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Author Topic: 50 Billion Reasons to Support Ethanol Back to Topics
gamechanger2011

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Message Posted: May 20, 2013 12:21:30 PM

"It doesn't have to be so complicated. Controversy aside, there is one calculation that can bring everyone together to support ethanol. The calculation is so simple that you can do it on the back of a napkin. What if I told you that simply blending ethanol into motor gasoline saved the United States $50 billion in 2012? That represents the equivalent amount of crude oil displaced by ethanol. Don't believe me? Here's how it works from the first corn kernel to the last dollar."
50 Billion Reasons to Support Ethanol
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gamechanger2011
Champion Author Wichita

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Message Posted: May 22, 2013 8:42:07 PM

brerrabbitTX...exactly! That's why that 8 cents a gallon is crucial! You can compete if you are unbranded. It's the only way. The oil companies know that it is getting increasingly more difficult to make gas margin, so they try things like bringing people in to help you make margin inside the stores.

here is a branded chain of stores in our area that used to try to match Quick Trip pricing but lately are keeping their prices 4 cents above. But even these big chains need to make gas margin. These stores are very expensive to operate. What we see happen is that they may try to make margin in one area of the country and cut their margin in another.

All I am saying is that being unbranded makes it much easier to stay in the game. We also can do what ever we want as far as offering blends of ethanol. We no longer have to play by the Big Oil companies rules! Oil companies can be very controlling!
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borsht
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Message Posted: May 22, 2013 5:21:01 PM

Today’s Strait report
“Ethanol facilities continue to be the most aggressive bidders in the west as margins hold at profitable levels. Spot margins for plants in IA are estimated at 38 cents per bushel as of May 17th, down slightly from 41 cents the week prior. “
“Weather-The trade is concerned that with such a large amount of the nation's corn crop planted at the same time, it could mean it's likely to pollinate close to the same time. Fears that an untimely heat wave may adversely affect yield has subdued the bearish conviction at least for now.”

Obviously Weather is always there to affect the price of corn; But ethanol producers are becoming a big factor in price support
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brerrabbitTX
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Message Posted: May 22, 2013 1:30:04 PM

Part of the problem with competing against a QT, Sheets, WaWa, or Racetrack or the big box retailers like Costco, Sams and the Grocers is the fact that branded and even unbranded retail gas stations have to make some amount of profit on fuels sales. Those others do not. The big box guys treat gas as a loss leader and have perpetual tie ins to their stores. Wal Mart gives you 3 cents a gallon off if you use a gift card which you have to go into the store to buy. Grocers will give you discounts based on how much you spend in the store through loyalty programs, the QT's and others in that world make most of their revenue and profit selling drinks, beer cigerettes, cokes, Ho Ho's and twinkies so their margin requirement for gas is minimal. Therefore the branded sites have a hard time competing in that market and it is not just the wholesale price causing the issue, it is also the amount of margin required by the dealer.

This is not necessarily the "fault" of the oil companies but rather the consiquinces of a shifting market place. Branded sites lost business is all showing up at the Big Box Retailers sites.
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gamechanger2011
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Message Posted: May 22, 2013 11:56:10 AM

brerrabbittTX...it's not worth the 8 cent a gallon price difference...trust me. My spouse has been in the business for over 20 years. You cannot compete in an area that has a large unbranded chain like Quick Trip, if you are a branded location. It will put you out of business! People are price conscious now days. Unbranding has allowed us to pass on better gas pricing to the customers. Our business has grown since we unbranded. Branding is overrated in my opinion. We've done both! As for the additives I think it's a gimmick. But that's just my opinion as well.

Thanks for explaining the high gas prices in the midwest!
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brerrabbitTX
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Message Posted: May 22, 2013 12:08:16 AM

"Well it is a Motley Fool article. Not an ethanol publication. So you can hardly blame the ethanol people for this article. It's an investment publication."

True but if you investigate a little this guy uses an alias (granted if you click on his name you can find his alias) to comment on his own article. He is a independent contributer to MF just as you can be an independent contributor to MF. He is not "ethanol" and MF is not a ethanol publication but quite honestly half of the stuff they post there are gateways to get your e-mail address to send you investment information and ask you to buy their analysis so I really don't trust at face value much that is said there and this is not the first time I have read articles they post that take far out positions to encourage people to search their site for more information.

