Guest Post by Eric Peters
You can’t just sell gas anymore.
Most people don’t realize it, but what they’re pumping into their car’s tank isn’t actually gasoline, properly speaking. It’s gasoline mixed with ethanol alcohol – the ratio currently set at 10 percent ethanol and 90 percent gas (E10).
“Diesel” often isn’t exactly diesel, either.
The real stuff – the petroleum-based stuff – is mixed with bio-diesel, which is derived (like ethanol) from non-petroleum sources, usually vegetable matter.
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The market isn’t demanding this – but the government is.
There is a law called the Renewable Fuel Standard. It requires the “blending” of oceans of corn con ethanol and biodiesel boondoggle into the general fuel supply – ostensibly, to reduce America’s dependence on foreign (and non-renewable) oil.
Like so much that government does, it sounds good – but what it actually does isn’t so good.
The RFS has raised refining and distribution costs as well as the cost to motorists, who not only pay more for the Uncle-adulterated fuel but also for the fuel systems in their vehicles, which have had to be modified to be compatible with the not-quite-gas (and sort-of diesel) fuels the government is pushing.
These adulterated fuels are also – ironically – less efficient. A gallon of pure gas will take you farther than a gallon of 90 percent gas and 10 percent ethanol because the gallon of gas contains more energy than a gallon of E10.
As is almost reflexively true of everything the government mandates, we get less – and pay more for it.
But that doesn’t mean someone’s not making a buck – as is also usually true when government intervenes in the market.
In addition to the Usual Suspects – the ethanol lobby, for instance – there is a another group of crony capitalists making hay off the RFS mandate. These are the large refiners and chain gas stations, who can leverage – in the lingo of the federal bureaucracy – Renewable Volume Obligation (RVO) credits to gain an unfair competitive advantage over smaller refiners and independent gas stations.
To understand how this works requires a bit of semantic deconstruction.
The RFS mandate requires a certain volume of “renewable” fuel be produced each year and injected into the general fuel supply. But it does not require that every refiner or fuel wholesaler/distributor actually produce a given volume of it themselves.
They may purchase tradable credits instead – and use these to satisfy the RVO.
It works very much like the “carbon credit” con – which that obliges car companies who want to be allowed to sell conventional cars in states like California to either invest huge sums designing and building electric cars that they can’t sell . . . or buy credits from a company that builds only electric cars – like, for instance, Tesla. These credits are considered, for regulatory enforcement purposes, the equivalent of actually having manufactured the required number of electric cars. Tesla makes a fortune selling carbon credits to other car companies – which are basically forced to subsidize his business at the expense of their own.
The RVO works on the same model.
Each refiner/wholesaler is assigned a production quota for renewable fuels very much like the one used to extort car companies into either building electric cars – or buying credits from a company that does build them.
A refiner/wholesaler can achieve compliance by meeting its RVO “in house” – by making or mixing its own renewable brew – or by purchasing credit for what they didn’t actually produce (or introduce into the fuel supply) from a refiner/wholesaler who did.
In both cases, it’s effectively legalized extortion, another government-mandated racket.
The larger refiners/wholesalers – who have economies of scale in their favor – have been using the RVO as way to strong-arm their smaller rivals. They are able to manipulate the price of the renewable fuels, underselling their smaller rivals, who cannot afford to sustain the losses – or compelling them (via the RVO) to buy credits from them at inflated prices.
Consumers, meanwhile, pay more for the adulterated/renewable fuel – which takes them less far per gallon as an additional kick in the keister.
It is important to keep in mind that all of this is artificial – not the supply and demand forces of a free market, working to the advantage of everyone. It is a colossal rent-seeking rip-off that uses legislated “demand” to distort the market for the profit of crony capitalists – whether they are of the Elon Musk variety or the Renewable Fuels variety.
It’s so lousy with price-fixing and outright fraud that even the former head of the EPA’s Criminal Investigation Division, Doug Parker, has called for a major overhaul of the entire architecture of the RFS mandate. Now in the private sector, Parker wrote a white paper last fall (here) detailing the systemic problems.
When a high EPA muckety-muck concedes there is a problem with a regulatory fatwa, it is a sure sign there’s a big problem.
There is nothing wrong with the idea of renewable or alternative fuels. That’s not what’s at issue here. The issue is using a good idea to camouflage and justify a rent-seeking rip-off, another crony capitalist con.
When I read articles like this, I come to the ongoing conclusion that the ‘system’ is so hopelessly broken, that if Trump wanted to be a good President, almost historical, he would just literally do everything he can to keep throwing monkey wrenches in the ‘system’ until it simply just breaks under it own rotten edifice. Period. I doubt there is any reform possible at this point. There are just simply too many parasites in the current one. When the parasites overtake the host, it is simply prudent to let the host succumb, and then start over. We are at that point in our ‘capitalist’ system. The only thing capitalist about our economic system now, is that it is being run by the thieves in each state’s capitol. Beyond that, there is nothing resembling free market capitalism anywhere. I was hoping, like I do every time there is a potential ‘government shutdown’ that the theater of the absurd we all have to endure will actually result in a real shutdown. Then I sober up, and realize it is nothing more than drama and something similar to the old PBS fundraisers they would have every year espousing that ‘public broadcasting’ will shut down if you don’t call in your gift. Of course, I can’t refuse to ‘give’ . Amazingly, 30 years later, PBS is still on the air, and the government ALWAYS manages to ‘pass a bill’ to keep the crony assholes employed. Because, the reality is, if they actually shut it down, it would mean a real end to their strip mining operation of our production and property. Sad.
