GUSHER OF LIES - Book Review and Reply to Robert Bryce Pt 4


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A Book That's Aptly Named for What It Is

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Marc J. Rauch

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Part 4

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



I GOT YOUR RELIGION RIGHT HERE

Joseph Goebbels, the infamous minister of propaganda for the Nazis, used a technique that has become known as “doublespeak,” which is defined as evasive language that says one thing but means another, usually the opposite.

Due to the over-lapping of time, there’s a question as to whether the oil industry was guilty of doublespeak first or if the oil industry simply adopted the technique from the Nazis. Given that Standard Oil began their propaganda against ethanol shortly after the passage of the FREE ALCOHOL bill in 1906, and that they later engaged in un-American activities with the Nazis before and after our entry into World War II, perhaps Goebbels learned his craft from the oil industry.

In any event, no group or entity has mastered doublespeak like Big Oil and its shills: From accusing ethanol for causing the engine problems that gasoline is actually guilty of, right up to and including Bryce’s comment that “Ethanol isn’t a motor fuel. It’s religion.”

Bryce writes, “America is divided into two camps, the believers and the heretics.” He adds, “So far it appears that the believers are winning. And their zealotry has created a multi-billion-dollar bushel of subsidies (for ethanol)…”

Bryce runs through a series of character assassination criticisms of Bill Clinton and Al Gore (which I don’t generally disagree with), before settling onto the comment that “The irrational exuberance over ethanol has led investors to dump bushels of cash into companies that produce ethanol.”

While it would be fantastic if ethanol was “winning,” how anyone could say that ethanol and ethanol proponents are winning is beyond me. If ethanol was winning this document wouldn’t have been written. The effort to get any kind of acceptance of ethanol into the marketplace is always met with the fiercest attacks by the oil lobby and by consumers who have been gulled (as Bryce puts it) into believing that ethanol is the inferior fuel. Even with more than 180 years of experience and proof that ethanol is the superior fuel Big Oil keeps screaming that more testing is necessary.

If any group is guilty of zealotry, it’s the shills for Big Oil. People like Robert Bryce just suck in the lines fed to them and spit them back out. I seriously doubt that Bryce or Taylor or Searchinger or any of the other oil industry lackeys who I mentioned have ever even tried pumping a gallon or two of E85 into their vehicles’ fuel tanks, just to see what happens. They pretend they know something about this subject matter but all of their information is second or third hand, and it comes from others who only received the information second or third hand.

Yes, subsidies have been given to the ethanol industry and investors have invested in ethanol companies, but remember my comments earlier about Bryce’s acquiescence to the same types of subsidies and investments for electric cars. As I pointed out, he and the oil lobby have no problem with the subsidies given to electric car development because they know that electric cars are not a threat to the oil industry. “All subsidies are equal, but some are more equal than others. Subsidies for electric is good; subsidies for ethanol is bad.” You can almost hear George Orwell’s Animal Farm pig making that statement; it’s doublespeak at its finest. (Orwell’s next book, 1984, coined the terms “newspeak” and “doublethink.” These are considered the predecessors to “doublespeak.”)

Let me be frank about the subsidies situation: It is 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 is no more economical than petroleum-based 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 assistance and intervention that was used to make oil/gasoline our primary fuel. The playing field must be leveled.

The oil industry has benefitted from a staggering amount of government subsidies, which are “paid” out in many forms. Government assistance to the oil and gasoline industries continue to this very day even though oil-related companies have recorded astronomically huge profits year after year. And we continue to wage war and use our military to defend the oil industry as if our military was the oil industry’s own private security force.

Worst of all, hundreds of thousands of American service men and women have lost their lives in oil-induced wars and military engagements. This is the incalculable cost that I referred to earlier. What value do we put on the life of an American soldier, sailor, airman or marine? Why should we discount their lives just so that some Arab sheiks and Third World dictators can drive their million dollar Ferraris in the Desert?

I am not against war; I’m not philosophically opposed to it. I understand the reasons and need to go to war. Often I think we have not gone to war quickly enough. I am, however, against long drawn out wars where our quick victories are turned into defeat just to secure an oil position or to protect a bunch of misogynist racists who pretend that they rule by divine right.

We overpay for gasoline and diesel at the pump, we overpay for them via taxes, and we overpay with human lives. Later on in his book, Bryce talks about morality. He questions the morality of using farmland to grow products that are used to create a fuel to replace gasoline. And to help bolster and explain this position, Bryce uses a quote from Fidel Castro – that’s right, the same Fidel Castro that made himself a king and then subjected all his fellow countrymen to a life of serfdom. What a role model for morality.

