Ethanol Prices Collapsing

Crude oil prices can crash and we never see it at the pump.

So don't expect anything to get cheaper at the liquor store :!:

 

Probably the biggest reason for the price drop is the tar sands production in Canada, augmented by a partial switch from oil to natural gas usage, here in the USA, for some applications. This natural gas switch has been made possible mainly because of hydraulic fracturing, as a natural gas extraction technique.

We may have already reached the point where the price of crude has gone up enough to make at least some so called 'unconventional oil' profitable.

But there are problems with this.

1.) there is still plenty of conventional oil being produced, most of it in the middle east,

2.) the hydraulic fracturing wells have relatively short output lives. I read that they produce up to 42% of their total production in their first year.

3.) there are apparently some very serious local environmental costs to hydraulic fracturing. These may be so severe that this process might be removed from consideration, because it is so politically unpalatable, or at least become much more expensive, as means to make it more palatable.

4.) concerns over global warming are not going to fade away.

As I rejoice $3 a gallon gasoline, which I must have to get to my low paying job, I keep in mind that this relief might be quite temporary. I may someday soon have to find room in my budget for $5 or even $6 a gallon gasoline.

All it would take for this to happen is a failure of a major oil field, anywhere on the planet (probably in the middle east). If such were to happen, a global panic would undoubtedly occur.

Since the price of oil today, along with the price of natural gas, to some extent, is determined by a mix of the costs of conventional and unconventional extraction methods. If there is a major cut in conventional oil production, oil produced by unconventional methods will have to take up the slack. Such may indeed be possible, but there will almost certainly be a lag in total production, which may last years.

During those years, the prices could go through the roof.

Since the economy here, in the USA, is geared to the direct cost of petroleum, such a lengthy shock could send it into a tail spin.

Although I'm presently enjoying the $3 a gallon gas, I'm not enjoying it much. It is giving the global markets in general, and the USA markets in particular, a very dangerous false sense of security. Already cars and trucks, with big engines and higher gross weights, are starting to top sales charts, while more fuel efficient models are starting to go begging.

Markets have no memory. And they are incapable of looking into the future. All the are capable of doing is reacting to the present.

To paraphrase what a famous attorney once said:

The market is an ***.

 

The problem with ethanol is that it is all about turning food into fuel.

I am a methanol man myself.

It is relatively easy to turn methane into to methanol, and future car engines can be designed to run on it.

Large stocks of human and animal manure, which presently get dumped into rivers and streams, can, instead, be put in huge fermenters. There they will produce two major products, methane and nitrogen rich fertilizer.

Now. I'm quite aware that all the bull **** in the USA (including that in our capital) can provide a mere fraction of the methane based fuels, needed to replace oil, for our present way of life. But who says we need to continue with huge energy sucking automobiles, or automobiles at all, at least in urban environs?

In Rural areas, where autos and light trucks are certainly more defensible, they can have much smaller engines, probably as little as 25 Kw per ton. They may not go from 0 to 60 as fast, but they will retain at least 90% of their utility.

Today's cars and trucks have power loadings closer to 75 kw per ton.

The reason for such high power loadings is to enable them to merge into traffic safely. A healthy amount of acceleration capability is require for that. But these merging situations exist mostly in urban and suburban locals. If autos and light trucks were removed from such duty, their remaining country cousins could get by with far less capability.

 

You know you really need to keep up folks. Trying the newspaper instead of an i-pad might help.

Had you been paying attention in recent months, China has reduced its subsidies on pricing, which after translated to the free markets, caused them to have a lower national demand, thus a rising inventory world wide. This combined with speculation and profit taking opportunities, plus a rapidly growing domestic alternative energy industry, have caused the momentary crude slide. Everyone that pays attention knew it was going to - its just predicting when that's hard.

It's important to keep things in perspective. It's not that current pricing is low, but that what we've been seeing has been inflated for a couple of years. $80 is where it should be and $100 isn't sustainable, as the market is showing, both here and overseas. OPEC meets next month and things will get interesting, but Russia and Iran may not be able to wait this long, before it dramatically hurts them economically. Simply put, Saudi Arabia can tolerate a drop for a while (a few years), as they're flush with cash and are delicious vendors, for economically strapped countries in Europe and Asia, that are becoming increasingly dependent on Middle east oil. It's probable that the Saudi's will take advantage of this in 2015, but for now can sustain a slow down on demand. In fact, they are making significant discounts (guarantees) on oil pricing, to gather up sales (futures).

