Worst Energy Ever: Ethanol Subsidy a $10 Billion Tax - EIA


Highest Production Of Lowest Quality Fuel In The World 

via srsroccoreport.com

Yes, it’s true… the United States smashed another fuel production record this year.  According to the U.S. Energy Information Agency (EIA), the country produced over one million barrels per day of this liquid fuel in the first six months of 2017.  Unfortunately, this isn’t something to brag about.  It would be wise just to keep this lil record to ourselves, rather than broadcast it loudly across the energy news wires and Mainstream media.

Why do I say that?  Because the U.S. produced a record 1.02 million barrels per day of corn-based ethanol, the lowest quality fuel in the world.   Corn ethanol’s EROI – Energy Returned On Invested is so low, it barely provides one net barrel of fuel to the market for one barrel worth of energy that it took to produce it.  I get into that in a moment, but let’s look at U.S. ethanol production since 2010:

U.S. ethanol fuel production was 870,000 barrels per day (bd) in 2010, fell to 852,000 bd in 2013 and then continued to increase to a new record of 1.02 million bd in the first six months of 2017.  We must remember, corn ethanol is blended into gasoline which is called “E10.”  All E10 means is that the gasoline you buy at the pump can be blended up to 10% with ethanol.

Americans consumed the majority of domestically produced corn ethanol as it was blended into the 9.3 million bd of motor gasoline we burned in 2016 (EIA).  Actually, it works out quite nicely as 10% of 9.3 million bd or motor gasoline equals 930,000 bd of ethanol.  According to the EIA, the U.S. exported 68,000 bd of ethanol in 2016… which is very close to the total 990,000 bd of U.S. ethanol production last year.

Okay, so we are producing one hell of a lot of corn juice to power our vehicles… what does that really mean?  It means that we are consuming approximately 40% of our domestic corn crop to produce 10% of our motor gasoline supply.  In the article, Trump’s Support For Ethanol Is Bad For Taxpayers & Their Cars:

And the federal government not only requires the use of ethanol; it also subsides it. Tax credits between 1978 and 2012 cost the Treasury as much as $40 billion. Moreover, numerous other federal programs, spanning multiple agencies, allot billions of dollars to ethanol in the form of grants, loan guarantees, tax credits, and other subsidies.

Taxpayers suffer in other ways, too. Vehicles can drive fewer miles per gallon using ethanol blends than they would with pure gasoline. So Americans end up spending an extra $10 billion per year for fuel, the Institute for Energy Research estimates.

Ethanol also guzzles 40 percent of the U.S. corn crop, and the resulting scarcity drives up the price of food. This year alone, the Congressional Budget Office estimated, American consumers will spend $3.5 billion more on groceries because of the ethanol mandate.

As the article states, Americans pay an extra $10 billion a year for E10 fuel, because ethanol has a lower energy content.  Basically, a gallon of ethanol has two-thirds the energy content of a gallon of pure motor gasoline.  Furthermore, the EPA says that fuel efficiency can decrease by 1.5-3% (or even higher) using ethanol blended gasoline.

When we add up the negatives of ethanol, why are we wasting 40% of our corn crop to produce a fuel that has a lower energy content and costs Americans more money to drive down the road?  That’s a good question.  Unfortunately, it gets even worse.

If we look at the chart below which lists the different U.S. Energy EROI – Energy Returned On Investment ratios, corn ethanol is ranked DEAD LAST:

According to different sources I found on the internet, corn-based ethanol has an EROI of 1.8-2/1.  That means, for each barrel’s worth of energy burned to produced corn ethanol, the market receives a profitable 0.8-1 barrel of fuel.  On the other hand, soybean based biodiesel is closer to an EROI of 3/1.  Thus, soybean biodiesel supplies about 2 profitable barrels of fuel for the energy cost of 1 barrel.

NOTE:  In the original table above, biodiesel was ranked lowest, while ethanol corn was second lowest.  I switched them because new research shows that soybean biodiesel has a higher EROI than corn-based ethanol.

In a nutshell, the U.S. is burning good quality oil and natural gas to produce the lowest quality fuel on the planet.   This is as moronic as turning GOLD into LEAD.  But, the insanity doesn’t stop there.  In a Zerohedge article, Farmers Set To Receive $7 Billion In 2016 Subsidies – 10% of Income:

The USDA has announced it will pay $7 billion in “Agriculture Risk Coverage” and “Price Loss Coverage” (aka “subsidy”) payments to farmers this year as prices for most agricultural products, particularly corn, have remained depressed.  At $7BN, subsidy payments will be equal to roughly 10% of the USDA’s forecast for aggregate farm income in 2016.  Farm subsidies this year are up 35% versus the $5.2BN paid under the ARC/PLC programs last year.