So I’ll raise the same morality question, what’s more moral, protecting the lives of American citizens or protecting an Arabs sheiks’ right to buy a Maserati that matches his Ferrari?

A study released by the Environmental Law Institute in September 2009, covering the years 2002 to 2008 revealed that:

The federal government provided substantially larger subsidies to fossil fuels than to renewables. Subsidies to fossil fuels—a mature, developed industry that has enjoyed government support for many years—totaled approximately $72 billion over the study period, representing a direct cost to taxpayers (this figure did not include the cost of our military involvement anywhere in the world; or the funds provided to clean up oil spills; or for water infrastructure improvements in ports, harbors, or waterways that are used to accommodate oil tankers).

Subsidies for renewable fuels, a relatively young and developing industry, totaled $29 billion over the same period.

Most of the largest subsidies to fossil fuels were written into the U.S. Tax Code as permanent provisions. By comparison, many subsidies for renewables are time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry.

On July 3, 2010, The New York Times published a story by David Kocieniewski, a Pulitzer Prize winning writer, titled, “As Oil Industry Fights a Tax, It Reaps Subsidies.” Among other findings, Kocieniewski reported that:

“When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.

The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes. At the same time, BP was reaping sizable tax benefits from leasing the rig.

According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.

With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure, warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil. But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.

Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.

Other tax breaks were born of international politics. In an attempt to deter Soviet influence in the Middle East in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers. Saudi Arabia and others began to treat some of the royalties as taxes, which entitled the companies to subtract those payments from their American tax bills. Despite repeated attempts to forbid this accounting practice, companies continue to deduct the payments. The Treasury Department estimates that it will cost $8.2 billion over the next decade.”

In his encyclopedic book “Alcohol Can Be A Gas,” David Blume writes “Between 1968 and 2000, oil companies received subsidies of $149.6 billion, compared to ethanol’s paltry $116.6 million.”

On September 23, 2012, Kevin Begos, reporting for Associated Press, wrote a pro-oil story titled, “Decades of federal dollars helped fuel gas boom.” The sub-head of the story was, “Pioneers in gas drilling say government research and tax breaks helped launch boom.” The story provides valuable insights into why government subsidies were necessary:

“Over three decades, from the shale fields of Texas and Wyoming to the Marcellus in the Northeast, the federal government contributed more than $100 million in research to develop fracking, and billions more in tax breaks.

Now, those industry pioneers say their own effort shows that the government should back research into future sources of energy — for decades, if need be — to promote breakthroughs.

"The government has to be involved, to some degree, with new technologies."

The first federal energy subsidies began in 1916, and until the 1970s they "focused almost exclusively on increasing the production of domestic oil and natural gas," according to the Congressional Budget Office.”

So contrary to how the Big Oil shills try to play down how much government support they get, while yelling their heads off about subsidies given to ethanol, the facts reveal a completely different story.

Bryce writes that “Tax incentives won’t result in energy independence, but they will mean more profits for the world’s largest agribusiness outfit, Archer Daniels Midland Co.”

Archer Daniels Midland? Bryce is comparing ADM’s profits to the profits recorded by the oil and gasoline companies? He is mad, Bryce is insane. At just about the time that the paperback edition of GUSHER OF LIES was published ExxonMobil declared a fourth quarter profit of more than $40 billion. That’s just ExxonMobil not the entire gasoline industry, and it was just for one quarter, and it came on top of all the subsidies and tax breaks that they received. Archer Daniels Midland reported their fiscal fourth quarter profit of $372 million. Although $372 million is nothing to sneeze at, it’s less than 1% of ExxonMobil’s profit.

BIG OIL GETS AN $80 BILLION ‘BONUS’ SUBSIDY

We all remember the $80 billion given to General Motors and Chrysler to bail them out, right? The tax payers paid for that. But the tax payers should never have paid for the bail out. The bailout should have come from the automobile industry’s number one beneficiary, the oil industry. Without automobiles, the oil industry is done. The days of kerosene lighting is over. The oil industry had the most to lose and they had (and have) the resources to save the two Detroit manufacturers. The oil industry was given a gift; a gift that they didn’t deserve. A gift that was twenty times more than the Archer Daniels Midland 2008 fourth quarter profit. ExxonMobil could have provided all the bailout funds by themselves from their annual 2008 profits. Isn’t that what a company is supposed to do, reinvest their profits to secure future earnings?