The butt kicker is what Russia is going to end up with and they're already making moves to alter their position and political posture. Their budget requires pretty high oil pricing ($100 or more) to bolster failed domestic concerns, but OPEC can likely live with a 20% less figure, placing both Russia and Iran (for similar reasons) in a difficult position, such as retreating on spending commitments, which will force political oil (and other issue) manipulation.

This stuff isn't especially hard, though you do have to keep up. How many of you look at oil futures daily/weekly, if ever? Understand predatory pricing and why it's employed? Know anything about what the Saudi's want to do to rival Shia governments, let alone ISIL and do you think they're still pissed about our not taking out Syria, not to forget undercut Russia as Europe's provider and prevent a repeat of what the USA did back in the 1970's (they haven't forgotten).

Lastly, we better hope this is just an OPEC food fight, as this could become a huge deflationary bomb, though you do have to keep up if you'd like to protect yourself somewhat. If not, this is a work of geo-political art by the Saudi's and they could make the whole world come begging, literally.

 

In 2009, crude oil crashed and we got $1.75 at the pump.
I my area gas is now $2.79 for regular cheapest I have seen was $2.75.

 

Cheap gas - fuel is one of the best economic stimulants as it effects everyone immediately without federal government involvement or the FED reserve which seems to mostly affect big banks and consumer borrowing costs.

 

What do we do when the oil reserves start approaching the end?

I hope that either Fusion power or Thorium reactors will be operating with in 300-500 years.

Ethanol will be with us for a long time.

1 The US president primaries start in corn states .

2 The percentage of ethanol in the fuel directly reduces the MPG of the vehicle.

Gas taxes are on the volume of fuel sold , so 10% reduced vehicle mileage is 10% more fuel required , hence 10% more taxes extracted.

What a deal for the politicos , they can hide a tax increase while posturing behind the climate change HOAX !!

What politico will stand in the way of these good deals for politicos?

 

Here in corn country, in the upper midwest, we knew about the blending wall over a year ago. However, the corn lobbyists put a spin on it and claimed it was all the EPA's fault, that they were heavy-handedly capping/reducing the total ethanol production at their own whim, when in reality it was already written into federal law many years ago. The real issue is that the U.S. is using less gasoline/oil than it used to, due mainly to more-efficient vehicles (which, in the grand scale, is a very good thing). But the corn lobbyists are calling foul (what else would you expect?).

I don't support ethanol because I believe it is a false economy. It also wreaks havoc on most small engines, outdoor power equipment, outboard engines, etc. It seems to work fine in cars/trucks made in the last ten years (which is the wave that lobbyists/politicians ride on), and even some modern outboard engines. But if you put the stuff in an older boat with an older fuel tank, the ethanol (which is a "cleaner") will cause the gunk on the old fuel tank walls to loosen, fall off, and plug up the fuel lines/filters before it ever makes it to the engine, so you have fuel troubles regardless of how new your engine might be. Not a pleasant thought if you are miles offshore in desolate waters.

Ethanol has also wreaked havoc on fish and wildlife. Due to higher corn prices fueled by the ethanol industry, within the last ten years many wetlands have been drained via tiling, virgin prairie sod has been broken, and thousands (probably hundreds of thousands) of acres of Conservation Reserve Program lands have been put back in to production. All of that is very very bad for fish and wildlife populations, but the politicians in D.C. never see that, because it isn't happening in their backyard. The states affected tiptoe around the issue, because agriculture is their number one market and they won't badmouth that business.

In full disclosure, I have two brothers and two brothers-in-law that farm and grow corn. And yes, we are a close-knit family!

 

It's amazing how grossly misinformed most posting here are. Low crude prices aren't a boon to an economy. Why do you think we've pushed fracking and tar sand production in recent years? What do you think will happen if crude prices drop to current levels for very long? Man this stuff is standard fare if you read the papers, instead of getting it from Fox news. Basically, the Saudi's have made a major, some would call a masterful stroke and they pretty much will get what they want in the end and have the pockets to survive it. They'll starve out the two major Shia players in the region, consolidating their position and dramatically weakening Iran and Irag's economy.

This is part of the "play", punish those they think need some discipline, especially the USA, who is now indirectly helping the Assad government, in spite of the opposite lip service provided for the last few years. They get to spank the Russians too, though they're not in as much danger, mostly because of the difference with their heavy crude, compared to the Saudi light, which refineries would have to retool for and the fact that the Rubble has dropped significantly against the rising dollar. Speaking of the dollar and it's recent growth spurt, this also favors the Saudi's as the strong dollar doesn't affect them locally, so taking undervalued contracts just sets them up for the long term, while undercuts it's rivals.

