Turning Soybeans Into Diesel Fuel Is Costing Us Billions (npr.org)

This year, trucks and other heavy-duty motors in America will burn some 3 billion gallons of diesel fuel that was made from soybean oil. They're doing it, though, not because it's cheaper or better, but because they're required to, by law. From a report: The law is the Renewable Fuel Standard, or RFS. For some, especially Midwestern farmers, it's the key to creating clean energy from American soil and sun. For others -- like many economists -- it's a wasteful misuse of resources. And the most wasteful part of the RFS, according to some, is biodiesel. It's different from ethanol, a fuel that's made from corn and mixed into gasoline, also as required by the RFS. In fact, gasoline companies probably would use ethanol even if there were no law requiring it, because ethanol is a useful fuel additive -- at least up to a point. That's not true of biodiesel. "This is an easy one, economically. Biodiesel is very expensive, relative to petroleum diesel," says Scott Irwin, an economist at the University of Illinois, who follows biofuel markets closely. He calculates that the extra cost for biodiesel comes to about $1.80 per gallon right now, meaning that the biofuel law is costing Americans about $5.4 billion a year.

Comments

Telecommute for the environment.

[Narcocide]

Way too many of you don't actually need to be driving every day but still are. I realize that's immaterial to food/resources shipping, but it's still the bulk of the weight of emissions and fuel waste. What we're looking at here isn't the real problem. The real problem is wasteful employers demanding their wage slaves jump through these unnecessary extra hoops just out of some blind devotion to an obsolete tradition, or else some sick psychotic enjoyment of the sense of control it provides them to be able to order them to do in some cases even hours of unpaid work before and after each shift.

Normally I'm quite against biofuels

[Rei]

But it's important to know that in 2020 a new low sulfur standard on bunker fuel is going to come into play. That's going to put shipping in direct competition with diesel for refinery output, and will likely create a significant crunch in that regard. The right time to have killed off biodiesel's subsidies is either "several years ago" or "after the market adjusts to the new low sulfur standards", not during the crunch / adaptation timeperiods.

I mean, you can make the diesel crunch worse if you want if you're willing to drive up commodities prices further in order to accelerate the transition to electric shipping. There's a logic there. But as far as timing goes, diesel is going to be in a tight spot as it is without taking a lot of alternative fuel off the market.

Re:Normally I'm quite against biofuels

[Amouth]

so are you building the extra refinery? or am i? or you know if you don't i won't and we can both just charge x2 the price...

cost

[Tom]

That might all be true, but has it occurred to any of those people that cost may not be the only factor that was considered when the law was created?

Omg, the sky is falling, run for the hills - somebody is thinking about something else than profit, profit, profit!

Stuff made from plants is renewable. Sooner or later we will have to switch to renewable, because - surprise - oil is only renewable on a scale of millions of years. So you can over a period of some decades slowly transition to renewables - with probably increased overall costs, definitely higher costs initially because everything is more expensive when you start it - or you can keep burning oil until it is actually over and then watch civilization crumble in the price shock.

The last numbers I could find in a quick search was biodiesel wholesale prices above $4 per gallon. That means with taxes, distribution and profits for the petrol station, it'll be somewhere in the $5-$6 range per gallon by my naive estimate.

Imagine the price of gas suddenly went up into that price range. I bet you know a lot of people who would have to make some hard life choices.

Re:cost

[Solandri]

Nearly all the farm subsidies stem from the Great Depression. The Dust Bowl led to food shortages. Today we pay farmers not to plant crops just to prevent their farmland from being sold and converted into condominiums. The idea is that if a similar ecological disaster strikes, we'll have plenty of reserve farmland which can rapidly be put back into production and sown with seeds.

Likewise, we pay farmers to overproduce. There's no way to know ahead of time what percentage of the crops will fail, so we set a target of growing enough crops that even if there's a worst-case crop failure (e.g. devastating cold snap in late Spring), there will still be enough crops to feed the entire country. Of course when no crop failure happens, we suddenly have more food than we need. Left to normal supply/demand economics, this would cause the price of these crops to crater, and farmers would go out of business. So instead the government sets a guaranteed price before the season. It buys all the crops thus ensuring the farmers stay in business. Then it sells that food to wholesalers and distributors at a loss. This is how corn, wheat, soybeans, etc. are subsidized.

That takes care of the economics (keeping the farmers from going bankrupt). But there's still a discrepancy between supply and demand. Because we overproduced, the government is left with a bunch of food which it can't sell. Rather than let it rot in silos, the government has to come up with other uses for it. A lot of it becomes food for foreign aid (which kills the economy for local farmers overseas, but that's another story). Some of the corn gets turned into high fructose corn syrup, to reduce our dependence on imported sugar cane (which only likes to grow in tropical climates).