Bottom line MF is primarily and advertising site trying to lure in as many net surfers as possible.
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brerrabbitTX
Champion Author Houston

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Message Posted: May 21, 2013 11:49:44 PM

In another thread I attempted to explain the separation between oil prices and gas prices and the fact that they really are two very distinctly different products. I say this in reference to the gas prices in the Midwest currently. They have been high, however the Wholesale prices will be coming down significantly tomorrow as they were today. The primary reason for the regional differences in price are because of refining capacity in different regions. Several refineries including one in El Dorado, KS, and Illinois have been down and not producing gas. This is the primary reason for the regional price differences of late. To buy, and transport gas from the Gulf Coast up to the midcontinent takes about 21 days via pipeline and that is not fast enough to react. Additionally a pipeline in the Mid Continent went down over the weekend for 48 hours. All this adds up to increased prices.

As far as the difference between unbranded and Branded prices, this type of activity occurs in every industry not just gas. It works like this, if you sign up with a Brand as a dealer or wholesaler you will get funding from them to convert to their brand. They provide credit card clearing services cheaper than the open market. Because they clear credit transactions smaller lines of credit are needed for fuel purchase because the Brand is clearing them for you and there is always cash in the pipeline. Additionally the Branded contract says that the branded sites are the ones that will get the gas first. In short supply situations branded sites get gas first. Contract, non branded folks get gas next. The last to get gas are the rack customers who are opportunistic buyers. So basically a refinery makes product. Some times they have to much and to clear the refinery they discount the prices for those who are willing to buy a lot of it at that point. However when they have to little gas the spot price goes up fast while Branded prices go up much slower. So the affiliation with the brand puts them in a better supply situation. Also the branded product gets you tier 1 additives while unbranded is a generic additive. You also get national brand advertising, tie ins to rewards programs and local promotions.

So at the end of the day you get more as a dealer by being associated with a brand. Do you get more help opening your own burger joint on the corner or franchising with McDonalds? Same difference.

Now you can agree or disagree, that's your prerogative but the is a proven value proposition that suggests there is a lot of value being a Branded Wholesaler.

The pricing of gas is like many commodities, firm, fixed, guaranteed supply of any commodity is more valuable than something sold at the margin.
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tdioiler
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Message Posted: May 21, 2013 11:13:08 PM

Sounds like the pro-ethanol propaganda machine is still humming along as well. Only govt people use 'simple calculations' to cover the total story of a larger complex issue with multiple inputs and outputs.
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gamechanger2011
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Message Posted: May 21, 2013 8:30:56 PM

Hannie59 said.. "Fair competition isn't good enough for big oil, they need to own the whole flippin' pie." And that is why they can't support ethanol. Big Oil can't support what they can't control. They've controlled the game so long that they refuse to let go. Renewables mean a loss of control to oil companies. They control fossil fuel reserves but they con't control corn fields or second generation sources.

This is how greedy they are. I know of one Big OIl company that sells gas to large chains that are unbranded, at a much cheaper price then they sell to their own branded customers. In some areas of the country this makes it virtually impossible for their branded customers to make a profit, or even survive. It's impossible to price match when the unbranded chains have purchased fuel at a much cheaper rate. I even verified this by talking to a manager at this large unbranded chain in our area, that consistently saw fuel invoices that were from the company that we were branded with. This is a huge conflict of interest! This large unbranded chain is known for shopping to get the best fuel pricing available, so that they can sell fuel cheaper then their competitors.

We are unbranded now and love it! They have no control over what we sell under our canopy any longer!



[Edited by: gamechanger2011 at 5/21/2013 8:35:44 PM EST]
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Hannie59
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Message Posted: May 21, 2013 7:46:06 PM

To your point gamechanger2011, I am also sickened by what the oil companies do. Nothing is off limits, not even manufactured scare tactics and market manipulation.

brerrabbitTX writes well and makes alot of good points, I like reading his writings. But he never addresses, nor will admit the propaganda machine factor, or that it is deliberate deception.

If the petroleum industry wants to compete with a good product and good pricing then do it. Using every appeal to emotion and it still doesn't add up (Food prices, false damage claims, mandates, energy yield from the processes, ad nauseum). OMG you want to see net negative energy yield, look at the well to wheel net yield of oil into gasoline. Alcohol whips it hands down on ebnergy yield vs. input, well to wheel.

Don't manipulate the system with unfair practices and blame their price gouging on the competitive fuel. Fair competition isn't good enough for big oil, they need to own the whole flippin' pie.


[Edited by: Hannie59 at 5/21/2013 7:51:10 PM EST]
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gamechanger2011
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Message Posted: May 21, 2013 7:32:05 PM

Well it is a Motley Fool article. Not an ethanol publication. So you can hardly blame the ethanol people for this article. It's an investment publication.

