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Adam Smith is dead! Will moving his body help secure absent competition in fuel markets?

Former Gov. Richard Lamm of Colorado and I once led a group of CEOs on a trip to London. It was focused on what Colorado could learn from the British healthcare system. During the trip we visited St. Elizabeth Hospital. There in the lobby was a stuffed, mummified body of Sir Jeremy Bentham, so I took a picture with him. He was not very talkative.

But the resulting photograph brings back memories, perhaps apropos to the oil industry. Seeing Bentham looking so well and remembering how much he meant to my life — both the pain and joy — I propose we bring back Adam Smith, and place him in the lobbies of the big oil companies. Why? Easy: they seem to have forgotten about the value of free markets, competition and capitalism. A little dose of recall and guilt every morning when they go to work and when they leave their offices every evening wouldn’t hurt. Over time, maybe there would be substance behind their luncheon or dinner speeches concerning free markets and capitalism. Maybe they would remember Smith’s warning that, “People of the same trade [in this case, the oil industry] seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Right on, Adam! You are not my favorite economist or ethicist, but your quotation appears to fit the behavior of the oil industry. Sen. Dianne Feinstein, during California’s increase in gas prices a couple of years ago, suggested that oil companies and investors might have tried to set prices and blur their actions by casting blame on the refinery fires for gas price spikes. Her view was that market variations alone did not explain the high prices consumers were paying at the pump. Her comments implied some sort of collusion or manipulation.

E85 and E10 PricesThe general behavior of the big five oil companies concerning competition from E85 lends credence to Feinstein’s suspicions. Listen, my reader, and you shall hear some examples of big oil’s apparent, sometimes seemingly coordinated, efforts to restrict the growth of E85 sales here (sorry, Longfellow), even though E85, at the time, posed no real immediate competitive threat to overall gasoline sales. Of the just over 150,000 retail fuel or gas stations in the nation, only 2.5 percent offer E85 and less than one half of one percent of the major brands provide E85 under their branded canopy. How nice of them! Read a franchise agreement from Exxon or Texaco, and see if you can find a provision for an E85 pump…maybe there are words suggesting a location in the back of the station, near the men’s or ladies’ room or in front of the station, clearly off center and not under the canopy.

Look hard at the language and the decisions of nationally branded retail stations. Franchisees are generally limited as to price, fuels, location of pumps and marketing strategies. Maybe these restrictions are legal and from a monetary and profit point of view, understandable. But from a consumer perspective, they limit choice and often frustrate competition.

Some have charged oil companies with price fixing or collaboration in setting prices (a nicer way to say fixing). “No, not in America,” you say? Adam Smith would turn over in his grave! According to a report by AJW company in 2014, “Since RIN prices began to rise in 2013, the nationwide average discount for E85 vs. E10 at independent stations has been 14 percent or greater for all but one month. During the same period, the nationwide average discount for E85 at major branded stations reached 14percent only once. This discount is only a price comparison and does not factor in relative energy content of the fuels. As long as there is limited availability and unattractive pricing at major branded stations, low E85 demand likely will persist among consumers using those stations.”

Generally, I am not a fan of special-interest group research or funded research. I prefer to rely on, at least, relatively independent think tanks, universities and scholars. Yet, recently gifts of money for research blurs the line between the interest of funders and the integrity of the word independent. Caveat emptor!

A 2014 case study by the Renewable Fuels Association (RFA), an advocacy group funded, in part, by self-interested donors, tracked the per gallon fuel costs of all nine retail stations selling E85 in St. Louis during the summer of 2014. Each station had the brand names of one of the five largest oil companies.

The data indicated that there is some support for the notion that gasoline producers/suppliers and their franchised retailers in at least St. Louis purposely employed pricing strategies to discourage E85 consumption. They, apparently, wanted to negatively influence the consumer perceptions about the fuel.

Oil companies appeared to control key price behavior at the nine stations and, to some extent, worked together to set prices, either formally or informally. RFA argues that it’s hard to believe that the price similarities at stations in St. Louis happened by chance. For example, the average E10 retail prices were $3.45 dollars per gallon while the average E85 retail price was $3.47 dollars per gallon. Wholesale prices of E85 were an average of $2.58 per gallon, while E10 averaged $2.93 per gallon. “Based on prices for locally available ethanol, hydrocarbon blend stock, RFS RIN credits and a typical markup, E85 could have been offered at retail for $2.44-2.55 dollars per gallon.” There probably are many reasons why average E85 prices were more expensive than E10 and almost one dollar larger than their wholesale price….like someone from outer space tampered with the pumps or consumer demand for E85 overwhelmed supply and the stations responding to market pressures raised the E85 price to mute interest from buyers. Neither, of course, was true!

