The Federal Flex-Fuel Corn Lobby Fraud

CORNY FLEX-FUEL BULL***

Updated:2006-08-20 11:53:38
Flex-Fuel Fallacy
By ERIC PETERS

The sticker looks mighty tempting -- a full-size, seven-passenger SUV
with a V-8 engine rated at a hybrid-like 33 mpg!

Too bad it's a sham.

Unfortunately, the shuck and jive isn't well-known, or apparent to
consumers -- who might be gulled into believing they're helping cut
down on energy consumption (and saving the planet to boot) when in fact
all they're doing is supporting the latest government boondoggle for
the benefit of the politically powerful ethanol lobby.

Here's how it works:

Under the cover of promoting "renewable" energy, the federal government
has put into place a loophole in its Corporate Average Fuel Economy
(CAFE) requirements -- which require the automakers to achieve a "fleet
average" of 27.5 mpg for cars and 21.5 mpg for trucks or face so-called
"gas-guzzler" taxes that are passed on to the consumer. This loophole
distorts the truth about a vehicle's actual mileage capability -- but
only if it's a vehicle made to run on either gasoline or a
gasoline-ethanol blend known as E85.

Such "flex fuel" vehicles are credited with much higher
miles-per-gallon capability than they actually get -- on the theory
that when they burn E85 (which contains 85 percent corn alcohol and 15
percent gasoline) they are using less gas. Thus, a full-size, V-8
powered SUV like the GMC Yukon is rated at 33 mpg for CAFE purposes --
higher than the current passenger car CAFE minimum of 27.5 mpg -- when
in fact it only gets 15 mpg in city driving and 20 mpg on the highway,
according to the EPA (which is just below the 21.5 mpg minimum mileage
for trucks and SUVS under current CAFE rules).

The E85 Yukon and vehicles like it get even lower mileage when running
on fuels containing large concentrations of ethanol -- since
alcohol-based fuels contain less energy per gallon equivalent than
straight gasoline.

What Do You Think?

As a result of this loophole, GM, Ford and other automakers have been
given a strong incentive to build large numbers of E85-burning
"flex-fuel" vehicles -- vehicles which might not make the CAFE cut
otherwise and thus be less economic to produce because of "gas guzzler"
taxes that jack up the price of a given vehicle by as much as $1,000 or
more.

But the idea is to create market demand for the heavily-subsidized
ethanol industry -- not produce more fuel-efficient vehicles. According
to a NY Times piece by Thomas Friedman, the E85/CAFE loophole
"increased U.S. oil consumption by 80,000 barrels per day in 2005
alone." GM has built some 2 million flex-fuel vehicles -- many of them
large trucks and SUVs that would otherwise be subject to gas-guzzler
fines, absent the clever accounting tricks.

The ethanol lobby has also been aggressively pushing its product on the
supply end -- via a proposal that's been floated in Washington to
require E85/ethanol pumps be installed at service stations -- in
effect, forcing oil companies to subsidize the product of a direct
competitor. (And of a product that is itself already heavily subsidized
on multiple levels.) Stations would have to invest in new tanks/pumps
and so on -- much if not all of it on their own nickel.

It would be the equivalent of mandating that McDonalds sell Wendy's
burgers -- or that Ford dealers set aside a portion of their new car
lot to sell GM vehicles. Pretty nutty, And that's at odds with basic
principles of a free market. Why should gas stations (or anyone else)
be compelled to sell a product they might not want to? In particular,
one that is produced by a rival industry which already benefits from
generous government protection?

This, however, seems to be the only way the ethanol lobby can do
business in this country -- a consequence of the fact that E85 costs a
relative fortune to make, uses oil in its production (everything from
the petroleum-sourced fertilizers used to grow the corn to the plants,
trucks and other infrastructure involved) and contains less energy per
gallon equivalent than still-cheaper regular unleaded. These factors
have rendered it a tough sell on the free market.

But the free market is not what the ethanol lobby is interested in.

E85 may have a role to play in reducing this country's dependence upon
foreign oil. But it shouldn't be oversold, let alone forced down our
throats -- or given special loopholes that encourage circular results
such as the production of large numbers of especially fuel-inefficient
vehicles like "flex fuel" SUVs and pick-ups.

