Tuesday, April 29, 2008

Food, Fuel and Bio-fuel, Part 1

To hear the news, one would think the end of the world is drawing nigh... gas prices soaring, food prices out of control (and even rationing?), Jihad around the world threatening to eradicate our way of life, "politics of personal destruction" rampant (gotta love that one), and insane leaders -whose names are so easy to make fun of - insisting on nuclear technology. Sounds almost like a recipe for... oh, I don't know... disaster?

Up to this point, I've just watched what's going on and shook my head. I've had a semi-firm belief that the President of the United States doesn't have much control over soaring gas prices, unless you're talking to me about the Carter administration and then I seem to think he was the cause of soaring gas prices back then. I am fully aware that these beliefs make no sense together, but I have not had the inclination to research enough to figure things out, so the beliefs have always just stuck there in the back of my mind. 

I recently had a friend write to me, asking me to blog on the gas prices as well as the food shortages and how I think it will all affect the election this year. Never being one to back away from a challenge, I put some effort into understanding current events as relates to fuel. Even with the effort I've made, I must admit to feeling somewhat kerflumoxed... but I'll do the best I can here.

Gasoline prices are affected by many factors. Too many to list them all here - and too many for me to understand in a short period of time. Keeping it simple, the cost of basic gasoline is broken down into the cost of crude oil, refining, distribution and marketing, station mark-up and taxes. 

The price of crude oil rises and falls. A year ago, the price per barrel was around $65.00. This year in January, crude oil hit $100.00 per barrel for the first time. It is now at $118.75 per barrel. From what I've been able to read, the price of oil is soaring in part because of new demand. However, crude oil prices are only a small fraction of what is driving our gas prices higher at the pump. 

Every spring and summer, the price of gasoline goes up. One might assume that the oil companies (or BIG OIL as they're sometimes called) are interested in making an enormous profit and they're willing to do it off the back of the working man as he tries to take his sweet family camping in the summertime. Not so. Summertime gasoline has a higher ethanol content than wintertime gasoline. Ethanol is more expensive (and less efficient, I'm told) and this causes the price of the gasoline to go up. That, coupled with the switch-over from making winter mix to a summer mix, raises the prices. 

So on to Ethanol. Why bother? ...I mean, I read about it and I'm still asking -- Why bother? Ethanol burns cleaner than regular gasoline. Fine. But consider what goes into producing it. Ethanol is made from food products. In the United States, ethanol is generally made from corn. Brazil is the largest ethanol producer in the world, and they make theirs from sugarcane. The production of ethanol not only takes a large measure of energy (which can be derived from "non-renewable" energy sources), but it also takes a lot of corn. A LOT. So, in order to create a fuel that will burn "cleaner" in order to reduce carbon dioxide emissions in the air, we have farmers cutting down trees (which process carbon dioxide) to grow the corn to create the fuel. And the very creation of this fuel also releases carbon dioxide into the air. Add to that the fact that it's less efficient and you're having to fuel up your car more frequently and I just don't see the point. 

Some people are wanting to "bring down the price" of gasoline by suggesting fewer different blends for the country. (Different areas and regions have different blends suited to their needs and their clean air laws.) Others argue that reducing the number of blends would perhaps lower the price in those areas of the country that already require the cleaner burning blends, but would raise prices on those who have less stringent blends. California fuel is, no surprise, the most expensive fuel in the world to produce. If the country were to go to one or two blends, that would mean a price increase for most of us. The Energy Information Administration wrote, "There does not seem to be a means of reducing price volatility in the short term by reducing the number of fuel types. The measures needed to reduce price volatility could cost the nation more than they would save a particular region." 

Here's where it gets political. Many Republicans are calling for domestic drilling. Hallelujah! Of course, we all know that this isn't going to happen barring complete disaster. And drilling is kind of a long term solution, not a solution to bringing down the gas prices now. Even if the government were to authorize new drilling and refineries in the US, all that takes time to begin. 

Democrats, along with those in the renewable energy business, have called for higher taxes for oil companies (which really means for us because the oil companies are going to pass that along to the consumer), with the money being used to fund renewable sources. Democrats are also trying to get President Bush to stop filling the Strategic Petroleum Reserve. The SPR, in May of 2007 was storing 690 million barrels of oil, which amounts to a 60 day supply if all oil imports were suddenly cut off. In 2005, the Energy Policy Act directed the Secretary of Energy to fill the SPR to its authorized 1 billion barrel capacity. 

Loosely translated, this means that the Democrats are in bed with big business (renewable energy) and that they're wanting to take money away from the taxpayers to bolster that big business. Anybody who tells you that ethanol isn't "big business" is doing some "big lying." The fact is that the ethanol business has been subsidized by the taxpayers all along. And now they want more. Also, the Democrats are wanting to stop filling our "rainy day oil fund" and they're encouraging President Bush to break a 2005 law in order to do so. Of course, if he followed their advice, they'd attack him and say that he thinks he's "above the law." Silly stuff. A couple more reasons to be glad I'm not a Democrat (as if I needed them). 

I suppose for reasons of fairness, I should also loosely translate the Republican position of caring more about cheap oil than for the beauty of ANWR and the wildlife it contains. 

More on food shortages soon...

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