Oil companies and their retailers appeared to set the price of ethanol to steer E85 and fuel-agnostic buyers to gasoline. They also wanted to keep the loyalty of gasoline buyers. The similarity of prices could have occurred by chance. Sometimes, I wear a blue shirt in the morning and so does my colleague. We never discussed what we would wear. But our color schemes are coordinated. What the study doesn’t answer is why other St. Louis stations, independent from national brands, did not see an opportunity to come in below the prices of majors and sell E85. Personally, I would have liked the analysis better if other cities were included as cases for comparison and if the time period went beyond the summer. But it was an interesting provocative report and you can’t have everything.

Anecdotes and studies based on the relatively recent California methanol fuel experience and Colorado’s effort to build E85 sales seem to support the RFA study. They suggest that the fear of competition from alternative fuels among oil companies and or retailors led to, at best, begrudging support for both methanol and ethanol. They often located pumps (if they agreed to have them at all) in unfavorable positions in their or their franchisee’s retail stations. Marketing strategies were marginal at best, and non-existent at worst. Stories from some astute observers suggest that relatively high methanol and E85 prices were put in place to detour customers to gasoline. Among other factors leading to problems with each state’s initiatives, there was a lack of sustained interest by major oil companies in building and sustaining sales of both alternative fuels with competitive pricing.

Maybe things will change. The present downturn in oil and gasoline prices has led some oil company leaders to think more charitably about alternative fuels —natural gas, ethanol, methanol, biofuels — particularly in light of the development of more flex-fuel cars coming from Detroit, and from consumers who convert their older cars to be flex-fuel vehicles. They have begun to view alternative fuels more favorably as part of their future business and strategic plans. If they go further, they will have to face questions, which include: whether they integrate gasoline and alternative fuels under one organization and canopy or separate both, perhaps, as different brands. Real competition, probably, will require Congress to consider some variations on a theme of open fuels legislation. Success in building competition at the pump would make Adam Smith happy, were he alive, and be good for the environment, the economy and consumers.

PUMP debuts on Netflix, so stream at your leisure

PUMP the Movie is now available on Netflix, giving millions of Americans the chance to watch an important film that shows the patch forward to ending our dependence on oil.

The documentary, produced by Fuel Freedom Foundation and narrated by Jason Bateman, was originally released in theaters last September. In fact, it’s still showing on big screens around the country, as the foundation has worked with partners to host screenings on college campuses and for nonprofits.

(For a full schedule of showings, as well as movie reviews and other content, check out PUMPtheMovie.com.)

But Netflix is a whole new level. The video-on-demand service is now available in 36 percent of U.S. homes, compared with 13.5 percent for Amazon Prime and 6.5 percent for Hulu Plus. Thirty-five million people watch movies and TV shows using Netflix’s streaming service, while another 5 million still get DVDs by mail. (We have DVDs for sale too, in an attractive blue case, on our website).

PUMP charts the century-long story of oil and how it built its monopoly on the U.S. transportation-fuel industry. There are interviews with major energy and auto-industry players like John Hofmeister, former president of Shell Oil Company, and Tesla Motors founder Elon Musk.

Much of the film is dedicated to solutions to our oil addiction: For example, ethanol, which is cheaper than gasoline and burns cleaner, with fewer toxic emissions, can be made from plenty of “feedstocks” besides corn.

Here’s a clip from the film featuring alcohol-fuels expert David Blume, telling us about the possibilities:

Another voice in that snippet belongs to Marc Rauch, editor of the Auto Channel website, who says: “Ethanol is not just any competitor [to gasoline]. It is the better fuel. It has always been the better fuel.”

The point is choice: American drivers deserve more than just one. To learn how we can achieve it, in the cars, trucks and SUVs we drive today, pick up the remote and watch PUMP.

The flex-fuel Dodge Charger shows you can be both green and cool

Aaron Walsh’s first car was a 2008 Chrysler Sebring flex-fuel, meaning it could take E85 or any other ethanol blend. It was a good car.

But his new car … wow. The 2012 Dodge Charger, in Tungsten Metallic gray. Now that’s a proper car for a young man. And Walsh never would have bought it if it didn’t come in a flex-fuel version.

“That’s my biggest reason for using it,” says the student from Haslett, Mich., just east of Lansing. “I absolutely hate the petroleum industry.”

