if you were to extrapolate points for $20, $10, and $0 oil, it becomes apparent that somewhere around 40% of America's total trade deficit stems solely from imported oil.





if you were to extrapolate points for $20, $10, and $0 oil, it becomes apparent that somewhere around 40% of America's total trade deficit stems solely from imported oil.




So it actually makes economic sense for the government to spend $200+ billion dollars a year on alternatives?
Who'd of thunk it.





well, not exactly. $200 billion would have paid for somewhere around 40% of last year's oil imports. But in exchange for that $200 billion in gov't subsidies, all we basically accomplished was the substitution of Ethanol for MBTE as a fuel additive with little or no net effect on the negative oil trade balance (but a positive effect on the profits of US ethanol companies and US corn farmers), plus a few gov't grant funded experimenters and researchers cooking up synthetic diesel, hydrogen etc. demonstration projects that aren't economically viable even with the gov't subsidies. Also, the diversion of corn from export as a food to domestic consumption as a refinery feedstock potentially puts $20 billion dollars worth of future annual POSITIVE trade balance at risk (along with the tortilla supply of Mexico !).
MBTE was about reducing oil pollution (and increasing water supply pollution.)
If it is a choice between MBTE and Eth I would go for Eth anyday!
Anything this far reaching will need some government assistance - consider for example - the internet!





^^^ yes, but ... in the early 90's the US gov't poured a lot of money into tax incentives and subsidies for coal liquification and other alternative energy pursuits. These got off to a strong start based on the lure of profitability due to the existance of the gov't subsidy money as well as a historically high price for oil. But when the price of oil dropped and the gov't trimmed the federal budget and eliminated the subsidies 2-3 years later, all of the alternative energy activities came to an abrupt halt because they were not profitable in and of themselves.
Ethanol based on corn technology clearly is not profitable in and of itself. This is the reason that the US gov't has enacted a 50 cent per gallon tariff as well as import quotas on imported sugar cane based ethanol. This is also the reason that fed and state gov'ts are handing out tax incentives and grant money to private businesses for the purpose of constructing new ethanol refineries. Without the gov't money, any bank with 1/2 a brain would deny an ethanol refinery construction loan because it knows that the future profitability is 100% dependent on the continuation of US gov't policies keeping up subsidies and keeping out less expensive foreign imports.
If the gov't wanted to ban MBTE fine no problem. But spending billions of dollars in tax money on corn farmers and private refinery developers, in addition to forcing every American to pay a 50 cents per gallon higher price for US ethanol vs Brazilian ethanol (= an extra 5 cents per gallon on E90 blended gasoline), with the expensive side effect of raising the price of corn and virtually every other food staple to boot, seems like the height of economic blunder.
Of course the 'tin foil hat' crowd would tell you that the reasoning behind US corn based ethanol are much more Machiavellian ...
!





Well, consider what it would mean to other US industries if the same sort of subsidies and protections were enacted by US lawmakers to cover the product they produce. For example the 51 cent/gallon tariff on imported ethanol (actually taking the form of an excise tax rebate that US producers receive but foreign producers don't receive) vs an average US ethanol price of about $2.00 amounts to a 25% markup at the US border on foreign produced ethanol that would sell for $1.50 outside the USA. If this were applied to the auto industry it would translate into about $5,000 in tariff being added to the basic $15,000 price of an imported car sold in the USA to put the purchase on an equal footing with a US produced car selling for $20,000. However, because of lower offshore production costs (which for Brazilian sugar cane ethanol are reputed to be around 75 cents/gallon), a 25% tariff alone is insufficient to stop foreign imports from underpricing US producers.That shit is out of control.
To further protect US producers, the US gov't has also enacted percentage based import quotas on sugar cane based ethanol, which I believe limits the amount of imported ethanol to 10% of the amount produced domestically (2 years ago it was 7% but I think that this was increased). In the automotive equivalent, a similar quota would limit the number of imported cars allowed across the US border to 10% of the number of cars sold by US auto producers - effectively guaranteeing 90% of the US market to US producers regardless of the actual production cost / sale price of their product.
And then we get to the gov't subsidies to the US producers. This is difficult to quantify since it takes the form of farm subsidies, state and local grant money to ethanol refiners, tax abatements etc. The USDA admits that the farm subsidies amount to another 18 cents per gallon, with an equal contribution from state and local grant money and tax abatements being a reasonable guess as well. Thus on a $2.00 gallon of ethanol, the producers receive a 36 cent or 18% subsidy from the public treasury. For the auto industry equivalent, this would amount to gov't subsidies, grant money and tax abatements from the public treasury to the US automakers worth $ 3,600 for every $20,000 car produced in the USA.
and for stats
and best of all
(snip)"U.S. corn growers claim that they could possibly produce 15 billion gallons [of corn based ethanol - sic] in a decade. Brazil seems ready and able to export another 15 billion gallons [of sugar cane based ethanol - sic] at $1 per gallon."(snip)
.
Last edited by Melonie; 02-08-2007 at 05:22 PM.
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