Come December OBEC will likely settle on $90, which they can live with, though will hurt the Russian, Shea and Venezuela heavy crude producers. This limits Iran's forays into exporting radical support for Hamas, Hezbollah and many of the jihadis presently in Syria and Iraq, including ISIL. They also lower Russia's influence and maybe can whittle some market share out of Europe in the near future. Lastly they get a chance to avenge the pasting they took in the 70's and 80's with USA farting around. Look the Saudi's have been trying to do this for about a decade now and seem to be in position to pull it off, so if you think lower oil prices are a good thing, maybe you need to put some time into the subject, as we could be looking at a major recession or possibly a full blown depression over it.

 

There are many alternative energy sources available should oil become less available. It is mostly a matter of adjusting our expectations. As Sharpii2 mentioned, most vehicles are vastly overpowered and only need that power for very limited periods (today's 400hp pickup trucks make you wonder how our grandparents got along with 100hp (and less!) six-cylinder pickup trucks). Issues of merging traffic will eventually be solved by self-driving (or assisted-driving) automobiles which can react/respond much quicker than humans. Motorcycles can be made to achieve 100mpg and still keep up with today's traffic, although the market instead drives sales of 40mpg motorcycles that can beat most musclecars (this is mainly in the U.S. - in the rest of the world, most motorcycles are less than 400cc and quite efficient).

Electric cars... the biggest barrier with electric cars is range - what if you want to take a trip across country? This issue was solved a few years back by the introduction of the idea of making cars with quickly/easily replaceable batteries. Batteries are to be stocked at regular old-fashioned gas stations. Pull in, swap out batteries, pay your $25 and continue on, cheaper and just as quick as a gas fill-up. This idea was quickly squashed by industry leaders who saw much greater profit using less-efficient avenues.

Battery technology is getting better. Within 5-10 years, we will likely have batteries large enough to power cars that can be recharged in a matter of minutes, about as much time as it would take to swap out batteries in a car...

 

All of this is very much in my line of thought and hence I agree with this analysis.
We are witnessing a major geopolitical game of chess on a worldwide level, fought with a combined action of oil prices and military means. Don't know about you, but I can feel the odour of a global disaster in the air.

 

100% correct.

It annoys/puzzles/amuses me that the vast majority (95%?) of people spend hours a day watching TV-sports,Kardashians,zombie movies etc or playing games or on Facebook or on forums when a fraction of that time can secure incomes and futures.
Only TV I watch is travel,WW2 docs,and nature documentaries.

Case in point: August 31 voting laws imposed by China on Hong Kong. It was VERY plain to me that: protesters= Hong Kong insecurity= market sell off on index.FTSE,etc:

Hang Seng:
August 31: 25,300
October 1 and later: 22,900

2400 points. With a few grand in an account,and running $100 a point profit-do the math.

 

This has turned into a political discussion the affect of which has long run (maybe short run) implication. Par has read his accounts well. So have I.

The Saudis are shrewd Arabs that can influence our destinies. Meanwhile the Russians and the Iranians are hurting and they may have to pull back on their sneaky financial support of the crazies. That is the good part. Wait until the other shoe drops.

As for ethanol, it is not an efficient fuel. It has only about 60% of the latent heat of standard gasoline. Efficient piston engines, operating on gasoline, have a brake specific fuel consumption (BSFC) of around 0.45 to 0. 48. That means that an engine will use 0.45 to 48 pounds (not gallons) of fuel per horsepower per hour. Pure ethanol fueled engines have BSFC figures in the region of 0.8 pounds per horsepower hour. Volume wise that is not a bargain. The advantage of ethanol is that it burns cooler than gasoline and the engine components like valves and piston domes can withstand the thermal stress more easily. It is not uncommon for the intake manifolds of alky engines to develop a frost on the outside of the part which suggests that evaporation is part of the deal. Actually that is an advantage because incoming atmospheric air is cooled somewhat. The result is that the air has slightly more oxygen density. That is fine for race engines, but not particularly advantageous for the grocery getter automobile or the power boat engine.

Fred is right about the increased tax advantages of 10% ethanol mixtures. Not ten percent, but a small volume increase, thus tax advantage for the tax collector. Whether our legislators are smart enough to figure that one out is a moot question.

 

http://www.businessweek.com/articles/2014-09-29/oil-prices-fall-and-the-global-economy-wins

I am not alone in thinking falling oil is an economic stimulant

http://www.businessweek.com/article...s-are-dropping-but-drilling-is-more-expensive
Drilling themselves into oblivion, world has much more oil to be coming on the market, the price will drop more I think but not much more..

 

A drop in the price of oil is great for every economy except the producers.

Works like a tax cut , and we dont have to shoot the politicians to get it.