The Auto Channel Fights for the Truth about Ethanol Versus Gasoline - VIDEO ENHANCED


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Lies and Misconceptions about Ethanol Continue to Keep it from Public Acceptance

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Not an accurate depiction of Marc, he has far less hair

By Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL

Originally published May 25, 2010


A couple of months ago Bob Gordon and I posted some stories and a RoadTrip video we produced about ethanol. The video featured interviews with actor and environmental activist Ed Begley, Jr., and David Blume, author of “Alcohol Can Be A Gas” (the best and most complete book ever written about producing and using ethanol). The stories and video can be found by CLICKING HERE.

Bob and I have studied the issue of alternative fuels and energy and we've become very enthusiastic supporters of all the technologies. We like CNG, we like propane, we like algae biofuels, we like electric, we like wind energy and solar energy, and we even like the concept of powering vehicles with compressed air. But most of all, we like ethanol. Why? Because ethanol can be used right now, anywhere in the U.S., and by most vehicles without any engine conversions. Virtually every fuel-injected automobile can use e10, e15, e20, e30, and e50 without conversions and without being official flex-fuel vehicles. Some can even use e85. And with an inexpensive, easy-to-install device every fuel-injected vehicle could use up to 99.9% alcohol (e100). Best of all, you can make alcohol fuel right in your own kitchen, garage, basement or backyard. You can’t do that with any other alt-fuel.

In discussions about alternative fuels it is often said that there is no "Magic Bullet" and that a variety of solutions will have to be used to replace gasoline. Bob and I disagree with this philosophy. We think that one alt-fuel could become a primary replacement for gasoline, and that alt-fuel is alcohol (ethanol). Keep in mind that gasoline was never the only engine fuel in use over the past 80 years; diesel was required for powering large vehicles and equipment. And for these machines something other than a straight alcohol or alcohol-gasoline blend would be required. But all standard gasoline-powered vehicles could use just one fuel, alcohol: Domestically produced, environmentally friendly, terrorist free, and much more economical than gasoline.

To be sure, there are many questions surrounding ethanol, and for those answers you should use the link above to start the process. But the point of this story is to tell you about our fight to overcome the lies and misconceptions about ethanol that are promulgated by the oil and gasoline industries.

Well, in response to the stories and video we received a couple of emails challenging the information we presented. The challenges were based upon information contained in two other videos on YouTube that are anti-ethanol. One video contains comments made by David Fridley, a scientist at the Lawrence-Livermore Laboratory in Northern California, and the other was a John Stossel story that featured Jerry Taylor, a Senior Fellow at the CATO Institute in Washington, DC. These videos can be found at http://www.youtube.com/watch?v=DeVT7jMYZlo&feature=related and
http://www.theautochannel.com/news/2010/02/18/466262.html, respectively.

The information contained in these two videos are lies and/or gross misconceptions; the lies and misconceptions that were invented and circulated by people working for the oil and gasoline industries. These untruths are supported by the millions upon millions of dollars that they give every year to politicians and those who are in the hip pockets of the oil/gasoline industry.

After watching the Stossel/Taylor and Fridley videos I sent them both emails expressing how appalled I was at their lack of knowledge and recitation of lies, and offering various facts that contradict their statements. Mr. Fridley sent a very nice reply in which he only stated what he had said in the video. He had no answers to the points I raised. Mr. Taylor replied a bit differently. He wrote: “You will have to be more specific with regards to my appalling ignorance. But before you pipe up, make sure you're not demonstrating any of your own.” He included a link to a report he wrote for the Federal Reserve Bank of St. Louis, titled “An Economic Critique of Corn-Ethanol Subsidies.” (a link to the report can be found below)

Now I have to admit that taking on a scientist at the prestigious Lawrence-Livermore Lab and a guy described as “among the most widely cited and influential critics of federal energy and environmental policy in the nation” is pretty heady stuff for a simple little man like me who hails from the backwoods of Brooklyn, NY; but the good thing is that when you catch a rascal with his hands full of misinformation, it’s really not so daunting a task.

