Berkshire Hathaway 2007: Charlie Munger on Ethanol
May 6, 2007 by Eric Schleien
Charlie Munger stated again in this year’s Berkshire Hathaway meeting that Ethanol was not a feasible solution to our energy needs. Similiar to what Carl and I have written about in recent weeks, Ethanol has three large problems associated with it.
The first problem is that it costs almost as much to make Ethanol as the energy it yields. Therefore it is extremeley inefficient. The second issue is that Ethanol predominately comes from corn. Munger talked about sacrificing ethanol with higher food prices was absolutely ridiculous. What he didn’t mention is that Ethanol is only 70% effective as octane gas. Essentially, if you were traveling from point A to point B with 1 gallon of gasoline you would only go 70% of the distance with the same amount of Ethanol.
Eric Schleien
zachary
teenmoney
josh4580
Carlton
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The usually-ignored “sticker” is that a 1.06 net energy value (per USDA, w/o coproduct credits) implies a 17-fold multiplier for cropland requirements.
The United States could not produce more than 1% “new” energy if all corn production were dedicated to pursuit of the subsidy.
russ
Maybe Charlie Munger should step up and see how other countries run their programs. Just to write the idea off like he does while other countries like Argentina have extensive programs in place just shows an extreme lack of understanding.
DrMike does not seem to realize that other countries use sugarcane to produce ethanol which actually does pass the math test. of course the us house and senate have immediately put massive tarrifs on the importing of sugarcane given the Iowa caucuses and the importance of arcer daniel midlands…. the general argument is better to be hostage to Iowa and archer daniel rather than the middle east
Corn-based ethanol is not the only alternative. Ethanol derived from cellulose is on the horizon, via the help of bacteria (more specifically, bacterial enzymes). The biggest hurdle for that is maintaining colonies large enough to meet energy needs, but will probably be overcome long-term. Cellulose-derived ethanol eliminates the argument of production inefficiencies, mainly since its method relies on plant material that would be discarded anyway.
And ethanol being combustion inefficient? That just because it’s being used in engines it was never originally designed for. Given time, that obstacle can be overcome too.
Dr Mike nowhere have I seen anyone use ethanol for their cars in argentina. However many people convert their cars cheaply to use compressed natural gas that doesnt have a far range but is much cheaper…and anyways you can just switch back to your gas tank when you run out of natural gas! Ethanol is one of the options in brazil for fuel, but again most taxis ive seen there still use compressed natural gas.