The Oil Drum: Europe

Modelling Biofuel Production as an Infectious Growth on Food Production

Biofuel capacity or production as a fraction of food supply for three different cases, along with sigmoidal (ie logistic) projections, 1998-2018. Plum curves show US corn ethanol processing capacity in service or under construction as a fraction of ethanol potential of entire US corn crop. Brown curve shows actual production of US ethanol as a fraction of ethanol potential of US corn crop. Violet curve shows global biofuel production as a fraction of estimate of biofuel potential of entire global human food supply. Sigmoidal curves all have K = 1/3 (infection doubling time of three years), and cross the 50% line at 2008, 2010.8 and 2014.2 respectively. Sigmoids are scenarios, not forecasts. Actual biofuel production growth will depend heavily on oil prices and policy responses to increasing food prices. See text for sources and methods.

(Ed note: Stuart has been an important part of this team, but no, he is not "back." It has just been more than six months since he wrote this article, and it seemed like it might be a good time to revisit it.)

Thanks to TOD reader Tim R. for pointing out this piece on the food v. fuel problem in the Seattle PI yesterday. One takeaway message (but is it a valid one?) is contained in this chart from a group at The University of Washington (click to enlarge):

UNDER THE FOLD, you will find two youtube videos that are worth your time. The first is from Fast Money (CNBC) yesterday entitled "It's Supply, Stupid." After a bit of discussion on the panel, Joe Terranova provides a really nice discussion (about 4 mins) of the reasoning behind why the price oil is rising: supply and demand. Sure, it's a little bit the weak dollar, it's a little bit speculation, but Terranova makes an elegant argument as to why it's mostly the fundamentals--which is kinda what we've been saying for a while around here, eh?

The second video, is Jim Cramer of CNBC's Mad Money (1:30) discussing ethanol and its implications for food; he uses the words "Wall of Ethanol Truth," "that issue is killing Americans," "ending the ethanol mandate," and "Malthusian." Wow. Let's discuss.

This post looks at the role the USA plays in global grain (wheat, corn, sorghum) and soybean (soya bean) trade, since the USA is to a large extent the world's breadbasket and there are concerns over this role in the light of the current corn-to-ethanol expansion. The article begins by looking, very briefly, at how similar concerns were raised about 20 years ago, due to the potential effects of global warming on US grain production.

Modelling Biofuel Production as an Infectious Growth on Food Production

Biofuel capacity or production as a fraction of food supply for three different cases, along with sigmoidal (ie logistic) projections, 1998-2018. Plum curves show US corn ethanol processing capacity in service or under construction as a fraction of ethanol potential of entire US corn crop. Brown curve shows actual production of US ethanol as a fraction of ethanol potential of US corn crop. Violet curve shows global biofuel production as a fraction of estimate of biofuel potential of entire global human food supply. Sigmoidal curves all have K = 1/3 (infection doubling time of three years), and cross the 50% line at 2008, 2010.8 and 2014.2 respectively. Sigmoids are scenarios, not forecasts. Actual biofuel production growth will depend heavily on oil prices and policy responses to increasing food prices. See text for sources and methods.

In addressing the supply side of oil and gas depletion, much hope has been put into the scaling of 'biofuels', by applying new (and old) technologies to annual crops to create ethanol or biodiesel, thus providing chemically viable alternatives to the transportation liquids derived from crude oil. Much of the biofuels debate thus far has focused on their lower energy balance, vis-a-vis crude oil. While this is important, analysis of the impacts on non-energy inputs and impacts should a massive scaling of biofuels occur, urgently needs to be discussed. The National Academy of Sciences recently published a report titled "Water Implications of Biofuel Production in the United States". The paper outlines impacts and limitations on both water availability and water quality that would follow the pursuit of a national strategy to replace liquid fossil fuels with those made from biomass.

Existing and planned ethanol facilities (2007) and their estimated total water use mapped
with the principal bedrock aquifers of the United States and total water use in year 2000.(Source USGS) Click to enlarge.

This is a guest post by Glenn Morton, a geophysicist in the oil industry. For Kerr-McGee Oil and Gas Corp., Glenn served as Geophysical Mgr Gulf of Mexico, Geophysical Mgr for the North Sea, Dir. of Technology and as Exploration Director of China. Currently he is an independent consulting geophysicist, and you might know him as seismobob.

