitively taxed (excise taxes), and without subsidies, it would exist. And be purchased. But to drink it, not to burn it in our car engines.
You left out the ecological impacts.. Ethanol has led to massive industrialized GMO corn farms with extensive demands for fertilizers and herbicides. This has led to a massive decline in biodiversity in rural areas, increased water demand in drought-prone areas, and fertilizer loaded runoff that causes algae blooms in rivers, lakes, and estuaries. Corn for ethanol was a major reason that Toledo, OH didn’t have a municipal water supply for a week last summer.
BTW – agricultural subsidies make up 5% of US federal government spending. It should be a prime target for the Tea Party to go after to reduce government spending. Unfortunately, most of the prime areas for the Tea Party are reliant on corn subsidies to keep their economies are growing, so they want other entitlements to be slashed instead.
This policy is the result of the hysteria that can wreak havoc on policy. Everyone remember the screaming that went on for switchgrass in the Bush era? Well, the Feds DID pony up $100 million in research, but guess what, it’s even LESS efficient than corn based ethanol, but yet, at the time, it was hailed as the salvation play for energy independence. I mean, the noise was unbearable, and most of us not being experts in the biomass field, no doubt we all egged Washington on. WON’T SOMEBODY PLEASE DO SOMETHING?!
The same thing happened to our privacy after 9/11. We simply wired the entire country up because no one thought of putting a lock on a cockpit’s door, and now, when a retired librarian opens up a brokerage account, we treat her a possible terrorist suspect and money launderer.
It’s O.K. to overreact. Those of us who toil in the markets which this sh&t happen all the time. But it shouldn’t be too much to ask to admit a mistake and correct the policy after it proves to be wrong.
this was more a political choice than any thing else. both parties advocated for it, but the GOP was able to get passed. so changing it isnt really an option any more
Have absolutely loved this website for years. Read it everyday, but never commented. I love America, too, and hate ethanol subsidies. They are worse than a waste. However, “I believe that ethanol is one of the sickest political diseases fostered by the United States, with impacts throughout the world,” is a bit too much hyperbole. I mean, slavery was built into our Constitution and we waged an actual war on Native Americans. I’m not remotely happy that agriculture prices have risen in the developing world, but the author, in my opinion, loses his perspective in this piece.
I want to know how much water it takes, in gallons, to produce 1 gallon of ethanol; including the irrigation water to grow the corn, the water to boil the corn mash to make the ethanol, the water it takes to process the natural gas in to anhydrous ammonia nitrogen fertilizer to grow the corn , etc. etc. Almonds are bad but I really want to know how much fresh water is wasted on this ethanol scam. . . and while on the subject of farm subsidies, does anyone have a dollar figure for the amount of money spent over the last 30 years on the Conservation Reserve Program , which paid farmers to idle poor and erosion prone acres, that were then put to the plow again as a result of the corn/ethanol demand ??
Pure-gas.org has a map of the US showing stations with ethanol free gas. Liberty in Virginia has ethanol free at the same price as competing stations with ethanol.
This could be solved if we moved the caucus from Iowa to Vermont. That is, as long as we stay vigilant against efforts to mandate maple syrup as a fuel additive.
Cheese would quickly become the most subsidized food product on the planet.
” ethanol is one of the sickest political diseases fostered by the United States, with impacts throughout the world. Our federal budget statistics show that billions of dollars have been expended to subsidize ethanol. Our politicians campaign early in Iowa out of fear for the Iowa corn farmer. Those scurrilous politicians will do whatever they can to placate farmers who are looking for preservation of ethanol policy so they can enjoy a subsidy paid for by the rest of us.”
True that.I have no concept of how something so stupid can continue, other than something about money and elections.
Ask anyone who works on gasoline powered anything. Same answer from everyone of them. Don’t use ethanol gas, and especially don’t in periodically used equipment. Your boat,chainsaw,mowers,blowers,tillers, etc will perform much better and much longer.
This is one more reason for public financing of political campaigns and perhaps a national primary for both parties.
Thank you – very thought provoking and finally a quantifiable metric to what we all suspected, or knew, was a boondoggle. Such is the rent that Big Ag has extracted from the rest of us. Of additional surprise to me – I wouldn’t have imagined David Kotok drove a Hyundai even if it reflects a greater value proposition. Thanks again.