You will notice that the corn farmers received $3.7 billion in subsidies in 2015.  This was 71% of total $5.2 billion in farm subsidies that year.  If we assume that the Federal Government was going to pay $7 billion in 2016, than approximately 70% of that $7 billion for the corn farmers would be nearly $5 billion.

Now, if we also assume that corn ethanol consumes 40% of the U.S. corn crop, then 40% of that $5 billion subsidy, or $2 billion went to subsidize corn ethanol production last year.  Of course, this is just an estimate, but at least it gives us a ball park figure.

Here is the ranking of top Global Ethanol producers in 2016:

United States = 15.3 billion gallons

Brazil = 7.3 billion gallons

European Union = 1.4 billion gallons

China = 845 million gallons

Canada = 436 million gallons

Thailand = 322 million gallons

Argentina = 264 million gallons

India = 225 million gallons

I would like to remind my readers that the modern U.S. economy needs at least an 12-15/1 EROI of its energy-fuels to maintain business as usual.  With corn-based ethanol coming in at a whopping 1.8-2/1 EROI, we must be completely insane to be producing 1+ million barrels a day of this fuel.

Unfortunately, it seems like the BRAIN DAMAGE is spreading far and wide here in the Good ‘ole U.S. of A.  At some point, money printing won’t be able to solve…. STUPIDITY.  So, I say… enjoy the ride while it lasts.

IMPORTANT NOTE:  Thanks To Those Who Decided To Support The SRSrocco Report Site

I wanted to thank everyone personally who decided to support the SRSrocco Report site by becoming a Member on the site, or a PATRON at my new Patron page.  I really appreciate the kind and generous donations, memberships and new PATRON subscribers.

As I mentioned in my previous article, the reason I decided to start the MEMBERSHIP and PATRON page was to be able to spend more time providing additional articles and reports for my followers.  Currently, there are 47 PATRONS supporting the SRSrocco Report site.  Again, I want to thank everyone for supporting.

My ultimate goal is to reach 500 PATRONS.  However, it would be something else to first reach that 100 PATRON goal.  If you have been following the SRSrocco Report site and enjoy the research and work or find value in the articles and reports, please consider pledging $1 or more a month at my new PATRON page.

If you would like to support the SRSrocco Report site, please check out the information below.



let my followers know that I will have a new SRSrocco Report Patron page and a new MEMBERSHIP page to the site as well.  I wrote about this a few weeks ago when I mentioned that the SRSrocco Report site is not a paid or subscription site.  Rather, I try to put out original content every week not found on any other website.  For example, there isn’t another site on the internet that provides the actual data of record Australian gold exports to China.

As I mentioned previously, I fund the site through the donations of a handful of generous supporters and Google Ad revenue.  However, a good portion of those funds go just to maintain the site.  I would like the ability to spend more time researching and writing articles and reports for the SRSrocco Report site, but would need more financial support from my followers to do so.

Many sites such as the SGT Report, James Kunstler and the Corbett Report have Patron pages and Patron supporters.  Please click on those links and check out the numbers of Patron supporters.

IMPORTANT NOTE: Please understand, you don’t have to spend a lot to support the SRSrocco Report site.  There is a selection on my Patron Page to pledge $1 a month, which is $12 a year.  If a portion of my followers (10,000+ a day) were to support the minimum amount, this would be a great help in allowing me to continue working on the site as well as provide a greater amount of articles and reports.

Furthermore, many websites publish entire articles and content from the SRSrocco Report site for their benefit of their readers.  If you are a website that publishes my work or an institution or large investor that receives value for the content on the SRSrocco Report site, please also consider supporting my work by selecting one of the higher Membership levels on my new SRSrocco Report Patron Page.

Lastly, there are very few sites that analyze PRECIOUS METALS, MINING, ENERGY and the ECONOMY the in-depth, Connect-The-Dots sort of way we do at the SRSrocco Report site.  It is for this reason, I ask that you consider supporting the SRSrocco Report site.  Again, you do not have to pledge a lot to support the site.

My goal is to reach 500 PATRON SUPPORTERS.  By reaching that goal, I would be able to produce a greater number of articles and reports with more detail and information.

So please consider supporting my work on Patron by clicking the image below:

Read more by Soren K.Group