A study came along this past week from economists at Iowa State University and the University of Wisconsin that found that if ethanol production came to an immediate halt, the estimated gasoline price increase would be what the researcher described as “historic proportions,” ranging from 41 to 92 percent.
That’s roughly $5.50 to $7.50 of gasoline per gallon.
The same research team, in a study sponsored by the Renewable Fuels Association and released by the Center for Agricultural and Rural Development (CARD), found that the increased use of ethanol reduced wholesale gasoline prices by an average of $0.89 per gallon in 2010. The average effect increased to $0.89 per gallon, and the regional impact ranges from $0.58 per gallon on the East Coast to $1.37 per gallon in the Midwest, according to the study’s authors.
At the same time, ADM this week reported a 37 percent earnings increase, and a 33 percent revenue increase with earnings more than 13 percent above the analyst consensus. Yet shares were drubbed more than 6 percent in daily trading, with observers citing concerns about the future of ethanol and ADM’s dependence on the same.
Ethanol — can’t live with it, can’t live without it, that’s the conclusion we draw from the two sets of results. Why has the fuel become so unpopular?
Propel Fuels CEO Matt Horton, addressing the Advanced Biofuels Leadership Conference last month in Washington, described the average consumer’s branding experience with ethanol as based in a warning label: “May contain up to 10 percent ethanol.”
It is difficult to promote the benefits of a blended, regulated, practically invisible commodity like ethanol fuel. It’s like the Wall Street bailout — tough for taxpayers to visualize the wisdom of all that spending sold on the premise that the alternative is worse.
It was the problem that George Bailey faced in the film “It’s a Wonderful Life.” Unable to see the benefits of his existence, he contemplated suicide until rescued by an itinerant angel.
The angel’s strategy: To show him Pottersville — what the world would have been like without him. Bailey was shown those things he could not visualize for himself.
What the World Needs Is a Good Climate Change Pottersville.
Too often, a future society is portrayed by the advocates of new technologies in terms of a rosy EPCOT where everyone is happy, and technology has created an enviable standard of living. The problem is, people generally take technological change for granted, generally picture the future as vaguely improved over the past (in terms of technology — not always in quality of life), and generally discount claims of the transformative impact of new technologies. Too many snake oil salesmen have come down the highway over the years.
But what if the advocates of renewable fuels — instead of touting benefits in Washington or issuing a zippy set of press releases all about the wonders of the future with new technology, or the dangers of a future without technological change — actually built a Pottersville.
Pottersville vs. Bedford Falls
For instance, what would happen if there was truly an ethanol-free zone. A radius within which all the gas stations sold $5.50 to $7.50 ethanol-free fuel, and there was a decent simulation of global warming going on, and every week the mayor held a ceremony handing a check to the representative of a nefarious foreign regime, who pledged the funds to the destruction of democratic values.
Then a Bedford Falls, maybe 10 miles away, where fuel was $4 per gallon, the climate was stabilized, and every week the mayor held a ceremony handing a check to the representative of a local bank, who pledged the funds to the promotion of the local community, its children and its values.
Flooding in the lower regions of town, higher prices for food stemming from the low yields that climate change brings, a general lack of repair because of a lack of investment dollars.
Well, you get the idea. Bedford Falls vs. Pottersville, and no prizes for guessing where people, generally speaking, would want to live.
Benefits need visualization and prevention is a tough sell. Pottersville, a sneak preview of an ethanol-free world, might be just the medicine the world needs.
Copyright 2011; Biofuels Digest