How much gas are we exporting these days. Prices are ridiculously high in the midwest due to so called shortages. I have friends in Florida paying $3.15 a gallon. Seems to me that it would be better to keep the gas in our country instead of being greedy and selling out of the country to increase their profits. I have lost all respect for Big Oil companies and the way they conduct business. My spouse was involved with big oil for many years.
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brerrabbitTX
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Message Posted: May 21, 2013 5:14:01 PM

I would have to really sit down and think about the comprhensive methodology to come up with an appropriate number and I do not challenge the amount of crude we imported.

My challenge is simply that the number as derived is far to simplistic for some of the reasons I stated. Additionally one would certainly have to at least net against the amount of crude imported, the amount of finished products, ie gas, diesel, jet, and crude exported.

The article presented takes the number of gallons of gas only in a barrel, grosses that up to say you only get 19 gallons of gas ber barrel and implies from that the number of barrels and multiplies that times the average cost per barrel of crude based on a Brent North Sea commodity price. That is a very simple yet unrealistic calculation. How many net barrels came from Canada at a lower price? How many came from Mexico at a lower price? How much gas did we export which can be netted back against the crude imported? How many of those barrels were sold into the export market as other products like lube oil, grease bitumin, and pet coke?

All I am saying is again one side or the other in the ethanol vs gas battle wants to quote a number for "wow" value and to the average consumer of sound bite news in the US today but in reality as with any situation of this magnitude it is far more complex than a calculation on a napkin. Great fodder for an article to prop up ethanol and tear down the oil industry but far from the facts.

I am merely saying that if ethanol wants to scream about the untruths, and out and out lies that they say the oil industry spouts then they need to step above the fray and not make sensationalized statements that cannot hold up under closer examination.

Is it not merely fighting lies with more lies.

If nothing else I think people here as well as the public at large needs all the facts, not just the ones that each side wish to present in a vacum.
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gamechanger2011
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Message Posted: May 21, 2013 12:45:12 PM

The article says "By contrast, the United States imported 3.8 billion barrels of crude oil in 2012." How much do you think that we imported?
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gamechanger2011
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Message Posted: May 21, 2013 12:32:17 PM

brerrabbitTX...What would be your method to estimate? How would you do this differently?

[Edited by: gamechanger2011 at 5/21/2013 12:36:07 PM EST]
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brerrabbitTX
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Message Posted: May 21, 2013 9:28:05 AM

The simple calculation is really not that simple. To suggest that we would have not bought those barrels of oil because of ethanol displacement is wrong. This calculation assumes that the residual value the 26 gallons of each barrel that does not become gasoline is zero. That is not correct. A portion not going to gas becomes diesel, jet fuel, VGO that is used to boost octane in premium blends, lubricating oils, heavy grease lube, bitumin, asphault, and pet coke. All products that are refined and have commercial value. This calculation assumes that those are stranded costs that fuel consummers must bear and that is just plain wrong.

Also the assumption is that every barrel of incremental value is based on an imported barrel when in fact our imports have been consistantly dropping due to the increased production of domestic crude at lower prices. Additionally there was no add back for the cost of RINs to refiners which the writer admits will approach $22 billion by the end of the RFA.

Don't get me wrong, I am not saying that ethanol is bad, but these type of simple calculations are the sound bites that polarize the sides in the ethanol vs gas discussion. Read the article and understand that it is a simple myopically focused calculation that ignores much of the reality of the current market place.

[Edited by: brerrabbitTX at 5/21/2013 9:30:16 AM EST]
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gamechanger2011
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Message Posted: May 21, 2013 8:39:39 AM

BigHorne1. You're already buying E10/unleaded. This article is talking about the the 10% blend that you are using daily. The prices keep going up because of speculating and supplies. The prices in the southeast are significantly lower then here in the midwest. Florida has gas for as low as $3.15. Big oil companies are also exporting gasoline out of our country now which might have something to do with supply problems and price increases.

The link that I provided above did not work. Open the link below!

[Edited by: gamechanger2011 at 5/21/2013 8:41:42 AM EST]
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BigHorne1
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Message Posted: May 21, 2013 8:30:38 AM

Maybe you can answer this or someone, if ethanol is saving us money at the pump, why is prices keep going up, when we are pumping oil out at record level amounts and finding even more.

Plus, unless your engine is adapted to run ethanol, it hurts the engine. Not everyone can afford the new fancy vehicles that run on this stuff.
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gamechanger2011
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Message Posted: May 20, 2013 3:30:17 PM

I'll repost! Thanks! It's an article from May, 19. Don't know what the issue was with the link that I copied. This one should work!
50 Billion reasons to support ethanol



[Edited by: gamechanger2011 at 5/20/2013 3:33:58 PM EST]
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brerrabbitTX
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Message Posted: May 20, 2013 3:17:19 PM

You may have followed a link from houstongasprices.com which is outdated or incorrect. Or we may have screwed up, these things happen.
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