His reasons are mostly environmental: the BP spill in the Gulf, etc. “I could go into it, but it would take a long time.”

The point is, he did something about it, and that something came around the time he decided he needed a vehicle upgrade. Walsh already knew the benefits of ethanol because of his father, who works for the state of Michigan, which encourages state employees to put E85 into their flex-fuel vehicles. So right around his 21st birthday, last June, he found the Charger and its 3.6-liter Pentastar V6 engine.

“I wanted something that didn’t have to run on gasoline,” he said. “And the first thing I wanted was an electric; I was really into the Chevy Volt. But then I realized a college student doesn’t have $40,000. Then I looked and saw that the Charger is $24,000.”

Walsh, who attends Lansing Community College, says finding an E85 station isn’t difficult. “It keeps getting easier and easier,” he says. He posts his fill-up data to his Twitter feed, @gasisoutrageous (his account name is #Number1BigHero6Fan … hey, dude has other interests besides ethanol), and he regularly gets in the twenties for mpg. Also, E85 is a lot cheaper than regular gasoline at many stations in the Lansing-Haslett area. Nationally, E85 was only $1.86 a gallon Thursday, 23.7 percent cheaper than E10, according to E85Prices.com.

Price isn’t the only benefit to buying E85. Higher ethanol blends burn more cleanly and efficiently than E10 (what most of us call regular gas). Using more alcohol fuels displaces oil, strengthening the overall U.S. economy, creating domestic jobs; reducing oil consumption is better for our air, water and health.

But the price at the pump is still a big factor, and most Americans know this. Walsh knows it, and needs it. He works at a convenience store, and says his dad has been helping him out covering the cost of payments and upkeep. The vehicle is also not exactly ideal for the brutal Michigan winters, with is rear-wheel and slick tires.

But he loves it. Using ethanol doesn’t mean you can’t enjoy your car at the same time. And that roaring engine runs great on high-octane E85.

“When I started driving, whenever I would slam on the accelerator pedal, I’d just hear dollar signs. Now I like the performance. I actually bought that car just because of the engine.”

Other posts in our “Share Your Story” series:

10 people who turned anger into solutions for high gas prices

So we’ve heard from Americans who say high gas prices have disrupted their lives and their work. Let’s shift to the people who are more than mad as hell. They’re mad enough to turn their energy into action.

Among these 10 ideas, what’s the most practical for your life?

 

“I just ditched my old 1998 Volvo S70 for a used Prius, and it is so much more fun to fill a 10-gallon tank than an 18-gallon one. And have it last more than a week of heavy Los Angeles commuting. It’s still new to me, so I still kind of giggle every time I fill up the tank. I’m thrilled to put the money I save toward better things.”
— Jennifer

“We save a lot of money in the summer because my wife takes the bus to the south side of Madison to go to work, and I pick her up in the afternoon, about 4 miles south of our home. If I was to take her to work and pick her up, it would be 48 miles round-trip, morning and afternoon. The bus is cheaper.”
— Laverne F., Madison, Wisconsin

“As gasoline was so high for so long, I made a bio-diesel processor from a old electric water heater and made my own fuel for the oil furnace and my old 1984 GMC van with a diesel engine. I still received 21 mpg. Begging for grease was the hard part.”
— Willis W.

“I wish I had a good story for you, but my wife and I drive a plug-in Chevy Volt. We hardly ever stop at a gas station, except perhaps once every 6 weeks or while on an occasional trip. When we top the tank, it seldom takes more than 5 1/2 gallons, i.e. less than $20 worth of premium fuel. The main reason that we stop at gas stations these days is to get an automatic car wash.”
— David and Barbara G., Gaithersburg, Maryland

“Still wondering how to convert my 99 Ford Expedition to NG?”
— Gary S., Laguna Woods, California

(We’re checking around to find a SoCal CNG conversion business. Will update later.)

“I have not visited a gas station since September 2014, when I took delivery of my Tesla. However, I still pay for my daughter’s gasoline, suffer the financial cost, and contribute to the oil industry’s wanton environmental degradation. Savings at the pump could help me fund her college education.”
— Dr. George

“Go electric. I did and am receiving my Tesla next week. No more gas at all.”
— Bob

“Today we bought a 2014 Ford Focus, a flex-fuel vehicle which enables us to use E85 for fuel. A small contribution to energy independence.”
— David

“We need a blender pump [for ethanol] in every station.”
— Melvin M.