I became fascinated with the connection between our food supply and energy when I first learned of the problems that North Korea was having feeding itself. (see here).  This data showed me something amazing about modern society, we don't live in the information age, we don't live in the industrial age, we live in the agricultural  age. Without food, we have no industry or information. Unfortunately many don't understand this.  Nor do they understand that today the modern farming system is merely a means to turn petroleum into food, via mechanized planting and harvesting, and the use of petroleum based insecticides and fertilizers which consume huge amounts of energy in their manufacture.  According to Wikipedia, who gets it from Science, 1% of the world's energy goes into the manufacture of chemical fertilizer (here).

There has recently been a claim that in the post-peak oil world, life will go on pretty much as normal.  For a while, as the world squeezes inefficiencies out of the economic system and fuel switching occurs, this is true.  But one can not seriously believe that the world economy is infinitely elastic with regards to energy.  With regard to the agricultural system, there is data which shows the limits to this inelasticity and these limits are due to the laws of physics.

The fun thing about conferences is that there are also sorts of individual lines that presenters say that could be pulled to the headline, and perhaps be more mischievous than helpful. I was thinking that today, when the opening speaker began with explaining why she couldn’t start her talk with a joke. Turns out that when she tried to Google “ethanol and Joke” all she got was pages of citations of “ethanol is a joke” or “ethanol is a big joke!” Conference, you say, speaker, you say, but I thought the ASPO Conference didn’t start until tomorrow?

Well yes, that’s true, but sometimes if you want to catch some of the developing stuff, or the stories that never make it to the National Meetings, you can learn a lot from smaller conferences, and so I came to Dubuque. Today is the first of two days on “The Impacts of Increased Bio-Fuel Production on the Midwest Landscape.” At a time when the current ethanol situation has been described as “the farmer’s version of the gold rush,” it was interesting to hear what is happening down at the farm level and in planning within the Midwest to look at answers to the looming problem. Some of the papers today discussed switchgrass, and algae, and biodiesel and how to effectively harvest the “crappiest wood” in the U.S. and turn it into useful energy. And in the discussions, in a town where the corn grows right up to the airport runways, there was a lot of realism in the discussions of water needs, and soil nutrition replacement and bottom line cost levels.

Why food costs more

Since the rise in agriculture started gaining altitude last spring, hedge funds have been pouring money into commodity exchanges, driving up prices and transforming backwater grain bourses like the Kansas City Board of Trade and the Winnipeg Commodity Exchange into highstakes casinos. Since 2005, corn has nearly doubled. Wheat is up 50% in the same period, while canola, one of the biggest crops on the Canadian prairie, has climbed 34%.

But the biggest effect of all the new hedge fund cash sloshing through the system is a major increase in volatility. Prices are on the rise but the upward trend has been anything but smooth.

"We are unaccustomed to this," said Mr. Gary, who adds that he hasn't seen this level of volatility since the 1970s when a group of big speculators briefly "muscled the markets around." But what's happening now is different, far more treacherous for traditional players.

Like many experts, Mr. Gary believes the markets have become disconnected from the fundamentals as prices rocket through peaks and valleys that have little to do with supply and demand.

Many of the hedge funds are trend players, who make bets based on the technical details around the direction they think prices are heading, moving in and out of the market with lightening speed. For them, volatility is an opportunity to make money.

As President Bush goes to Brazil in search of the secret to how they have used ethanol to become "energy independent", many media outlets are starting to catch on that ethanol may not be as great as it has been promised. There are several strains of this out there in the mainstream media, but not as well summarized as a recent Associated Press piece titled "Biofuels Boom Raises Tough Questions" that pulled most of these together into one place.

It starts off with perhaps the best description of the Ethanol situation.

"America is drunk on ethanol"

America is addicted to oil. Getting drunk on (corn) ethanol does not seem like the way out, just a temporary biofuel bender before we figure out that we live in an energy constrained world.

An open thread to discuss JHK's latest, "The Big Chill." While you're at it, refresh yourself by reading Robert Rapier's many posts on ethanol, which he nailed long ago. ([1], [2], [3], and [4] are just some examples, find the rest by clicking on Robert's name and going through the story list...), as well as EP's "Sustainability, Energy Independence and Agricultural Policy".