So, after reading Jerry Taylor’s report to the Federal Reserve Bank of St. Louis, I sent him the following email:


Hi Jerry -

Thank you for having taken the time and having the interest to respond to my email. I also appreciate you sending me the link to the report you wrote for the Federal Reserve Bank of St. Louis, “An Economic Critique of Corn-Ethanol Subsidies*.” (CLICK HERE for Jerry Taylor's report)

I read it and I will comment on it below, along with addressing the specific problems I have with your responses to John Stossel in the video interview he conducted with you. To make sure you know the video interview that I am referring to, you can find it at http://www.youtube.com/watch?v=j9QQcP_Y1II. It may be available at other places on the web as well.

In my initial email to you I wrote that I was “absolutely appalled at how little you know (or knew) about the subject (of ethanol). I hope you learned something since you did that video.” I then asked “How can the Cato Institute be for individual liberty, free markets and peace if you spout all the lies that OPEC and the gasoline companies have fabricated about alcohol/ethanol?”

The reason for my being appalled is that you are touted as being “among the most widely cited and influential critics of federal energy and environmental policy in the nation.” Now I understand that being widely cited and an influential critic doesn’t require that you actually know anything about the given subject, it may mean that you just have a good press agent. But since those that cite you, such as Mr. Stossel, do so in a manner that would portray you as having some expertise, then I personally feel that you should have some knowledge of the subject.

I’ll start with two issues in generality: Alcohol as an engine fuel, and then subsidies.

BASIC FACTS ABOUT ALCOHOL/ETHANOL
Alcohol (ethanol) as an engine fuel can be made from a variety of source materials; corn is only one, and from a productivity standpoint, that is to say, yield, it is not necessarily one of the most efficient and economical. To take up the issue of ethanol by limiting one’s argument to just corn ethanol – regardless of the perspective – is ignorant and/or dishonest. It’s dishonest if the position being argued is against the use of all ethanol. John Stossel approached the subject of ethanol in his video story as if it could only be made from corn. Your interview segment of the video only concerned corn. Given your overall predilection to be against alternative fuels, your responses were dishonest. If you were honest you would have brought to Stossel’s attention that there are other source materials that might be far more efficient and economical.

John Stossel is a practitioner of TV sensationalism masquerading as journalism. Television, being the content ravenous beast that it is, requires a steady ingestion of stories. They don’t have to be good stories, or important stories, they just have to be stories. The talent of the presenter to sensationalize or embellish the story is all that is needed. Stossel has become pretty good at this. Sometimes his stories are interesting and true, and sometimes they’re interesting and highly sensationalized or embellished to give them an air of credibility. My guess is that he may have purposely left out the inclusion of other raw source materials for ethanol in order to create a sensationalized story. But this is not an excuse for you, if you were either honest or objective.

You smugly pose circumstances that you think prove ethanol’s impracticability by couching its production and distribution along lines of a business model used by the oil/gasoline industry. Since your bio on the Cato Institute website doesn’t list any entrepreneurial business experience, I assume you have had none. This would certainly account for why you are ignorant of how business works in the real world. It might be polite to think that your lack of business understanding is the reason for your poor business interpretations, and it would have been hopeful if your report to the Federal Reserve Bank demonstrated that you had learned something about either real business or ethanol since the video interview you did with Stossel. Alas, that was not the case.

In any event, in a real world situation, the production and distribution of ethanol would rely on a business model that is significantly different than the oil/gasoline model for production and distribution. There would be no long distance shipping of alcohol over the road or in container ships; it would never be piped from the Midwest to the coast. For you to present this possibility in the Stossel interview is just plain stupid. Those really involved in the study and practical production of ethanol rely on a business model that has been proven successful in every country in the world. It can best be labeled as the “Dairy Business Model.” The ethanol would be produced locally, then picked up and distributed to retail outlets in the same manner as milk.

On this subject of local production, corn might be the source material used in a given region, provided that it was the most economically viable for that local market. However, cattails, switchgrass, cane sugar, beet sugar, seaweed, garbage, discarded paper, and wood chips and wood remnants might be more economical and plentiful. Moreover, cattails, switchgrass and seaweed requires no expensive or environmentally harmful fertilizer (the requirement for fertilizer to help grow corn is another canard often used by those seeking to discredit ethanol). In fact, when it comes to cattails, switchgrass and seaweed (garbage too, for that matter), municipalities have to go out of their way to try and limit their abundant availability. Therefore, the argument that the U.S. couldn’t produce sufficient ethanol from corn is a moot point, even if it were true, which it is not.