Ethanol was supposed to reduce emissions in cars with carburetors that needed tuneups (i.e. fouled plugs). No one has made cars with carbs for at least fifteen years and I believe 25 years in the case of Ford. Even with a carb, ethanol does nothing for emissions if the car is properly maintained. So there is NO environmental impact to discontinuing ethanol and positive effects on vehicle life. The lessened demand for corn is bad news for corn farmers and Archer-Daniels-Midland. Corn farmers can switch crops, say to soybeans. So why doesn’t the government end the ethanol mandate? An exercise for the student.
BTW, “non-ethanol” could mean butanol fuel, but I’m assuming the fuel in question is just ethanol-free gasoline. http://en.wikipedia.org/wiki/Butanol_fuel
Here on the Carolina coast, we have many stations that offer ethanol-free fuel. Perhaps one reason is that boats canot use ethanol because it would void the warranty on their marine engines.
Like most government programs, the mandatory use of ethanol blends was unleashed on the assumption that the world was running out of fuel (or was it the lobbying of farm state politicians). We now know how that settled science played out.
not sure that even if the gas station says they have ethanol free gas, that they really do, unless they have bribed the driver(s) of the gas delivery trucks, they are getting it. since the drivers are the ones who add the ethanol. thats also why on occasion the gas will have more than 10% ethanol. and why that leads to broken engines. this was an environment issue, but only back when cars used carbs and werent computerized
“My Hyundai dealer says that buying the non-ethanol fuel will extend the life of my car’s engine.”
Pure BS. There is a ton of urban-legend stuff about ethanol and that dealer doesn’t know what he is talking about.
Ethanol has been added to fuel in some midwestern states for over 30 years and there is zero stastical evidence of shortened engine life. You can complain about ‘burning food’ (if you are a cow and eat dent corn, I suppose), but that’s about all.
Thanks Wally. I was waiting for someone to say that. While I’m not a certified professional engineer, I did build and race NASCAR Modified race cars for several years that ran on pure 100% alcohol. It’s always funny hearing about how “ethanol hurts engines”. Engines and related components can be built to use many different types of fuels and last a long time. Engines last longer today than they did when I was a kid 50 years ago! Kotok just proves that if propaganda is repeated long enough…… someone will believe it.
Talk to small engine repair shops, they love ethanol fuel. Tears up small engines in generators, lawn mowers, chainsaws, weed-wackers, etc.
Most cars produced in the last half dozen years can handle ethanol without damage, they were designed to.
“In 2010, the U.S. government will require under the Renewable Fuels Standards (see EPA Issues Renewable Fuels Standards) that 12.0 billion gallons of corn ethanol are produced. The U.S. government will provide a $0.45/gal “blender’s tax credit” for petroleum refiners to blend corn ethanol which is equal to a $5.4 billion dollar subsidy.
There is also the issue of the indirect subsidy in the form of a $0.54/gal tariff on imported Brazilian biofuel (see Brazilian Ethanol Takes a Hit) to insulate U.S. ethanol producers from foreign competition. Basically, due to the favorable economic structure of sugarcane ethanol over corn ethanol, if this tariff did not exist, the U.S. would import billions of gallons of Brazilian ethanol.”
In essence, aside from the $5.4 subsidy, paid by us taxpayers, for a gasoline substitute that lowers our gas mileage, we also screw ourselves by not being able to purchase and use cheaper Brazilian ethanol, and the effect of cost of animal feed, grains that aren’t planted which increases the cost of our food, we’re probably looking at a total cost to the citizenry of $12 Billion per year?
This whole mess makes little sense, when so much of the water is used to produce cattle feed. It would make more sense to eliminate the program altogether and let that ‘free market’ that everyone seems to lean on so much when it comes to things like wages take over.
yes. Ask your mechanic what HE thinks. And he will spout the latest tea party baloney or whatever he has read on the internet. Show me a controlled study or statistics about the effect of ethanol on the internal combustion engine as marketed to consumers in automobiles. It is about the emissions of ethanol vs. petrol. That is why the money is spent. Yes, government policy does distort the market, Virginia.
http://www.wired.com/2011/06/five-ethanol-myths-busted-2/ Lots of opinions but not a lot of science or facts. Lets see what Wired has to say.
Oregon has been allowing non-ethanol premium fuel to be sold for a good many years now.
I did a side by side test on ethanol/non ethanol fuel several years ago when I had a series of appointments at the Portland VA, which is exactly 350 miles round trip from my house done in a single day. (Chrysler Pacifica, 2006 with 68k)
Ethanol fuel could make the round trip on one tank, but I was so close to empty when I got home, my first stop was the gas station.
Non-ethanol fuel consumption left me with over an 1/8 tank upon return.
Better gas mileage and my car ran and accelerated much better.
Nice to have a choice….and I’ve made mine.