“I top off my cars with E85 when I can. I fill up once a month with a discount at Kroger. I am really pushing to get Kroger to provide ETHANOL pumps and shop at the same place!”
— Gerard R., Stone Mountain, Georgia

 

Incidentally, here’s a handy guide to flex-fuel vehicles on the market.

‘If they raise gas prices, they should be raising the salaries’

Last week we shared stories from people whose quality of life has been affected by the unpredictable ebb and flow of gasoline prices. Visit our Facebook page and read the great discussion riffing on our last post, about Troy Harper in Missouri, to get an idea of how hot-button an issue this has become.

Today we’re passing along sentiments about the work Americans do and how the cost of fuel makes that tougher.

Some workers get paid by the hour, others are salaried, and still others are in business for themselves. Gas prices take a bite every time.

Here are a few of the responses we’ve received:

 

“I have to work one and half days just to fill my car, just to get to my job. That’s what I spend a week. If they raise gas prices, they should be raising the salaries.”
— Jose G., Streamwood, Illinois

“My wife and I both work at different times of the day, so we can’t carpool, and driving two cars every day gets too costly, at $3 to $4 a gallon. Not only us, but everybody that has to work has to give up something in order to make ends meet.”
— James

“As a business owner (lawn maintenance), even a few cents per gallon makes a big difference in my profit margin. My company uses approximately 100 to 130 gallons per week, sometimes more. So the cost of fuel has a large bearing on our workload. Lower prices would really help our bottom line.”
— Keith M., Boca Raton, Florida

“Gas prices affect me and my job, where most of my profits go toward fuel prices, [since] I’m on the road most of my time. Please lower the gas prices so we can get more out of our earnings, to spend more on family needs. There is no reason to have such high gas prices.”
— Frank C., Rancho Cucamonga, California

“I am a self-employed courier. I work only part-time now, but the price of fuel for my car has a big impact on my business. You just don’t make as much. With high fuel, prices everything goes up in America. Were are an economy on wheels, as you can tell with all the over-the-road trucks out there today. Fuel affects almost everything and makes it much more difficult to earn a living.”
— Flip P., York, Pennsylvania

 

Related posts:

 

 

Missouri dad perfectly sums up the frustration of volatile gas prices

Recently we started asking Americans to share their stories about the true cost of unpredictable gas prices. We got an earful.

But out of all the dozens of submissions we received — some only a sentence, others full-on essays — perhaps no one expressed that collective frustration better than Troy Harper of Independence, Missouri.

Here’s what he wrote:

“I used to have a pickup truck [a green 1981 Ford F-series Explorer] with dual tanks. I could usually fill it up for about 30 bucks. That was back when I was in my early 20s, somewhere in 1993 or ‘94. I can remember complaining about the gas prices then. Oh, if only could only go back and warn myself about what was gonna take place in my future, I’d sink every penny I had into crude oil. Because from there on, fuel prices continually increased! Before long it was 3 bucks a gallon and beyond that. It never hit $4 a gallon for regular, but if you wanted mid-grade or super-clean, you were basically paying in blood.

“I got married and had a family, 1996-’97. We had two kids about four years apart. I worked a full-time job had to get a car in order to get around and get back and forth to work. We went on vacations and went to see our families and camped out and went fishing and to the drive-in theater all the time, when we could. But as fuel prices got higher and higher, those trips became fewer and fewer. With the price of fuel rising, the price of everything else rises: food, clothing, household necessities, everything.

“I drove a truck for a produce company [Original DeFeo Produce], locally … I delivered fruits and vegetables to grocery stores and restaurants. Diesel prices were ridiculous. The prices of our products were forever increasing, a fuel surcharge was eventually imposed on our customers, just to cover fuel prices. At almost 5 bucks a gallon it was becoming a huge problem. Our customers’ businesses were seeing less and less business, yet the prices kept increasing. I watched several of these businesses eventually close their doors for good. Even the company I was working for went out of business in March of 2013. It had been in business in downtown Kansas City, Missouri, for over a hundred years. It was family owned and had thrived for a long time, but with the economy bottoming out and our customers closing, it was inevitable. I like to believe that fuel prices played a major role in that factor. As it did in all our lives.

“Currently, the prices have been relatively cheaper. As of today, at a Shell station I saw it for $2.20 a gallon in Independence, Missouri. That’s much better, but I don’t know how long those prices will last.”

To learn what you can do about volatile gasoline prices, check out our Take Action page. Among the list of choices, watch the movie PUMP on DVD, instantly on iTunes or Amazon, or coming to a college

Here’s what Americans are telling us about the price of gas

We asked, and you delivered.