In addition, opponents of ethanol will argue that among the reasons why ethanol has negative EROEI (energy returned on energy invested) is because of the energy it takes to produce and run the farm equipment that is required to grow corn. This is preposterous since it relies on the presumption that there is no equipment currently in use by farmers that could be used to plant, harvest and store corn, and that an entirely new collection of mechanized machinery and storage facilities would have to be manufactured from scratch. It also fails to take into account that alcohol fuel could be used to run the equipment at a lower cost and with less pollution than gasoline or diesel.

Further, any claims that ethanol (alcohol) can cause damage to vehicle engines is totally false. Virtually any modern vehicle (1990 to present) can use a gasoline ethanol blend of proportionately high levels of alcohol with no problem, even if they are not officially “flex-fuel” vehicles. For those modern vehicles that might have a problem with e85 or higher alcohol, an inexpensive easy-to-install device renders the vehicle capable of running 100% alcohol. Older vehicles, after being fitted with fuel injectors and replacing any rubber that is not tolerant of alcohol, can also function at full capability without any damage done to the engine. Alcohol cleans engines, it does not harm them.

GOVERNMENT SUBSIDIES
The argument against using government subsidies to increase the production capacity of ethanol and to encourage the use of it is so ridiculously puerile that it’s amazing that anyone with more than a fifth grade education would use it, regardless of where on the political spectrum they may fall.

I guess the only reason for doing so is that most politicians and cited analysts like you know that the general public will never research an issue and challenge such egregiously stupid statements as “If ethanol made a lot of sense it wouldn’t need to be subsidized?” By the way, if this stupid statement sounds familiar to you it’s because it’s what you said to John Stossel. You may have thought you were safe from rebuke, but “tag, you’re it!”

In any event, there is very little that would have gotten accomplished in America (to the good and bad) if it were not for government subsidies, incentives, allotments, and protectionist laws and taxes. No energy sector was developed and in continuous play without substantial subsidies, including the construction of hydro-electric dams, nuclear plants, and oil exploration and refineries. This is as true today as it was when the first pools of petroleum oil were tapped in Pennsylvania in the 1850’s.

Products made from petroleum oil, such as kerosene, would have never come into popular use for in-home heating and lighting were it not for onerous taxes placed upon alcohol. Despite the smell and harmful fumes of kerosene, consumers were driven to it because its cost was so much lower than alcohol: kerosene production was taxed at just 10 cents per gallon while ethanol was taxed at $2 per gallon. As the new petroleum oil companies prospered and grew they were able to buy the political support they needed to protect their development of new oil-based products and keep alcohol production too costly, finally making it completely illegal from 1920 to 1933, thereby handing the oil companies a monopoly on producing vehicle fuel.

From 1973 to 2003, for example, the Federal government paid $74 billion for energy subsidies to support nuclear power and fossil fuels, compared to just $26 billion in subsidies during the same time frame for renewable energy technologies and energy efficiency. In August/September 2008 Congress authorized $25 billion in subsidies to go to the U.S. automakers to help advance future fuels and technologies. Not one of the three Detroit automakers stepped up to claim some of that money. However, one month later the CEOs of the three companies went to Washington to beg for subsidies to allow them to continue making gasoline-powered vehicles. The government gave GM and Chrysler more than twice what they offered for future fuel and technologies subsidies, and the only people who benefited from this are the oil companies and OPEC. It is the oil companies and OPEC that should have bailed out Detroit, not the American people. The gift to GM and Chrysler of billions in dollars, and the right to scam shareholders and debtors out of untold billions more is as much an oil/gasoline subsidy as if they handed all that money directly to the Saudis, Iran and Hugo Chavez.

It’s amazing that opponents to alt-fuel subsidies think it’s okay to subsidize oil and gasoline R&D but that it’s suddenly un-patriotic or anti-free market when it comes to subsidizing something that might wrest power away from OPEC and the oil industry.

YOUR REPORT TO THE FEDERAL RESERVE BANK
The report you wrote for the Federal Reserve Bank presents many of the same incorrect and misleading points that you made in the interview. However, the report goes much further in making outrageous claims (by you directly or via the use of quoted citations) with greater expansion on those statements made to John Stossel. I’ve listed several of them below, with my comments. I stopped at just nine examples for the sake of some brevity and because there becomes a redundancy in your opposition to ethanol and your false statements that doesn’t require reiteration.

