Open Letter Reply to Fool's Gold Criticism of Ethanol - Updated

Precious metal analyst Steve St. Angelo makes ill-informed attack on ethanol

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

Hi Steve -

Marc Rauch

I hope you're having a great summer so far, and that the balance will be equally good. Mine's been good, in case you're wondering, and I'll close out the summer with a bang as a featured speaker on behalf of ethanol at the South Dakota State Fair over the Labor Day weekend.

I had the opportunity to read your article that was published yesterday (Sunday, July 23rd) on the GoldSeek.com website titled "U.S. SMASHES RECORD: Highest Production Of Lowest Quality Fuel In The World." It really made me laugh, for two reasons.... no, make that three reasons.

The first, needless to say, is because you clearly have no knowledge of the subject matter you wrote about, but to quote you, "I get into that in a moment."

The second reason I had a good laugh is because the only comment on the webpage (at the time of my reading) was left by someone who hides behind the screen name 'Erocker.' I've come across this guy/gal many times over the past few years and he/she is totally devoid of any knowledge of the subject. He/she makes all kinds of absurd anti-ethanol comments. Naturally, he/she likes your story.

I find it hard to understand how someone who hides his/her identity believes that their anonymous, unsubstantiated comments will carry any serious weight with other readers. And it's because of this that I had my third laugh. I looked to see who GoldSeek.com is. Not surprisingly, the website provides no personal details. Then I did a Whois URL search to find the name of an individual or entity behind the domain name and found that the identity of the person or entity is hidden behind a privacy wall.

So basically, your story is tantamount to writing an unfounded message on the wall of a toilet stall in a stinky old subway bathroom. Are you what the oil industry has sunk to in order to keep their lies circulating after I exposed their ring of paid professor shills?

But, enough fun, let me get into the misinformation you presented in your article.

You start with the EROEI (energy returned on energy invested) argument - a hollow argument to be sure - and you try to make it that the EROEI on corn ethanol is terrible.

All useable "energy" sources require lots of energy to produce the useable energy/fuel. This includes gasoline, and it so happens that gasoline is energy negative compared to ethanol. So if you really had a problem with the EROEI issue, you should be hating gasoline, not ethanol.

You relied on a chart from David Murphy and Charles Hall to make your EROEI assessment. The Murphy and Hall chart relied on bad information from David Pimentel and Tad Patzek. Pimentel and Patzek are the like the evil godfathers of the EROEI lies used against ethanol. If you would have conducted some real research on your own instead of just looking at an irrelevant Murphy and Hall chart, you would have learned that Pimentel and Patzek's work was rebutted many times, beginning shortly after the publication of their misinformation. To save you some time, should you care to learn the facts, you can read my chapter on this issue that comes from my 2013 60+ page report.

You'll see that Pimentel and Patzek's studies were disproved by Patzek's own university (UC Berkeley), other professors and universities, Argonne National Laboratory, and the U.S. Department of Energy. The DOE's report LIFECYCLE ENERGY BALANCE concluded that "...corn-based ethanol shows a clear benefit over gasoline."

There's one other thing I'd like to point out about the energy used (wasted) to make gasoline and diesel to really complete the picture: All energy expended by the U.S. military to fight oil-related wars and defend world wide oil shipping should be calculated into the equation, but it's not. This means the manufacture of guns, tanks, ships, airplanes, ammunition, fuel, manufacture of uniforms and other materiel, and caskets for the dead servicemen. Please note that I didn't yet mention the millions of American service personnel who were killed or wounded during the wars.

You call ethanol the "lowest quality fuel." Tsk, tsk, tsk. Ethanol provides the most power, so you can hardly call the liquid fuel that produces more horsepower than gasoline the "lowest quality fuel." I guess you've never driven a car, never attended an auto race, never spoke to anyone who builds high-performance vehicles. One sure and simple way to increase the horsepower of a car or boat is to use ethanol or an ethanol-gasoline blend.

Then you segue into the BTU issue, but you don't use the term 'BTU.' Instead you write "ethanol has a lower energy content." Was 'BTU' a little too high-tech for you?

Unfortunately for you, not using the term 'BTU' doesn't mean that you escape from having your knuckles rapped. The BTU ranking of ethanol compared to gasoline or diesel is irrelevant. BTU ranking is a gimmick used by the oil industry to hoodwink the public. A gasoline-powered internal combustion engine will produce more MPG using gasoline than it will with ethanol because the engine is optimized to run on gasoline. A similar engine optimized to run on ethanol will produce the same or better MPG results when using ethanol. This has been known for about, oh, more than 100 years.

By the way, bio-diesel will produce the same MPG in a diesel-powered internal combustion as petroleum diesel, yet bio-diesel has a lower BTU ranking than petroleum diesel. In addition, in recent tests conducted by Glacial Lakes Energy using an E30 ethanol-gasoline blend, they achieved slightly better MPG results in their gasoline-optimized vehicles than regular 87 octane gasoline.