At the start of our “Share Your Story” campaign, Fuel Freedom Foundation sent out the call: Tell us how volatile gasoline prices, which peak and plunge without warning or explanation, affect your daily life.

We got dozens of responses, from all age groups and all regions of the country. Here are some of the best:

 

 “I would love cheaper gas prices, because my boyfriend and I share my van, and several days a week, I have to drive him to work, then go back home, run errands, or take kids to school, then go back and get him later. It takes a lot of gas to do that.”
— Eileen N., Selma, N.C.

“I can’t raise my wage whenever I want. It’s hard to budget when you know they will raise the price every week — just ’cause they can, I guess.”
— Tim H., Coldwater, Michigan

“Fuel prices are the only thing in my budget that I can’t consistently account for … it’s infuriating.”
— Manny L., Daly City, California

“My new granddaughter lives in Odessa, and I can’t afford to take my medications AND go to see her on my fixed income. Groceries and goods are transported to stores by truck, and higher fuel prices are passed on to the consumer by increased food and goods prices. My dollar isn’t worth as much with the higher fuel prices. If gas goes up to $4 a gallon again, I will barely afford food and clothing, much less any traveling to see my granddaughter. Our economy will suffer greatly if fuel prices don’t stabilize around $2 a gallon or less.”
— Gary S., Rowlett, Texas

“I spend about $300 to $500 a month in fuel. There are some months that we are struggling to pay for food. The trade-off is that the rent is cheaper the further you are from the city, but the gas is killing us.”
— Abe F.

“I’m on SSDI [Social Security Disability Insurance]. When fuel prices go up or stay high, it’s really simple to explain: I have less food to eat, and I might not be able to buy all my medicine. I have also had to cancel some appointments. Sometimes doctors have to be put off for a later date!”
— Steven D., Des Plaines, Illinois

“I drive a car with 40 miles to the gallon, and I am still struggling with gas prices. Especially soaring gas prices in Arizona. During the Super Bowl, gas prices dropped to $1.70 a gallon. It was such a stress relief having to pay $15 to fill up my gas tank for the week. But after that week was over, gas prices went up to $2.49 in just a week. It is unfair that big companies do this to people. I can’t even imagine how people live with bigger engines. Having to shovel $80 for a tank that lasts a week.”
— Thomas M., Phoenix

“Gas prices have kept me from seeing my brother, who is 75 years old and lives 240 miles from me. He won’t be around forever, but the jerks screwing us with high gas prices will. I hope they someday get judged on making travel for the retired so hard. They need to lose all their money and see what it’s like.”
— Calvin

We’ll be posting more responses over the next week or so. If you’re wondering what you can do about the unending rollercoaster of oil and gas prices, there’s plenty, so visit our Take Action page, where you can learn more about our mission to reduce oil consumption. You can sign our petition asking major fueling retailers, like Costco, to offer consumers alternative fuels.

Also, check out our companion site, which is all about the stupendously great documentary film PUMP.

Fake and real news: Links between GHG reduction and alternative fuels

FT-emissions-graphicTurn on your local news every night and you’ll need a sleeping pill to get some rest. The format and content is the same around the country: a lot of tragic crime — ranging from sexual harassment, robbery and shootings — for about ten minutes; local sports for about 5 minutes; what seems like ten minutes of intermittent advertising; silly banter between two or more anchors for two minutes; and a human-interest story to supposedly lighten up your day at the very end of the show — likely about a dog and cat who have learned to dance together or a two-year-old child who already knows how to play Mozart. You get the picture!

Local news, as presently structured, is not about to send you to sleep feeling good about humanity, never mind your community or nation. National news is really only marginally better. Again, the first ten minutes, more often than not, are about environmental disasters in the nation or the world — hurricanes, volcanoes, cyclones and tornadoes. The second ten minutes includes maybe one or two tragically laced stories, more often than not, about fleeing refugees, suicide bombings, dope and dopes and conflict. Finally, at the end of the program, for less than a minute or two, there is generally a positive portrayal of a 95-year-old marathon runner or a self-made millionaire who is now single-handedly funding vaccinations for kids in Transylvania after inventing a three-wheeled car that will never need refueling and can seat twenty-five people.

Maybe this is how the world is! We certainly need to think about the problems and dangers faced by our communities, the nation and its citizens. Every now and then, Americans complain about the media’s emphasis on bad news. But their complaints are rarely recorded precisely in surveys of viewership. We criticize the primary emphasis on bad news, but seem to watch it more than good news. Somewhat like football, we know it causes emotional and physical injuries to players, but support it with the highest TV ratings and attendance numbers.