1. You write, “If ethanol is truly economically competitive with gasoline absent government preference - as many of its supporters seem to believe - then private investors will produce ethanol for the market regardless of whether government lends a hand (Tyner and Taheripour, 2008).”

After a hundred-plus years of government support and subsidized funding to the oil/gasoline industry, it’s absurd to think that an under-funded fuel/energy alternative of any kind could compete with gasoline without significant government assistance. The benefits of developing a domestic alt-fuel industry that causes less pollution and frees us from external forces makes the effort worthwhile, even if it was no more economical than petroleum oil fuels. In order for private investors to produce ethanol in the quantity that it needs to retire gasoline, the investors and the alt-fuel industry need the same government intervention that was used to make oil/gasoline the primary fuel. It’s time to level the playing field.

2. You wrote, “If ethanol is not economically competitive with gasoline, then subsidies distort the market by steering investment away from economically attractive gasoline and toward economically unattractive ethanol.”

I congratulate you on this clever ruse to hide the real issue. It’s gasoline’s price that is the distortion. So much in subsidies and incentives are given to the oil/gasoline companies that the price of gasoline is artificially held down. If they had to pay to defend their oil wells, pay to protect their lines of distribution, pay for all of their own exploration, and to bailout makers of gasoline-powered vehicles whenever they run into trouble (thereby protecting their primary user of their gasoline and oil), gasoline prices would be much higher.

Furthermore, if the government removed their unjustifiable limits on adding alcohol to gasoline, and mandated e15, or e20 or e50 for all fuel injected vehicles, producers of ethanol would be able to attract more private investment, build more efficient plants, amortize expenses more economically, and take advantage of volume pricing as it might relate to the production and acquisition of raw materials.

3. You wrote, “Economists broadly agree that, as a general rule, leaving production and consumption decisions to market actors proves more economically efficient than leaving the same to governmental planners. Only if some unique and fundamental failure occurs that prevents gains to trade in a given market is there room for the argument that government intervention improves the functioning of those markets (Cowen, 1988, and Cowen and Crampton, 2003). “

By “economists” I presume you mean that great body of people who have never actually been involved in the entrepreneurial building of a business. Those whose knowledge of market actions and demands come from text books or a laboratory-protected environment that never had to face real supply and demand or competitive issues because they were able to simply buy their way into a prominent market position. The price of gasoline has nothing to do with the common definition of “supply and demand.” It is a highly regulated and rigged market. It is no more subject to legitimate supply and demand forces than is the Diamond industry under the complete dictatorial control of DeBeers.

But my biggest objection to what you wrote above is that without the government stepping in to correct the unfair advantages that have been given to the oil/gasoline industry since the mid-1800’s, “market actors” will never get the chance to prove that ethanol can not only compete with gasoline, but overcome it.

4. You wrote, “The oil industry’s reluctance to use high blends of ethanol in gasoline absent a government mandate, build ethanol delivery infrastructure to supply service stations, or provide E85 pumps3 are often marshaled as evidence that oil companies are unfairly strangling an economic competitor in its bed. The existence of this self-serving oil cartel is said to explain why this otherwise commercially attractive transport fuel – ethanol - requires government subsidies and consumption mandates. Yet, as of 2007, 38 percent of the retail fuels market was composed of independent service stations, not vertically integrated franchises, and another 13 percent of grocers and other hypermarkets. Only 49 percent of retail fuel was sold by stations associated with major oil companies. Like wise, 56 percent of the refining market was composed of independent, vertically deintegrated refining companies (Lowe, 2008). Big Oil is simply incapable of keeping ethanol out of service stations if profits are to be made by selling ethanol to motorists.”

At best, this is just another example of your naÔve understanding of commerce and any market. But since you are “among the most widely cited and influential critics of federal energy and environmental policy in the nation,” I must conclude that it is really just another dishonest attack upon ethanol.

Why, and how could fueling stations sell anything but the product that is provided to them, and for which they have customers? You make it sound as if station owners can control the marketplace. Perhaps in 1915 an abundance of fueling stations with a particular affinity for one fuel over another could have influenced which vehicles their local neighbors might buy, but those days are long gone.