GM's Vice President of Global Communications, Steven J. Harris, says
that "we can significantly reduce the amount of oil we use right now"
by driving E85/flex-fuel vehicles -- but such Enron-esque fuzzy math
CAFE accounting doesn't take into account all the oil and energy that's
burned up along the way.

Whether it's burned up in our tanks -- or burned up to get our tanks
full -- the end result is the same.
~~~~~~~~~~~~~~~~~~~~~~~~~
Updated:2006-08-16 14:09:17
Food or Fuel
One tankful of the latest craze in alternative energy could feed one
person for a year
By LESTER BROWN

(Fortune Magazine) -- The growing myth that corn is a cure-all for our
energy woes is leading us toward a potentially dangerous global fight
for food. While crop-based ethanol -the latest craze in alternative
energy - promises a guilt-free way to keep our gas tanks full, the
reality is that overuse of our agricultural resources could have
consequences even more drastic than, say, being deprived of our SUVs.
It could leave much of the world hungry.

We are facing an epic competition between the 800 million motorists who
want to protect their mobility and the two billion poorest people in
the world who simply want to survive. In effect, supermarkets and
service stations are now competing for the same resources.

This year cars, not people, will claim most of the increase in world
grain consumption. The problem is simple: It takes a whole lot of
agricultural produce to create a modest amount of automotive fuel.

The grain required to fill a 25-gallon SUV gas tank with ethanol, for
instance, could feed one person for a year. If today's entire U.S.
grain harvest were converted into fuel for cars, it would still satisfy
less than one-sixth of U.S. demand.

Worldwide increase in grain consumption
More From CNNMoney

The U.S. Department of Agriculture reports that world grain consumption
will increase by 20 million tons this year, roughly 1%. Of that, 14
million tons will be used to fuel cars in the U.S., leaving only six
million tons to cover the world's growing food needs.

Already commodity prices are rising. Sugar prices have doubled over the
past 18 months (driven in part by Brazil's use of sugar cane for fuel),
and world corn and wheat prices are up one-fourth so far this year.

For the world's poorest people, many of whom spend half or more of
their income on food, rising grain prices can quickly become life
threatening.

Once stimulated solely by government subsidies, biofuel production is
now being driven largely by the runaway price of oil. Many food
commodities, including corn, wheat, rice, soybeans, and sugar cane, can
be converted into fuel; thus the food and energy economies are
beginning to merge.

The market is setting the price for farm commodities at their
oil-equivalent value. As the price of oil climbs, so will the price of
food.

In some U.S. Cornbelt states, ethanol distilleries are taking over the
corn supply. In Iowa, 25 ethanol plants are operating, four are under
construction, and another 26 are planned.

Iowa State University economist Bob Wisner observes that if all those
plants are built, distilleries would use the entire Iowa corn harvest.
In South Dakota, ethanol distilleries are already claiming over half
that state's crop.

The key to lessening demand for grain is to commercialize ethanol
production from cellulosic materials such as switchgrass or poplar
trees, a prospect that is at least five years away.

Malaysia, the leading exporter of palm oil, is emerging as the biofuel
leader in Asia. But after approving 32 biodiesel refineries within the
past 15 months, it recently suspended further licensing while it
assesses the adequacy of its palm oil supplies. Fast-rising global
demand for palm oil for both food and biodiesel purposes, coupled with
rising domestic needs, has the government concerned that there will not
be enough to go around.

Less costly alternatives

There are truly guilt-free alternatives to using food-based fuels. The
equivalent of the 3% of U.S. automotive fuel supplies coming from
ethanol could be achieved several times over - and at a fraction of the
cost - by raising auto fuel-efficiency standards by 20%. (Unfortunately
Detroit has resisted this, preferring to produce flex-fuel vehicles
that will burn either gasoline or ethanol.)

Or what if we shifted to gas-electric hybrid plug-in cars over the next
decade, powering short-distance driving, such as the daily commute or
grocery shopping, with electricity?

By investing not in hundreds of wind farms, as we now are, but rather
in thousands of them to feed cheap electricity into the grid, the U.S.
could have cars running primarily on wind energy, and at the gasoline
equivalent of less than $1 a gallon.

Clearly, solutions exist. The world desperately needs a strategy to
deal with the emerging food-fuel battle. As the world's leading grain
producer and exporter, as well as its largest producer of ethanol, the
U.S. is in the driver's seat.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Jan Eric Orme
"Always drink upstream from the Corn Lobby herd."

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