Jimmy Fallon, responding to the visible (but likely surface) cry for more good news, has added a section to The Tonight Show. He delivers fake, humorous news, which is, at times, an antidote to typical TV or cable news shows. Perhaps John Oliver, a rising comedian on HBO, does it even better. He takes real, serious news about human and institutional behavior that hurts the commonweal and makes us laugh. In the process, we gain insight.

This week’s news about carbon dioxide emissions “stalling” in 2014 for the first time in 40 years appeared in most newspapers (I am a newspaper junkie) led by The New York Times and the Financial Times. It seemed like good news! Heck, while the numbers don’t reflect a decline in carbon emissions, neither do they illustrate an increase. Let’s be thankful for what we got over a two-year period (in the words of scientists — stability, or 32.3bn tons a year).

But don’t submit the carbon stability numbers to Jimmy Fallon just yet. It’s much too early for a proposed new segment on The Tonight Show called “Real as Opposed to Fake, Good News.” Too much hype could convince supporters of efforts to slow down climate change that real progress is being made. We don’t know yet. Recent numbers only reflect no carbon growth from the previous year over a 12-month period. The numbers might be only temporary. They shouldnt lessen the pressure to define a meaningful fair and efficient strategy to lower GHG. If this occurs, yesterday’s good news will become a real policy and environmental problem for the U.S. and the world for many, many tomorrows.

I am concerned that the stability shown in the carbon figures may be related to factors that might be short lived. Economists and the media have attributed the 2014 plateau to decreases in the rate of growth of China’s energy consumption and new government policies, as well as regulations on economic growth in many nations (e.g., requirements for more energy-efficient buildings and the production of more fuel-efficient vehicles), the growth of the renewable energy sector and a shift to natural gas by utilities.

Truth be told, no one appears to have completed a solid factor analysis just yet. We don’t really know whether what occurred is the beginning of a continuous GHG emission slowdown and a possible important annual decrease.

Many expert commentators hailed the IEA’s finding, including its soon-to-be new director, Dr. Fatih Birol. He indicated that this is “a very welcome surprise…for the first time, greenhouse gas emissions are decoupling from economic growth.”

Yet, most expert commentators suggest we should be careful. They noted that the data, while positive, is insufficient to put all our money on a bet concerning future trends. For example, Hal Harvey, head of Energy Innovation, indicated, “one year does not a trend make.”

Many articles responding to the publication of the “carbon stall” story, either implicitly or explicitly, suggested that to sustain stability and move toward a significant downward trend requires a national, comprehensive strategy that includes the transportation sector. It accounts for approximately 17 percent of all emissions, probably higher, since other categories such as energy use, agriculture and land use have murky boundaries with respect to content. Indeed, a growing number of respected environmental leaders and policy analysts now include vehicle emissions as well as emissions from gasoline production and distribution as a “must lower” part of a needed comprehensive national, state and local set of emission reduction initiatives, particularly,if the nation is to meet temperature targets. Further, there is an admission that is becoming almost pervasive: that renewable fuels and renewable fuel powered vehicles, while supported by most of us, are not yet ready for prime time.

While ethanol, methanol and biofuels are not without criticism as fuels, they and other alternative fuels are better than gasoline with respect to emissions. For example, the GREET Model used by the federal government indicates that ethanol (E85) emits 22.4 percent less GHG emissions (grams per mile) when compared to gasoline (E10). The calculation is based on life-cycle data. Other independent studies show similar results, some a higher, others a lower percent in reductions. But the important point is that there is increased awareness that alternative fuels can play a role in the effort to tamp down GHG.

So why, at times, are some environmentalists and advocates of alternative fuels at loggerheads. I suspect that it relates to the difference between perfectibility and perfection. Apart from those in the oil industry who have a profit at stake in oil and welcome their almost-monopoly status concerning retail sales of gasoline, those who fear alternatives fuels point to the fact that they still generate GHG emissions and the assumption, that, if they become competitive, there will be less investment in research and development of renewables. Yes! Alternative fuels are not 100 percent free of emissions. No! Investment in renewables will remain significant, assuming that the American history of innovation and investment in transportation is a precursor of the future.

Putting America on the path to significant emission reduction demands a strong coalition between environmentalists and alternative fuel advocates. Commitments need to be made by public, private and nonprofit sectors to work together to implement a realistic comprehensive fuel policy; one that views alternative fuels as a transitional and replacement fuel for vehicles and that encompasses both alternative fuels and renewables. Two side of the same policy and behavior coin. President Franklin Roosevelt, speaking about the travails of the depression, once said, “All we have to fear is fear itself.” His words fit supporters of both alternative fuels and renewables. Let’s make love, not war!