Gasoline companies no longer need to own filling stations to control the market. They’ve done it by buying politicians and car company CEOs. Real competition between gasoline brands has been eliminated through mergers and mandated gasoline formulas: there is virtually no difference between them. Service stations no longer offer free drinking glasses, dishes or trading stamps because they no longer have to compete for business.

5. You wrote, “The EIA calculates that federal oil and gas subsidies outside the electricity sector total $30,000 per million British thermal units (BTUs). Biofuel subsidies outside the electricity sector, however, ($3 billion of the $3.2 billion of which are directed at ethanol via the blenders’ tax credit), work out to $5.72 million per million BTU (EIA, 2008, Table 36). Using EIA figures for oil and gas subsidies and estimates of the cost of the blender’s tax credit from Koplow (2007), economist Douglas Tiffany (2008) calculates that oil subsidies in 2007 were slightly less than $0.15 per gallon of gasoline while ethanol subsidies totaled $0.588 per gallon. Whether we embrace a narrow or broad definition of subsidy, the conclusion is the same; oil subsidies are relatively trivial while ethanol subsidies are relatively substantial.”

The 2007 gasoline subsidy that you cite most likely did not include the cost of fighting a war in Iraq and a war in Afghanistan. It probably also did not include the cost of stationing air force units in Saudi Arabia, Kuwait and other oil producing nations. The subsidy probably also did not include the cost of our navy protecting and escorting oil tankers (even those not registered to the U.S.). I’d be surprised to learn that the subsidy included the cost of beefing up the protection of American embassies around the world. And the 2007 subsidy definitely did not take into account the cost of the lives of the U.S. servicemen who died while fighting these wars and protecting the oil/gasoline assets. Protection subsidies like these have been paid by our government every year since at least the First World War.

There is nothing trivial about the subsidies that have been and are given to gasoline. Your estimation of them as “relatively trivial” is merely an indication of your moral depravity.

6. You wrote, “Proponents of ethanol subsidies argue that if the price of oil included the cost of our “oil mission” in the Middle East, the wars that the U.S. military engages there to protect oil supplies, the costs associated with our need to “kiss the ring” of Middle Eastern oil producers, the economic damage by terrorists from the flow of petrodollars into their coffers, and the harm done to U.S. interests by oilrich states like Iran, Venezuela, and Russia, then oil consumption would be far less than it is now. Alas, it is believed that those national security externalities are not embedded in gasoline prices and, as a result, gasoline consumption is heavily subsidized. Ethanol consumption is thus suboptimal and ethanol subsidies are an appropriate remedy. Economists, however, are far less worried about the national security costs of America’s reliance on oil (foreign or otherwise) (Bohi and Toman, 1996) and with good reason: Economists understand oil markets far better than do foreign policy elites. The alleged national security externalities associated with gasoline consumption are for the most part a figment of an imagination unmoored from a good understanding of market reality.”

In addition to my response to Point #2 above, if the cost of the wars and military actions were covered in the price of gasoline and/or the Federal taxes placed on gasoline our debt would not have risen so high since Operations Desert Shield and Storm began. This is proof that the cost of gasoline is heavily subsidized by the government.

Also, economists are worried about national security costs. Whether they understand anything better than anyone else is debatable, but for you to in any way say that it is not a concern to them is outright nonsense. Moreover, the news reports and video clips that we have seen on an almost minute-by-minute basis since Iraq first attacked Kuwait, right up to the latest reports on CNN or FOX News, are not a figment of anyone’s imagination. American forces were and are fighting to protect the Saudi royal family’s oil assets.

7a. You wrote, “Many believe that reliance on foreign oil requires the United States to militarily defend friendly exporting states and to ensure the safety of oil supply facilities and shipping lanes. Those marching under banners declaring “No Blood for Oil” seem to believe that is the case, as do most mainstream foreign policy analysts. Delucchi and Murphy (2008) offer a rigorous attempt to quantify the public dollars associated with the “oil mission.” They suggest that if motor vehicles in the United States did not consume Persian Gulf oil, the U.S. Congress would have likely reduced military expenditures by $13.4 to $47 billion in 2004 (one of the two years examined in the analysis). “

The U.S. sent no troops to fight in the long Iran/Iraq war, even though both countries produce and export oil. Our non-involvement had virtually no effect on our way of life and there doesn’t appear to have been any ill-effects to freedom for first-world countries. Not participating didn’t cause us to spend extra billions to defend and prop up one or the other country. From 1980 (the start of the Iran/Iraq war to 1988 (the end of the war), the price of gasoline didn’t change (it actually fell slightly). In the effort to defend the Saudi family and Kuwait (in other words, subsidize them) we experienced skyrocketing gasoline prices as well as an exploding national debt. The only reason we went to the aid of Saudi Arabia and Kuwait, and then back into Iraq in the recent seven years, is to protect their oil assets. It’s very possible that if we did not engage in the first and second Gulf Wars that prices of gasoline might not have gone to the levels that it has and we wouldn’t have spent trillions on the fight. We also would not have lost thousands of servicemen.