Steve, you got in way over your head on this issue. But wait, there's more.

You write that "...we are wasting 40% of our corn crop to produce a fuel (ethanol)..." American farmers grow as much corn as they do because they have sales orders for it. How is that a waste? You do understand basic business economics, don't you? You do know that if corn was not used for ethanol, and farmers continued to grow the same amount of corn that there would be an excessive surplus of corn and that the prices would plummet, thereby bankrupting farmers, don't you? You do know that if the farmers grew a different crop that there would then be an excessive surplus of that crop, which would result in the same calamitous situation, don't you?

Of course, it's obvious that you're using this 40% canard to imply that the use of the corn either creates a food shortage, or increases food prices, or both. Well, this was all debunked years ago. One of the debunkers was the same organization that mistakenly blamed ethanol production for food price increases in the first place: The World Bank. You can learn all about this in the same chapter of my 60+ page report. Lucky you, it must be 2-for-1 day.

You write about Federal corn-ethanol subsidies. There are no Federal corn ethanol subsidies. But guess what, there are tons of Federal subsidies for your buddies in the oil industry...an industry that is highly and wildly profitable. How does that make sense? By the way, if you'd like to challenge me on this point, please do, I would love to share the list of existing federal oil subsidies with you.

You end your article by writing that ethanol advocates have "brain damage." Steve, if you and I were alone in a room together and it was said that one of us had brain damage, it wouldn't be me.

There is something I don't understand, what the heck possessed you to write such garbage? You may know something about gold and silver, but if anyone uses your disparagement of ethanol as a measuring stick of your intelligence and integrity, it paints a very negative picture of you and your gold investment business.

Looking forward to hearing back from you.

Steve St. Angelo's reply to my letter

Marc - While I disagree with many items in your reply, I appreciate the contact. By the way, I have to set up the contact info that way to keep spam email levels low. There is no other reason than that.

First... let me start off by saying, for a person of your stature - VP of the AutoChannel - to spend so much time replying to commenters on GoldSeek, perplexes me. While I understand contacting an author of an article is justified, wasting time on websites responding to commenters is not something I thought a VP would be doing.

Second.... and most importantly, the 1 million barrel a day of U.S. ethanol is the least of our problems. However, it was interesting to me, which is why I published it. Marc, I imagine you are new to my blog, but I have been researching and writing about the Falling EROI in the U.S. Oil and Gas Industry for years. So, no, I am not PRO OIL and CON ETHANOL. Matter of fact, I rather see ethanol production on a local and organic basis than the way it is done now versus the crappy Shale Oil and Tar Sands industry.

As I have written about in many articles and on several interviews, the U.S. and Global Oil Industry is cannibalizing itself just to stay alive. Since 2009, the U.S. Shale oil industry hasn't really made any money producing shale oil. However, they have racked up one hell of a lot of debt. And they are now facing the DEBT WALL that comes due over the next five years.

The U.S. and Global Oil Industry will likely disintegrate over the next 5-10 years. We will be living in a much different world by then.

Lastly.... Ethanol EROI of 1.8-2.5 or whatever is still too low. But, I am not against farmers growing, saving their own corn seed and using it to sell to the market or make ethanol for tractor or vehicle fuel. But the AGRO-CARTEL we have today is much the same as the OIL CARTEL. Please don't come back and tell me it isn't.

Anyhow... wait around about 5-10 years... and you wont be concerned about Ethanol production as it will likely plummet 50-75% due to the disintegration of the U.S. oil and gas industry.

My follow-on response to Steve St. Angelo

Hi Steve -

I likewise appreciate your reply. I also appreciate that you may disagree with many of the items I wrote about in my response to your article; I know that the American Petroleum Institute and its shills also disagree with me. However, I have history, facts, experience, common sense and logic on my side. Hence those who disagree with me almost always do it in silence and they will never accept my invitation to a public debate.

You mention that you're perplexed as to why I would spend so much time on the issue and replying to commenters on the GoldSeek website. There's a real simple reason for this: This is my "neighborhood," so to speak (the automotive/transportation neighborhood). And just as I am in my residential community, if someone comes on to the block and starts throwing garbage on the street, I tell them not to do it again and then help clean up the mess.

There's also a more formal reason for the passion shared by my business partner and I for alternative fuels, in general, and ethanol, in particular. Several years ago, in response to other people also being perplexed over our passion, I published the following story. This will help to explain it all much better: Why Is Getting US Off Gasoline So Important to The Auto Channel?