Bryce (NY Times) and ethanol: The whole truth and nothing but the truth

E85 pumpWhat’s up with the Manhattan Institute for Policy Research? While I often don’t agree with the scholars who write for it, I find its articles and books thoughtful and provocative.

My question concerning the Institute derives from a desire to build a now absent civil dialogue concerning policy issues affecting the U.S. The Institute, when a reasonably informed national dialogue on policy existed, was an important participant. Now, that it has been lost, the Institute’s agenda and body of work offers hope that it can be resurrected someday soon. In this context Robert Bryce’s article in today’s New York Times, “End the Ethanol Rip-Off” concerns me. His article is filled with factual and interpretative errors that skew his conclusions concerning the Renewable Fuel Standard (RFS).

Bryce asserts that corn ethanol is responsible for significant environmental problems particularly related to land use, harvesting and processing fuel. He also states that it generates higher food costs, and that it damages small engines. Finally, according to the author, ethanol’s price has been and is generally higher, much higher, than gasoline. The only thing he left out is that ethanol is the cause of global warming, the Israeli-Palestinian conflict, unemployment, the trial and tribulations of Miss America contests and bouffant hairstyles in Texas.

No fuel used now in America is perfect. Certainly, the DNA of gasoline, which Bryce seems to champion, is much more harmful to the environment, and the nation’s need to reduce GHG emissions. Gasoline use also reflects significantly more public health problems and continues the nation’s dependence on imported fuels.

Let me try to summarize some of the facts that Bryce overlooks or does not seem to know:

  1. Although a cleaner burning fuel, E10 (10 percent ethanol) blended with gasoline does result in a small energy content gap that requires a purchase of additional E10 gasoline to secure mileage equivalency. But, up until recently, the lower price of E10, compared to gasoline, has more than made up for mileage differentials and slowed down the upward trend of the price of gasoline and put downward pressure on prices.
  2. E85, which the author does not mention, has been approved by the EPA for certain vehicle classes. Like E10, its use does result in lower mileage per gallon when compared to gasoline and also results in more mileage per BTU. The mileage gap is lower than the gap that Bryce indicates in his article. Again, before the decline of gas prices , the gap was more than made up by the lower costs of ethanol and its’ increased efficiency.
  3. There is no real consensus on the food vs. fuel debate. The World Bank has changed its position on this globally over the years and the Congressional Budget Office (CBO) has suggested that if there is a negative effect on food, it is very minor. Indeed, while the food vs. fuel argument has not yet been settled, most experts agree that increased oil prices contribute to increased food prices. The food vs. fuel argument has reflected an “on the one hand, on the other hand” dialogue. Perhaps more relevant, particularly with respect to corn, there are land use and processing techniques now being introduced that would mitigate possible problems. Certainly, corn is not in short supply and the price of corn to the consumer has not spiraled up significantly.
  4. The author also neglects the fact that natural gas- and cellulosic-based ethanol (as well as other feedstocks) maybe on the horizon. Investors have delayed involvement, primarily because of uncertainty concerning the market and gasoline prices. Its advent will likely lessen food vs. fuel issues and help lesson environmental concerns.
  5. Bryce suggests that ethanol, (again, he refers to E10 in his article), has a negative effect on engines. Most of the independent analysis of the impact of ethanol on engines, E10 as well as E15 and E85, suggest differently. The EPA has approved the sale of each blend with certain vehicular limitations with respect to E 15 and E 85.

Bryce spends much time talking about the cost to the consumer of ethanol and the so-called ethanol tax. Curiously, given his location in the Manhattan Institute, he neglects to mention the significant cost to the consumer of the failure of oil companies to open up the gasoline market to alternative fuels like ethanol. Try going to a “gas” station to buy E85 or to charge your electric vehicle. Good luck finding one near your home or easily on a long trip. Through tough franchise agreements, oil companies eliminate competition around the nation. I suspect the imputed tax caused by the oil companies’ monopoly or almost-monopoly position is quite higher, much higher, than the tax that Bryce suggests results from ethanol use. The Institute should pay for a copy of Adam Smith and give it to the author.

