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DAVID KRUSE

By Staff | Aug 7, 2015

A listener commented on my recent ethanol report saying that I was 100 percent correct, which is something that I always like to hear.

I wish my wife would have heard that. He said that he wanted to add several points to the information.

He said that he has been racing cars for 50 years and has had extensive experience with engines and fuels. He said that with a 406-cubic-inch racing engine that SUNCO petroleum racing fuel produces 50 fewer horsepower than alcohol.

There is more oxygen and more power in ethanol than in gasoline.

Gas engines run hot. The oxygen in ethanol makes the engine run cooler and extends engine life.

The expert said no engines that would be damaged by ethanol have been built for at least 20 years or longer. He said he couldn’t think of any component in engines today that would be harmed by ethanol fuel.

There used to use brass floats in carburetors which could be sensitive to ethanol, but the systems are all different now using plastic and he can’t remember the last time he had seen that kind of carburetor. The new ones are electronic.

That fits with the comments of the National Public Radio, Car Guys who said they have seen 200,000 autos in the shop and they have never seen one harmed by ethanol.

The listener said he burns E-50 in his 2003 PT Cruiser and it gets 23 miles per gallon whether he burns E-10 or E-50. E-50 sells much cheaper. It’s cost per mile that is important not BTUs in the fuel. Ethanol is the lowest cost per mile molecule in the fuel tank.

So with ethanol you get more octane, more horsepower, a cooler engine which extends engine life, the lowest cost fuel per mile, and a lower U.S. aggregate fuel cost.

Ethanol also contributes to cleaner air, better corn prices, higher net farm income, reduced farm subsidies a negligible impact on food prices as the distillers grain nearly matches soymeal use as a feedstuff benefiting livestock producers.

It also allows for less dependence of foreign oil, no risk to ethanol plants from hurricanes as there is to Gulf platforms and Texas refineries . . . all of which comes with no cost to the taxpayer as ethanol gets no subsidies like the petroleum industry does.

All the Renewable Fuels Standard does is prevent predatory market practices of petroleum distributers who would otherwise restrict consumer access to ethanol fuels. Mid-range ethanol blends are the best which is why the petroleum industry doesn’t want consumers to have access to them. I use E-30 in my Dodge Ram hemi with great performance and it sounds like I should bump that up to E-50.

Keystone pipeline update

All of the Federal indecision over approval of the Keystone XL pipeline has run out the clock on state permits so that South Dakota has to go back through the approval process all over again. South Dakota approved the TransCanada Corporation pipeline in 2010. They have to start construction of approved projects within four years to maintain the permit and as that has not happened with the Keystone pipeline, the South Dakota Public Utilities Board has to start in again with new hearings next month. While the pipeline may transport some oil from the Bakken field most of the oil from North Dakota would go through the proposed Dakota pipeline through Iowa.

The primary use of the Keystone pipeline is to move oil from the Canadian tar sands through the U.S. to gulf refineries. TransCanada posted a full page ad in the Sioux Falls Argus Leader saying “While Keystone XL was a good project for South Dakotans when we received our permit in 2010, it was an even better project today. It represents a choice about where and how you want to get the energy and products you need for your everyday lives. We believe it is better to get that oil from Canada and U.S. oil fields rather than continue to import millions of barrels each day from the Middle East and Venezuela regions that do not share American values.”

It is rather interesting when oil companies use the oil security argument supporting a pipeline bringing dirty oil from Canada to the market while opposing U.S. ethanol. Ethanol is a U.S. product much cleaner than tar sands oil and far more cost effective than tar sands oil, yet the oil industry would rather use millions of barrels each day from the Middle East and Venezuela “regions that do not represent American values” than ethanol produced in the U.S. Mid-west. They are amazing hypocrites.

Part of the reason why the Keystone pipeline is less interesting is because tar sands oil is too expensive. The crude oil market is trading below $50 barrel while shale oil producers need $60 to breakeven and tar sands oil development costs over $80 barrel to develop.

A pipeline connecting them to the market may lower costs slightly but it has a marginal impact on the economic viability of tar sands oil development.

The major change impacting the Keystone pipeline is shale oil development. They could turn a lot of shale development back on before crude prices ever reach a level where it is cost effective to produce tar sands oil. Shale oil technology makes tar sands oil cost prohibitive, so why do they want a pipeline? Why would someone want to ship oil that costs $80 barrel that is dirty oil to a sub-$50 barrel oil market?

The Keystone pipeline must be pure magic if it can solve that economic equation.

One would have to question TransCanada’s sanity. When oil companies support the RFS then we would take another look at the Keystone Pipeline.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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