As far as I know, from 1980 to the present day, the United States has lost no servicemen in the effort to protect and defend ethanol production.

7b. You wrote: “If U.S. motor vehicles did not consume any oil at all, military expenditures would have, oddly enough, gone down by far less: by $5.8 to $25.4 billion in 2004. The “best guess” of this analysis is that, if U.S. gasoline consumers were forced to pay for the U.S. oil mission, gasoline prices would increase by $0.03 to $0.15 per gallon. Simple economics, however, suggests that the oil mission—however large it may be—is unnecessary, regardless of what Congress may think. Oil producers will provide for their own security needs as long as the cost of doing so results in greater profits than equivalent investments could yield.”

If the oil producers are so capable of providing their own security why was it necessary to stage Operation Desert Shield and then Operation Desert Storm? Why has the United States and other countries not been reimbursed 100% by the Saudi and Kuwait governments? Since we acted as a mercenary force, why haven’t we also received a profit in doing so?

For you to say that oil producers are willing and able to provide for their own security, after what has gone on, you would have to be absolutely insane.

7c. You wrote: ”Because Middle Eastern governments typically have little of value to trade except oil—oil revenues, for instance, are 40 to 50 percent of Iranian government revenues and 70 to 80 percent of Saudi government revenues—they must secure and sell oil to remain viable (EIA, 2006). Given that their economies are so heavily dependent on oil revenues, Middle Eastern governments have even more incentive than do consuming states to worry about the security of oil production facilities, ports, and shipping lanes (West, 2005). In short, whatever security our military presence provides (and many analysts think that our presence actually reduces security; see Jervis, 2005) would be provided by incumbent producers were the United States to withdraw. That Saudi Arabia and Kuwait paid for 55 percent of the cost of Operation Desert Storm suggests that keeping the Strait of Hormuz free of trouble is certainly within their means. The same argument applies to al Qaeda threats to oil production facilities. Producer states have such strong incentives to protect their oil infrastructure that additional Western assistance to do the same is probably unnecessary. Although terrorists do indeed plot to disrupt oil production in Saudi Arabia and elsewhere, there is no evidence to suggest that producer-state security investments are insufficient to protect their interests. The U.S. oil mission is thus best considered a taxpayer-financed gift to oil regimes (and, perhaps, the Israeli government) that has little, if any, effect on the security of oil production facilities or, correspondingly, the price of oil. One may support or oppose such a gift, but our military expenditures in the Middle East are not necessary to remedy a market failure.”

My response in 7b answers all this. But in addition, if all of our efforts and expenditures were unnecessary, as you set forth, that doesn’t mean that we didn’t spend billions/trillions on this particular oil and gasoline subsidy, it just means that it was another ill-advised subsidy going to the oil/gasoline industry.

8. You wrote: “Does Western reliance on oil put money in the pocket of Islamic terrorists? To some degree, yes. Does that harm Western security? Probably not - at least, probably not very much. Before we go on, it is worth noting that only 15.5 percent of the oil in the world market is produced from nation-states accused of funding terrorism (Lundberg Survey, 2006). Hence, the vast majority of the dollars we spend on gasoline do not end up on this purported economic conveyer belt to terrorist bank accounts. Regardless, terrorism is a relatively low-cost endeavor and oil revenues are unnecessary for terrorist activity. That a few hundred thousand dollars paid for the 9/11 attacks suggests that the limiting factors for terrorism are expertise and manpower, not money. This observation is strengthened by the fact that there is no correlation between oil profits and Islamic terrorism. In Taylor and Van Doren (2007), we estimated two regressions using annual data from 1983 to 2005: the first between fatalities resulting from Islamic terrorist attacks and Saudi oil prices and the second between the number of Islamic terrorist incidents and Saudi oil prices. In neither regression was the estimated coefficient on oil prices at all close to being significantly different from zero. During the 1990s, inflation-adjusted oil prices and profits were low. But the 1990s also witnessed the worldwide spread of Wahhabi fundamentalism, the buildup of Hezbollah, and the coming of age of al Qaeda. Note too that al Qaeda terrorists in the 1990s relied on help from state sponsors such as Sudan and Afghanistan—nations that are not particularly known for their oil wealth or robust economies. Producer states do use oil revenues to fund ideological extremism. Saudi financing of madrassas and Iranian financing of Hezbollah are good examples. But given the importance of those undertakings to the Saudi and Iranian governments, it is unlikely that they would cease and desist these activities simply because oil profits were down. They certainly were not deterred by meager oil profits in the 1990s.”