You make a couple of new points that I think can use a little rebuttal. The "agro-cartel" is nothing like the "oil cartel." To begin with, it's teeny-tiny by comparison, which means that it's no where near as intrusive as the oil industry. And it will never be: Ethanol can be produced by anyone, anywhere, and from a wide variety of base materials. It would be nearly impossible for the "agro-cartel" to ever hold America hostage by cutting off ethanol. We've also never fought any wars over ethanol fuel. Yeah, there may have been skirmishes between hillbilly moonshiners, and perhaps you could lump in the gangster wars over hooch distribution during prohibition, but you can't really compare these events to even the smallest of the international wars America has been involved in. So I'm sorry that I did tell you that there is a difference between the oil industry and the ethanol industry, but there is a difference, whether you want to hear it or not.

Ethanol's low EROEI is like the joke about the two guys who come across a bear out in the woods. The one guy says to the other, "I hope you can out run the bear." And the other guy says, "I just hope I can out run you." It would be great if ethanol EROEI became much better, but as long as it's better than gasoline that's all that really matters. As I wrote in my initial response to you, there is no usable energy or fuel without a great expenditure of raw energy/fuel. Ethanol is cheaper to make than gasoline; it's safer and healthier; it's more powerful, and better for the environment. It doesn't need anything better about it, other than the need to eradicate lies about ethanol. In time, and with greater acceptance of ethanol, it will become more economical to use other crops than corn, and this will ultimately also make ethanol's EROEI better...maybe much, much better.

And with the future of EROEI in mind, you wish to review the information contained on the following links:
ETHANOL’S BIGGEST ADVOCATE MAY BE EPA?
U.S. DOE - Ethanol Vehicle Emissions

I'm not sure of what you mean when you write "you won't be concerned about Ethanol production as it will likely plummet 50-75% due to the disintegration of the U.S. oil and gas industry." If it's an important point, please restate it and I'll respond accordingly.

Steve St. Angelo's reply to my reply (Tuesday, July 25th)

Marc... with all due respect, your reply resembles what normally comes out of a Politicians mouth. If farmers who produce corn receive $2 billion in subsidies to grow and harvest the corn that goes into making Ethanol, then how else can that be misunderstood as not an INDIRECT SUBSIDY?

You are more than welcome to continue posting comments as a VP of the AutoChannel... but I find it quite interesting that a Vice President doesn't have anything better to do than spend time blogging via comments.

My reply to Steve St. Angelo's reply to my earlier response

Steve, what is it that you think "vice presidents" of a company do? In your original article you showed that you have very little business acumen, are you now compounding it to show that you have zero business acumen?

You say that what comes out of my mouth resembles what a politician says. But that can't be true since I've only 'spoken' the truth to you.

You built this little fantasy where you attack ethanol and corn grown for ethanol. You spout words that you know nothing about.

There are farm subsidies, but there are no corn ethanol subsidies. If you have a problem with Federal subsidies, as many people do, then you should have the same problem regardless of whether the farmer is growing corn or wheat or beans or peas or oranges or apples or potatoes or peanuts. You should have a big problem with all other Federal subsidies. But you didn't write a dopey story attacking peanut butter or public briadcasting, you wrote a dopey story attacking ethanol.

And as I wrote previously to you, if you hate federal subsidies then your first target should be the petroleum oil industry.

You made a few great miscalculations in how you handled this entire issue. First is that you repeatedly stated that 40% of all corn is used for ethanol. As I wrote in my initial rebuttal, you have done this in order to imply that the use of the corn for ethanol is creating a food shortage and/or causing general food prices to rise. This is the line of attack that all ignorant oil industry shills take. Corn ethanol production is not responsible for either of these things, and I provided ample source information to support me. You provided nothing to support your implication.

Second, if 40% of all corn is used for ethanol, then it still leaves 60% for all the other uses, such as popcorn, fattening candies, fattening soft drinks, baby powder, corn on the cob, canned corn, etc. If the purpose of your article was to decry corn subsidies, then why not attack the larger portion of where corn is used? Do you seriously think that we must have popcorn in movie theaters? Aren't there better ways to sweeten soft drinks then with corn fructose? Don't you know that America is battling obesity? If you're just an honest concerned guy, why not attack these uses of corn?

Third, most corn used for ethanol is not fit for human consumption, so we shouldn't even be considering it as corn. Therefore, the proper way to evaluate the situation is to say that nearly 100% of all corn grown is for human consumption or bodily applications (baby powder). And then we can say that nearly 100% of this other stuff that resembles corn is what is used for ethanol, which works out good because it's not it for human consumption.

And here's the best part, virtually all corn that is used for ethanol (regardless of whether it was fit for human consumption or not) can be used as a high quality animal feed after the distillation process. And by using the remnants, which are called distillers grains, the animals that are used for human food grow bigger and provide more meat.

In essence, Steve, you created a labyrinth of deceit that you can't escape from except by imagining that company vice presidents should have something better to do then post rebuttals to stupid stories and comments.

You've ignored one other thing: I'm not just any vice president of The Auto Channel, I'm the executive vice president of The Auto Channel. This gives me special powers to combat knuckleheads. :)

NOTE TO READERS: Any additional correspondence between Mr. St. Angelo and I will be posted here if and when they occur.