The politicians lament about how we are dependent on foreign oil and clamor that the government should do something about it. Consumers complain about the high price of gasoline, and demand the government should do something about it. But government has already done too much—and that's the main problem.
As noted in previous postings on this blog, our government has prevented oil drilling in large areas of the U.S., both on and offshore, and, even where it is allowed, has made it far more expensive than it need be through costly regulations. Refineries have had to pay more than $47 billion over the last 12 years to comply with environmental regulations that include, among others, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the Oil Pollution Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act. And that's not even including the Sarbanes-Oxley law and similar laws that apply to general business practices, not just to environmental issues. Naturally, the cost of complying with these regulations must be passed on to the consumers in the form of higher prices. The tens of billions of dollars spent by the industry to comply with regulations did nothing to increase the supply of gasoline. And from 2006 to 2012, fourteen new major environmental programs will force additional costs on refineries.
Government regulations are also the reason not a single new oil refinery has been built in the U.S. in the past 29 years. Companies can't get the permits. One company has been trying to get a permit for 16 years. A shortage of refining capacity leads to a shortage of product—and higher prices. Last week the Wall Street Journal featured an article about an Indian billionaire who is building a gigantic oil refinery in India. It will employ an incredible 150,000 people. He expects the largest customer for the gasoline it will produce will be the United States. He believes the cost saving from not having to comply with U.S. regulations will far more than offset the cost of shipping the gasoline all the way from India. So profits and jobs go overseas. And we continue to complain about our dependence on petroleum imports and jobs going abroad.
Thursday, September 21, 2006
Monday, September 04, 2006
Ethanol Damage
Yesterday's weekend edition of The Wall Street Journal has an article on the shocking costs of ethanol damage to boat motors. The damage has been increasing as politicians have increased the legal mandate to use ethanol. Yamaha Marine Group reports that ethanol problems have more than tripled this year, compared to the same period in 2005, and complaints “are coming from all over the country.” Refiners would like to offer a different product, but “legally we can't,” says a spokesman for the refiners. Government has phased out MTBE as an gasoline oxygenate because this previously federally required additive resulted in ground water pollution (see my blog of March 13, 2006.) This has left only ethanol as a way of meeting the federal oxygenate requirement.
It has long been known that many small engines aren't designed to run on ethanol and, in fact, are destroyed by them. Owners of brand new outboard motors, lawn mowers, chainsaws, and snow blowers have had their engines burn out because of ethanol. Many of the manufacturers of these devices have cautioned in their owner's manuals against using ethanol in these machines. (Some states have recognized this and have allowed non-ethanol gasoline to be sold for these small engines as well as for antique cars, which are also damaged by ethanol.) But in many localities this accommodation is not available, and the costs that now involve larger boats far surpass the money which small engines owners have been forced to shell out for ethanol damage.
The 10 percent ethanol-gasoline blend common throughout the country can leach the resin out of fiberglass gas tanks found in as many as 15,000 boats. This results in a black goo that coats the motor's innards and hardens as the motor cools. Walter Kaprielian of East Hampton, N.Y., bought a 20-foot boat with a small cabin, but the damage from ethanol will now require him to pay $25,000 for a new motor. Erich Koch of Old Saybrook, Conn, spent nearly $40,000 to buy and restore a 34-foot boat. But then ethanol problems set in and he ended up selling it for $9,000. He says it was time to cut his losses.
Ethanol was foisted on the public by claims an oxygenate was necessary to improve air quality by reducing automobile air pollution. But automobiles since the mid 1980s have automatic sensors that regulate the oxygen/fuel mixture to provide the most efficient combustion, thus doing exactly what an oxygenate (ethanol or MTBE) is supposed to do and making it unnecessary.
And where is the improvement in air quality from ethanol? Forget those ads by Archer Daniels Midland (the largest producer of ethanol) about “cleaner burning ethanol.” Even EPA admits that ethanol produces more nitrogen oxides and hydrocarbons (components of smog) than regular gas. Its vapor pressure also leads to greater evaporation even when the engine is not running. EPA initially refused to approve ethanol on the grounds it violated the Clean Air Act. EPA's position on ethanol was reversed only after a presidential waiver from the first President Bush, which, by coincidence, came in an election year when the votes of farmers in cornbelt states were important.