In essence, by providing the bailout funds, America paid for a second time (and perhaps third time) for the vehicles we bought from GM and Chrysler over the years. We already paid for them; they’re long gone.

If GM and Chrysler went away, only some American pride would have been hurt. Losing the specific vehicles that these guys were producing would have been no shock to the market; they were hardly the best or most popular options for new vehicle buyers. All the other car manufacturers would have gladly picked up the slack, and since we are already have a very healthy trend towards foreign brands establishing manufacturing plants in the U.S., in all likelihood the building of additional plants would have increased and they may have acquired some of the old plants for re-fitting.

Now, some 4 years later, although the loan has been repaid, what do we have to show for it? Two American brand car companies who are more interested in the Chinese market than the American market (yeah, yeah, I understand the value of keeping the brands alive in America in order to make them more attractive to Chinese buyers who think they are getting some genuine American items. I worked for a long time in the garment industry, I know the drill). So we put up $80 billion for that? As I said before, ExxonMobil could have done that. (Read the editorial I wrote in November 2008, “The Gasoline Companies Should Fund the Big Three Bailout”.

What if ExxonMobil would have bailed out GM and Chrysler? Wouldn’t that have been heroic? I think so; I think it would have been homerifically heroic. ExxonMobil could have milked that puppy for 50 years: “We Saved the American Auto Industry!” Wow, no one would even think of bringing up the Exxon Valdez oil spill after that. What an incredible marketing and public relations coup it would have been. No, instead Bryce and the other oil shills just whine about Archer Daniels Midland’s comparatively miniscule profits.

Even CATO Institute agrees that the government bailout wasn’t worth the effort. See: Truth About GM-Chrysler Bailouts.

In the meantime, all of GM’s common stock shareholders and Chrysler’s bond holders lost everything. How many millions is that? How many billions is that? When do these investors get bailed out?

Robert Bryce’s entire recitation on the unfairness of subsidies given to the ethanol industry is nothing more than exaggerated hypocritical, doublespeak.

GRAND NATIONAL SPITTING CONTEST

Bryce attempts to make hay with a short history of “financial inducements’ being given to politicians on behalf of the ethanol industry. Got it; duly noted. Bribes are offered to politicians, and politicians accept them.

Bryce also writes about some wrong-doing that ADM was found guilty of, and fined. So?

Other than in the hope that no one will take more than two seconds to consider all of the bribes, scandals, convictions, and fines that the oil industry is responsible for, not to mention all the deaths of those workers who were killed in drilling related accidents and in the tetraethyl lead experiments, I don’t get the point in his trying to show that the oil industry can spit further. We know that. The oil industry can spit further, and has been spitting on the public for more than 100 years.

I guess I already answered it: Oil industry doublespeak.

FOOL OR FUEL?

Bryce titles the header for his discourse on this issue as “Food Or Fuel?” But my title is actually far more appropriate because anyone who participates in disseminating or believing the food vs. fuel argument is a fool. You may recall that in Robert Bryce’s email response to me that he stated, “I am fundamentally opposed to use of food to make motor fuel.”

The basic premise is that corn is being taken out of the mouths of starving people and turned into ethanol just to enrich greedy farmers and distillers. We’ve all watched those Sally Struthers’ “fly-in-the-eye” TV shows where she asks for donations to feed the starving African children. So that’s the image that the oil industry wants the public to visualize, and that’s the image that far too many fools in the public choose to go with.

Unfortunately for the oil industry, it is a completely and totally false image that when you know the truth it only makes you laugh in amazement that they are able to get away with this nonsense.

Let me start with the most palpable image, the starving African children. If corn was no longer used for ethanol does that mean that we would see images of African children sitting around a campfire eating delicious corn on the cob smothered with butter? No. Why not? Well, because the world outside of America doesn’t eat corn the way that Americans do. They don’t like it, they don’t know it. They eat wheat. Corn is not wheat. Corn meal could be used in some circumstances in place of wheat, but they like wheat.

So why isn’t there enough wheat for them? Partially because Russian and Chinese wheat harvests have been miserable and so the wheat that would have been plentiful is hard to come by. Consequently there are those who feel that we in America have to make up for the farming losses suffered by the two giant communist countries, Okay, I know, I read the memo, Russia is Russia now, not the Soviet Union. Sorry, but their government and economic system still sucks and they still can’t get the farming thing down properly. China; regardless of how great their Olympics presentation was, is still communist China.