“if Trump wanted to be a good President”
That’s one big fuckin ‘if’. It’s kind of like the Mount Rushmore of ‘ifs’.
I worked in Diesel fuel injection at Bosch for commercial engines in quality control. Bio-diesel clearly led to fowling and deposit build ups in the finely ground surfaces, which move relative to each other like the nozzle body and the nozzle holder and the valve set. We are talking clearances of a few micros (0,001 mm). We rejected warranty claims all the time since there were tell tale signs of Bio-diesel fuel use. The most common failure was for the needle to seize as the deposits slowly filled the gap of the sliding surfaces. When you are talking 2-3 micros, it does not take much to fill that in.
Some trucks had dual tanks. They would drive on bio-diesel and switch takes to petroleum based diesel to flush the system since the bio-diesel deposits tended to form when things were not moving. But often the trucker forgot to flush the system before he stopped and the system still eventually failed.
Normally very the high pressure of a common rail system will break it free Normally you do not get a very high diesel pump starting pressure at start (low rpm’s) so the lower pressure will not overcome the deposits hindering the needle movement needed for injection. It won’t inject fuel and therefore the engine will not start.
As far as petroleum is concerned, the US is playing a game.
The game is called, The Last Country To Have Extractible Petroleum Wins.
No one wins in the oil age. The geopolitics almost guarantee the demise of all counties dependent on it. The Amazon and Australian aborigines will be the winners. That’s assuming we don’t resort to nuclear war, which is a high possibility.
You sound like JHK with the end of oil thing. Give it up.
Saudi Arabia has 70 years of oil left if they pump at a constant rate. They have the most conventional oil by far. Most other oil producing countries have a lot less. It is mathematical certainty that the “end of oil” is in the not to distant future. Keep your head in the sand Luvy.
Critical thinking is tough. I get tired of JHK too, but his main message is spot on.
http://money.cnn.com/2016/09/08/investing/apache-huge-oil-discovery/index.html
Is there a product to add to diesel fuel to minimize the sticking caused by the bio-diesel?
Eric is absolutely right about this topic.
I live in midwestern corn/soybean country. There are ethanol refineries (corn) everywhere, and bio-diesel (soy) refineries here and there. I know people that work at these plants. They are considered some of the ‘good jobs’ to be had.
You would not believe the size of the piles of grain that these operations consume. They ship rail tank cars of product by the train load. Trains are huge!
Corn is food! Soybeans are food! How fuckin’ hard is that to understand?
What a colossal fuckin’ mess!
I hope everyone enjoys Hardscrabble Farmer’s maple syrup, and the agricultural sanity that it represents.
The bio-fuels program like section 8 rental vouchers sounds like a positive thing for the country all the hype from the K-Street ,Wall Street & Capitol Street whores have us believing what a grand benefit we will all enjoy !
What all these programs are is welfare programs for private investors and businesses that now play in a false protected market at the cost and demise of legitamate concerns and real unconnected and unprotected business . These wealthy players will ridicule a welfare queen with a rent voucher and and an EBT card but gladly cash that taxpayer funded check for a property that under normal market enviorment they would not piss on if it was on Fire but with a federal section 8 voucher that triples the rent or more WOW Mr.Landlord becomes a benevolent investor preventing urban blight and of course the local government enjoys the protected tax base on what would have been a boarded up crack den ! Just like electric cars if they are so ready for prime time they would not need taxpayer help ! Let’s not forget the royal EPA cock ramed into VW Diesel for just finding a way around the impossible mandated from idiots that would not understand engine efficiencies and fuel if it were stapled to their libtard retard forehead !
So any welfare cuts should start at K-Street and Wall Street oh and let’s not forget the largest pig trough of all the pentagon
Methanol is a superior fuel to ethanol and can be made from cow farts, rotting landfill gas, coal or natural gas. Less than a buck a gallon with no subsidies. China uses it instead of ethanol in fuel.
Corn is what an idiot would use to make ethanol. Sugar beets produce six times as much per acre. Sugar cane produces ten times as much.
Our government in action.
Most ethanol plants are next to CAFO’s. They feed the by-products of ethanol production to cows that can’t move and have to be fork lifted to the slaughter house. Enjoy your rib-eye. Or buy some grass fed organic beef from hsf and shoot a deer.
“The average U.S. automobile, traveling 10,000 miles a year on pure ethanol (not a gasoline-ethanol mix) would need about 852 gallons of the corn-based fuel. This would take 11 acres to grow, based on net ethanol production. This is the same amount of cropland required to feed seven Americans”.
http://news.cornell.edu/stories/2001/08/ethanol-corn-faulted-energy-waster-scientist-says
“These adulterated fuels are also – ironically – less efficient. A gallon of pure gas will take you farther than a gallon of 90 percent gas and 10 percent ethanol because the gallon of gas contains more energy than a gallon of E10.”
Peters doesn’t take this explanation far enough. In my experience during the transition from regular to E10 with a 2008 Corolla and a 2011 Elantra (biggest POS car I’ve ever owned) I got 15-18% better mileage from regular gas than from E10 – that’s right, I could go farther on 9 gallons of regular than I could on *10* gallons of E10. Everythign else being equal, adding that ethanol leads to an INCREASE in petroleum consumption.
This concept, like the concept of private central banks creating money and lending it to governments when the government could simply create the money themselves interest-free, is so completely irrational that people can’t even contemplate that it could be a possibility, let alone reality.
Another factor in all of this is the sheer amount of chemicals and fertilizers needed to raise all that corn… and they all use petroleum. Yes, that’s right…. we want to use less petrol so we raise a crap load of corn that needs petrol to grow it…. more Big Government & Big Industry logic!!!