Oh my, but you are insane. You start by writing that even if Western reliance on Middle East oil does put money in the hands of terrorists, it’s not very much, like saying “It doesn’t mean anything.” But then you point out that the attacks on September 11, 2001 only cost a few hundred thousand dollars – hardly enough to even mention. To a sane person this means that any money given to terrorists is too much. A sane person would say “Let’s not do business at all with an oil producing regime that sponsors terrorists.” A person with a working brain would say “We must do everything to reduce our dependence on the product that keeps these murderers in business. We must become energy independent.”

But not you; no, in the Stossel interview you arrogantly declare that we will never be energy independent, and that domestic alt-fuel sources will never solve the problem. You may be ultimately correct, if you and others are allowed to continue to lie and misrepresent the facts regarding ethanol and other alternative fuels.

9. You wrote, Regardless, ethanol production cannot displace significant amounts of gasoline consumption (Akinci et al., 2008). Even if the entire U.S. corn harvest were dedicated to ethanol production, only 3.5 percent of current gasoline consumption would be displaced (Eaves and Eaves, 2007). All available cropland in the United States would have to be dedicated to corn production if all U.S. vehicles were powered by fuel composed of E85 ethanol. By 2036, all rangeland and pastureland would have to be added to that total to maintain adequate production. By 2048, all land outside of urban centers would be required for corn production (Dias de Oliveira, Vaughan, and Rykiel, 2005). Thus, no matter one’s opinions about the dangers of oil dependence (foreign or otherwise), corn ethanol cannot displace enough oil to matter.”

Ethanol can be produced in sufficient quantity to displace not just foreign oil, but all oil. After the period of time that it will take to transition away from the use of gasoline, which should be mandated to be not more than five years, petroleum oil in America should be used exclusively to make non-fuel products that require it as a chemical ingredient. About two years ago I wrote a paper on this topic, titled “No New Gasoline-Powered Vehicles By 2014…Can It Be Done?” It can be found by CLICKING HERE.

In closing, I remain appalled by your ignorance, your lack of morale fiber and that any person or entities would seriously take advice from you. You should be ashamed at yourself and the Cato Institute should be embarrassed to have to as an associate.

Cordially,

Marc J. Rauch Exec. Vice President/ Co-Publisher THE AUTO CHANNEL

EDITOR'S NOTE: How prevalent is the problem of the spreading of lies and misconceptions about ethanol? Hereís two more examples:

Detroit News Story Goes Overboard in Slamming Ethanol
Not Satisfied with Gluttonous Profits and Environmental Catastrophe, the Oil Industry Works Overtime to Malign Alternative Fuels
Ethanol Opponents Begin Ad Campaign

SEE ALSO: Ricardo Research Shows E15 Poses Minimal Risk to Older Vehicles
SEE ALSO: The Auto Channel Fights for the Truth about Ethanol Versus Gasoline
SEE ALSO: Ed Begley, Jr, Converts Prius to use Ethanol and Ethanol Booster (Road Trip VIDEO)
SEE ALSO: Exclusive Audio of Feb 3, 2010 Conference Call U.S. Energy Bio-fuel Task Force
SEE ALSO: Princeton BioEthanol Tutorial
SEE ALSO: Gasoline, America's Problem - Ethanol, American Solution
SEE ALSO: Electric Vehicles-Solution or Diversion?
SEE ALSO: Big Oil Benefits From "Divide and Conquer"
SEE ALSO: Yes Virginia There Is A Single Solution To "No More Gasoline Now"

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