Study after study has shown no air quality benefit from ethanol. For example, a study by the National Academy of Science states that “using ethanol as a blending agent in gasoline would not achieve significant air-quality benefits, and in fact WOULD LIKELY BE DETRINMENTAL.” And an article in SCIENCE by J.G. Calvert of the National Center for Atmospheric Research states: “No convincing argument based on combustion or atmospheric chemistry can be made for the addition of ethanol to gasoline.” And NBC News, reporting on an 8-year study by the National Research Council, stated: “There is no evidence that special fuels do anything.” Professor Douglas Lawson, who headed the study, said, “We are not getting the effects the models predicted.” For more examples, see my book MAKERS AND TAKERS, available from American Liberty Publishers.
Ethanol is just one more example of government solutions to economic problems turning out to be less beneficial and far more costly than what would result if the government just stood aside and let the marketplace decide products and prices. Professor John Deutch, a professor of chemistry at MIT and former director of energy research and Undersecretary of Energy in the Carter Administration, states that federal ethanol subsidy is costing the taxpayers $120 for every barrel of oil displaced by ethanol. With the price of oil hovering around $70 per barrel, only the ethanol industry (or maybe a politician) would consider that a bargain.
It has long been known that many small engines aren't designed to run on ethanol and, in fact, are destroyed by them. Owners of brand new outboard motors, lawn mowers, chainsaws, and snow blowers have had their engines burn out because of ethanol. Many of the manufacturers of these devices have cautioned in their owner's manuals against using ethanol in these machines. (Some states have recognized this and have allowed non-ethanol gasoline to be sold for these small engines as well as for antique cars, which are also damaged by ethanol.) But in many localities this accommodation is not available, and the costs that now involve larger boats far surpass the money which small engines owners have been forced to shell out for ethanol damage.
The 10 percent ethanol-gasoline blend common throughout the country can leach the resin out of fiberglass gas tanks found in as many as 15,000 boats. This results in a black goo that coats the motor's innards and hardens as the motor cools. Walter Kaprielian of East Hampton, N.Y., bought a 20-foot boat with a small cabin, but the damage from ethanol will now require him to pay $25,000 for a new motor. Erich Koch of Old Saybrook, Conn, spent nearly $40,000 to buy and restore a 34-foot boat. But then ethanol problems set in and he ended up selling it for $9,000. He says it was time to cut his losses.
Ethanol was foisted on the public by claims an oxygenate was necessary to improve air quality by reducing automobile air pollution. But automobiles since the mid 1980s have automatic sensors that regulate the oxygen/fuel mixture to provide the most efficient combustion, thus doing exactly what an oxygenate (ethanol or MTBE) is supposed to do and making it unnecessary.
And where is the improvement in air quality from ethanol? Forget those ads by Archer Daniels Midland (the largest producer of ethanol) about “cleaner burning ethanol.” Even EPA admits that ethanol produces more nitrogen oxides and hydrocarbons (components of smog) than regular gas. Its vapor pressure also leads to greater evaporation even when the engine is not running. EPA initially refused to approve ethanol on the grounds it violated the Clean Air Act. EPA's position on ethanol was reversed only after a presidential waiver from the first President Bush, which, by coincidence, came in an election year when the votes of farmers in cornbelt states were important.
Study after study has shown no air quality benefit from ethanol. For example, a study by the National Academy of Science states that “using ethanol as a blending agent in gasoline would not achieve significant air-quality benefits, and in fact WOULD LIKELY BE DETRINMENTAL.” And an article in SCIENCE by J.G. Calvert of the National Center for Atmospheric Research states: “No convincing argument based on combustion or atmospheric chemistry can be made for the addition of ethanol to gasoline.” And NBC News, reporting on an 8-year study by the National Research Council, stated: “There is no evidence that special fuels do anything.” Professor Douglas Lawson, who headed the study, said, “We are not getting the effects the models predicted.” For more examples, see my book MAKERS AND TAKERS, available from American Liberty Publishers.
Ethanol is just one more example of government solutions to economic problems turning out to be less beneficial and far more costly than what would result if the government just stood aside and let the marketplace decide products and prices. Professor John Deutch, a professor of chemistry at MIT and former director of energy research and Undersecretary of Energy in the Carter Administration, states that federal ethanol subsidy is costing the taxpayers $120 for every barrel of oil displaced by ethanol. With the price of oil hovering around $70 per barrel, only the ethanol industry (or maybe a politician) would consider that a bargain.
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