Then we have another problem. Let’s say we get the corn to the starving African countries. Then what? The local warlords prevent the supplies from getting to the people until and unless they get paid by the starving people…you know, the same starving people who have no jobs and no money.

Then we have another problem, assuming that the Africans decided that they wanted to make popcorn or corn-on-the-cob part of their staple diet, and assuming that the warlords suddenly were stricken by guilt for how they treat their fellow countrymen, who pays for the corn grown by American farmers? We would have to in the form of subsidizing the famers to grow the corn, and we give it away as part of foreign aid.

Did I say “subsidizing?” Is this another instance where the oil industry is okay with subsidies as long as the subsidies don’t go into producing a fuel that’s competitive with gasoline and diesel? I guess it is.

So here’s an idea, since the oil industry didn’t take advantage of the chance to be heroes by bailing out the auto industry, how about they use all of their profits to buy up all the corn before the greedy ethanol distillers can get it, and then send the corn to the starving people? Wow, another great PR idea.

And get this…the empty tankers that carried Arabian and Nigerian oil to America can be used on the return trip to carry the corn to the starving countries! WOW, and double WOW!

Let me get back to reality. What I just wrote won’t work because the corn that’s grown is not grown for human consumption; it’s grown as feed stock for animals. More than 90% of all the corn grown in America is not fit for human consumption. Can it be grown for human consumption? Sure, but then what about the animals? Farmers and ranchers need to feed the animals to make them grow so that the animals can get big and fat and provide us with meat. Did we suddenly give up eating meat?

There’s still another problem, most of our corn is genetically engineered to help the corn grow big and abundant. Most countries have regulations against importing food that has been genetically engineered. If we don’t continue using this process then our abundant crops might not be so abundant. So lower crop yield could result in not enough corn for the starving people who don’t eat corn, which results in higher prices or more subsidies that have to get paid to the farmers, which then raises other prices.

Here’s the amazing part: much of the corn that is used to feed animals is not used as you or I eat corn, it’s first converted to “distillers grains.” The process breaks down the corn so that the starch is removed and only the best parts (in terms of feedstock for cattle) remains. It’s rich in nutrients, providing about 4 times more protein to the animal than straight corn.

As the name “distillers grains” suggests, the process is conducted by creating a mash and then distilling the mash to get rid of the liquid. This liquid is ethanol. This ethanol is the ethanol that can be used to fuel an internal combustion engine. If the liquid wasn’t used it would be discarded. Why waste something that provides so much nutrient benefits that can be used in virtually every gasoline-powered engine and makes a profit? The above is only part of the story. American farmers grow as much corn as they do because they know how to grow corn, they have the soil and climate conditions that allow for corn to be grown, and mostly because they have a marketplace for the corn.

The image that the oil industry wants to create in this situation is one where just as the farmer is going to deliver his delicious corn into the mouths of starving people the greedy ethanol producers swoop in and buy up all the corn. This isn’t the way a manufacturing business is conducted.

Farming is just another manufacturing industry, with a few more concerns that are related to weather conditions. But it follows the same rudiments of manufacturing that is used for automobiles, clothing, appliances and a thousand other items. Mature, experienced manufacturers don’t just start making products simply because they have the facilities and workers to do so. They go out and pre-sell the next season’s line. They then use the pre-sell orders to secure financing that allows the manufacturers to pay the workers, pay for the mechanical aspects of production, pay for marketing, and pay for distribution. Yes, there are instances of people with their family and friends’ money who go willy-nilly into production in the hope that there will be buyers for their finished products. This is not the preferred way to be in the manufacturing business; it is very risky.

If there wasn’t a known demand for the corn (demand equals money) the farmers would not grow it, or at least not nearly so much of it. They would grow something else, or they just wouldn’t grow anything. If the farmers don’t grow anything they would be unemployed. So then the farmers would get some kind of public assistance, which in itself is a subsidy. If the famers chose to grow something else it could cause a glut on the market, causing prices to fall, which would hurt even more farmers. The government may still have to step in with some financial assistance or pay the farmers to not grow anything (which has happened many times in the past). This is a subsidy. If you don’t like subsidies, why would this subsidy be more acceptable?

The bottom line is that the use of the starving African children imagery is just a ruse to tug at the heartstrings of people who are or would like to be socially conscientious. The solution for the starving people is to teach them how to grow corn or wheat or cucumbers themselves. And this has been tried, of course. However, a peculiar thing has happened. In the effort to get some of our surplus produce in the hands of people in third world countries, the lower price (and often no-price) of the items winds up under-cutting similar locally grown produce. This makes it unprofitable for the local farmer to continue in business, and it drives him out.