And in the 1970s during the Arab Oil Embargo, some clever person said why don't we turn some of that extra food into fuel? You see, this is excess corn and soybeans we're talking about. The cost to grow the crop has already been paid - it's a sunk cost. Anything useful you can do with it is better than letting it rot in silos, as long as the added cost (i.e. excluding the cost of growing the crop) is less than the benefit of the use. For the biofuel program to make economic sense, only the cost of converting it into ethanol or biodiesel has to be less than the market price for gasoline or diesel. The feedstock (corn or soybeans) is essentially free.

That's how it began. Then the agriculture industry got a hold of the idea and lobbied for laws which mandated growing crops for the express purpose of converting them into biofuels. So now we're no longer talking about excess corn and soybeans. We're talking about corn and soybeans which were grown with the sole intent of turning them into ethanol and biodiesel. When you do that, suddenly the cost of growing the crop is no longer a sunk cost, and the economic cost of the program is the conversion cost plus the cost to grow the crop. And it becomes a money-wasting program. These programs need to be scaled back to what they originally were - a use for excess crops grown because of our food subsidies.

Like ethanol, biodiesel has its uses. Ethanol is hygroscopic (likes to absorb water). So adding a little ethanol to gasoline (but nowhere near the 10% we use) helps prevent water from building up in storage tanks. Likewise, the refining process which produces ultra low-sulfur diesel removes much of the natural lubricity in the fuel. Adding a small amount of biodiesel to the tank is a good way to get it back, helping reduce engine wear, reducing maintenance costs and improving engine lifespan. But the programs need to be scaled back to only use excess crops, with enough R&D on the process so they can be ramped up quickly if/when we hit peak oil.

Re:The Plan.

[plague911]

The whining about subsidies and externalities is one of the best example of our tribalism. Both sides while about the other side's subsidies and ignore their own.

There is plenty of waste oil for Biodiesel

[shawn95gt]

Virgin 'anything' oil will be expensive for Biodiesel. I used to use biodiesel exclusively. I drove almost 2 years using > 20 gallons of regular diesel. I bought the biodiesel in bulk from a local producer who ws making it from waste oil. With the subsidy it was usually about the same price as diesel. I bought fuel in bulk (200 gallon sat a time) which would 'fix' my fuel cost for however long it took me to burn 200 gallons of fuel. At 40+ MPG, it took a while :). I stopped using biodiesel after a diesel fill rendered my car un-drivable due to the injection pump leaking so bad. I sent the pump out for re-seal and it ended up costing $1000ish to repair the injection pump due to corrosion inside. The Root cause was deemed to be water in the biofuel. Once fixed, I haven't touched the special sauce. In general I'm not sorry I tried it, but it did seem to cause or as least exacerbate an injection pump issue, it got about 5% worse fuel economy, and seemed to make slightly less power. On the plus side, it usually smelled like Chinese food vs diesel exhaust stink. I still have the car but has since sold my home Biodiesel fuel station.

Limited production

[DrYak]

Stuff made from plants is renewable.

On the other hand stuff made from plants is, well... made from plants.
And there are only so many that you can grow at the same time.

If you produce bio-fuels by finding a new use for waste (e.g.: fermenting *plants waste* into ethanol, as done is some countries), then that's not a problem. In fact it's an advantage, now you can get even more value from the plants that you grow.

If you produce bio-fuels by growing specific plants for that (e.g: I might remember that in the US you tend to do that ?), then your fuel production if going to compete with your food production.
Will you plant crops that you will use to sell food ? Will you plant crops that you will use to produce fuel ?

Bio fuel production in the latter case can have a bad impact on food production, even more so if the bio-fuels are exported for a premium to much richer countries, whereas the already starving population can barely buy enough to feed themselves : the local population won't be able to afford food a higher price to increase the incentive to produce more food, while the other richer countries will be able to pay slightly more money to make sure they'll receive the fuel they crave.

Re:The Plan.

[K. S. Kyosuke]

Look at all of the solar and wind companies that have bankrupted even with subsidies.

Look at all the coal, oil and nuclear companies that have bankrupted even with subsidies. Your point is?

Re: The Plan.

[BlueStrat]

Is that why we wasted 20 billion on two nuclear plants

No, much of that $20 billion was wasted on fighting anti-nuke protesters, eco-nutter lawsuits, over-regulation, NIMBYism, fossil-fuel lobbyists and their pet politicos, and general irrational fears that the anti-nuke people have incubated for decades using mis- and dis-information and outright lies.

There are many forces, both domestic and foreign, who do not want the US to have cheap, safe, and reliable nuclear power, and who have been working for decades to make nuclear power plants as expensive and difficult as possible to build and maintain.

Strat

Re: The Plan.

[fahrbot-bot]

Dude, solar is now the single cheapest way to generate power in the US, with no subsidies.

Stop living in 1995

Nuclear and hydroelectric are the cheapest, by far.

And solar is unreliable. Every night I check my panels and they're not working, so I call the service guy. He comes out the next morning and they're working fine. It's really frustrating and the constant service calls are expensive.