Bryce’s article does not really contribute to a needed transparent debate over Renewable Fuel Standards or the wisdom of alternative fuels. It mixes up concepts and facts concerning energy content, car performance and efficiency. It sweeps over serious issues with respect to food vs. fuel and the environment with a broken brush or broom. Its conclusion concerning ethanol and implicitly other alternative fuels is inconsistent with his assumed anti-regulatory position and belief in the market place. We need such a debate, one that reflects a comparison between alternative fuels such as ethanol and gasoline as well as one that accommodates a needed transitional strategy between alternate and renewable fuels.

 

Photo Credit: East TN Clean Fuels Coalition

Ich bin ein Norwegian and Swedish — expanding open fuel markets

artI have been intensely involved in urban policy issues since the early sixties — that’s the 1960s, for those who are young. Once, I was at a conference with the late and wonderful mayor of Minneapolis, Art Naftalin. He was a dear and valued friend and colleague. I asked him why the Minneapolis St. Paul Metropolitan Metro area had given rise to more urban policy innovations than most other areas of the nation (including metropolitan delivery of services, tax-base sharing, etc.).

I expected the mayor to respond with something like, “Well we have good leaders,” or, “Our citizens care,” or, “We really do have a solid institutional structure,” or “The politics are ripe.” Without batting an eye, however, Mayor Naftalin— “Art” — looked at me and indicated, “It’s because we have more Scandinavians here.”

What an interesting answer! I queried the mayor on his response. He said, “It’s because folks who emigrated from Norway and Sweden came to the area with a strong sense of community and social conscience.” He added, laughingly, that the weather often “was so cold, and the environment in Scandinavia so tough, that [they] began life at an early age, assuming shared responsibility for taking in someone else’s wash, children, and caring for the community’s public good.”

I think that Mayor Naftalin’s comments about the impact of demography and community consciousness were interesting and, for Minneapolis St. Paul in the sixties, probably reasonable. Jumping to 2015, and the present political polarization of Washington and many states and communities, I have some “fabulistic” ideas. First, why not create an innovative Avis-Rent-a-Scandinavian program to encourage Scandinavian emigration. Involved immigrants would receive fast pathways to citizenship as long as they show strong involvement in community life and leadership. Second, why not organize Scandinavian leaders in communities in the U.S. that illustrate a vibrant, strong Swedish or Norwegian demographic? They could make wonderful facilitators and spread the word about community building. Third, why not grant subsidies to surrogate mothers who agree to bear a Scandinavian child for parents desiring Norwegian or Swedish children? All right, this one is only presented to wake you up! It will take too long a time to make a difference in population numbers. No genetic engineering here. (As an aside, the idea is akin to relying only or even primarily on renewable fuels at the present time to significantly reduce GHG and other pollutants, given the number of existing internal combustion vehicles.)

Again, this discourse seems to be right out of Peter Pan’s Neverland. But, bottom line, there is wisdom in Mayor Naftalin’s comments, particularly with respect to developing strong concepts of the public good to secure support for polices to increase use of alternative fuels, FFVs and open fuel markets.

Because of the media’s wall-to-wall coverage of what was, until two weeks ago, focused on declining prices of gasoline and often real-dollar savings to low- and moderate-income households, an opportunity to create a nonpartisan constituency for sustained lower-fuel costs probably now exists among America’s population, particularly among less-than-affluent folks and their advocates. So, let’s make everyone a bit Swedish or Norwegian.

But human memories are often short lived and if gasoline continues to rise over the next few months, our memory of nearly $2 dollar a gallon gasoline will likely be lost. How many remember when gas was only twenty-five cents a gallon? I do. Only because I ran out of money when I was 16 several times and had to cash in bottles to secure gasoline.

Seriously, a brief window exists to create a broad community or public interest coalition (e.g., government, business, environmental groups, national, state and community groups interested in helping low- and moderate-income people, etc.) to sustain lower fuel prices. The coalition’s agenda, if successful, would open up gas markets to competition from safe, lower-priced, environmentally better alternative fuels — natural gas, ethanol, methanol, electricity and other renewables. They are not perfect fuels, but they are better than gasoline. Let gasoline compete on an even playing field instead of being protected by franchise agreements between stations and oil producers as well as the present absence of equitable and efficient public policies. I bet by trolling computerized Yellow Pages, the coalition could find Swedes and Norwegians — or their counterparts throughout the population — to provide strategic local, state and, indeed, national leadership and support for alternative fuels. Or, better yet, we all could become, in Mayor Naftalin’s terms, Scandinavian. Paraphrasing President Kennedy, “Ich bin ein Norwegian, Swedish.” Yes, we can! Instead of “drill baby drill”, let’s substitute “alternative fuels grownups alternative fuels!”