Now while it took several paragraphs to explain these rudiments of manufacturing, it is really very simple to understand and makes all the sense in the world. So then why don’t the oil industry shills get it? Why do all these high-powered, well educated people like Robert Bryce and his cohorts not understand this? Why do they insist on painting the food vs. fuel picture? They answer is that they either don’t know this because they have no real business knowledge and experience or because they are paid to not acknowledge it. I happen to believe it’s both.

On the other hand, if I’m the one who is wrong or ignorant, then virtually every manufacturing company in the world is wrong and ignorant.

Food vs. fuel is a non-issue, unless you are a fool, Mr. Bryce.

Moreover, specific to the corn issue, corn doesn’t have to be used to make ethanol. In fact it is one of the least desirable crops to be used because of the relatively low annual yield and the heavy requirement for water. But again, the reason why corn is the primary base material is because we have so many farmers who are experienced growing it and because we have so much land. In Brazil they use sugar and in Australia they use sweet sorghum. Some American ethanol farmers are already switching to sorghum because of water issues. Sorghum can also be used to make distillers grains too, so we’ll still get a crop that can feed animals and produce fuel. It’ll be fun to see what argument the oil industry comes up with then.

One way or the other, I’d rather have my fuel money go to American farmers then to foreign terrorists.

LAND HO … HA, HA, HA

Bryce takes the usual line against using corn or other produce because of available land. In doing so, he again makes the jump from present ethanol production and use to a full-on replacement of all fossil fuels as a way to portray the impossible nature of the effort. He has no room for middle ground.

Bryce takes the amount of land currently used to grow corn (that’s used to make ethanol), he multiples it by the liquid volume that would be necessary to replace all gasoline, and declares it is impossible.

The number of the amount of land that he uses for his statistics was a number given to him by someone else with an anti-ethanol agenda. He then uses it against a crop yield number that is out-of-date or was never correct in the first place. Taking those figures Bryce then multiples it all together using the wrong BTUs information, as I explained earlier, to arrive at an “energy replacement” number.

Bryce references America’s total available cropland as 440 million acres (not just for corn, all crops). He also cites a number used by Dennis Avery of the Hudson Institute as the amount of land that would be needed to replace all imported crude oil (546 million acres) Obviously there is a significant difference so Bryce declares it impossible

However, in addition to the 440 million acres of cropland, America also has 939 million acres of farmland. According to land definitions, farmland is not quite as good as cropland, but suitable for growing things such as specialized energy crops.

According to David Blume, who’s probably the single most experienced and knowledgeable guy in the world on ethanol and ethanol production,

“Of its nearly half a billion acres of prime cropland, the U.S. uses only 72.1 million acres for corn in an average year. The land used for corn takes up only 16.6% of our prime cropland, and only 7.45% of our total agricultural land. Even if, for alcohol production, we used only what the USDA considers prime flat cropland, we would still have to produce only 368.5 gallons of alcohol per acre to meet 100% of the demand for transportation fuel at today’s (2007) levels. Corn could easily produce this level—and a wide variety of standard crops yield up to triple this.”

Therefore, as compared to Bryce’s calculations that would never compute out, there is a vastly different side to the story. And, as Blume points out, if corn is replaced by a higher yielding crop then calculations become dramatically more favorable.

Furthermore, Blume’s figures pertain to 100% replacement of gasoline and diesel. As I pointed out regarding Bryce’s immediate jump from 0% to 100%, I’d say the same is true for Blume’s comments (and I’m sure David would agree); let’s first make sure we get E15 into national acceptance – which is just a tiny increase in America’s current use of ethanol. Then we can move onto E20, E30, E50, etc., etc. Even my very aggressive plan for cutting out the production of all new gasoline-powered vehicles takes place in five years and it never fully eliminates the use of gasoline as an engine fuel until the vast majority of gasoline powered vehicles are retired and off the road – that would probably be at least 15-20 years later.

Since improvements are regularly being made on crop yields, water requirements, and enzyme technology, the numbers will only get more favorable for ethanol. Remember what happened to the teleconferencing video guy who insisted that Internet connectivity would never be faster than 28.8k.

Click to continue to Part 5 of GUSHER OF LIES - Book Review and Reply to Robert Bryce


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