“Go sell crazy elsewhere; we’re all stocked up here.” Jack Nicholson in As Good as It Gets
We should have seen it coming. After all, we live in a world where hard and verifiable facts have long since lost their place as the starting point for making critical and intelligent decisions. Instead, we are driven by demagogues and dreamers, who promise us the world without the public’s ever realizing we already have one. It may have started a week ago, when one of the major gasoline chains sent out a press release announcing that its stations were going to carry E15 ethanol. This would, it said, save consumers money, clean the air, reduce our need for foreign oil and apparently toast our bread while we’re slicing it.
Of course, there was that quiet, small warning that cars older than 2001 (without mentioning small gas engines) have not been certified for this greater amount of ethanol in the fuel.
At the same time the Productivity Commission, which advises the NSW government in Australia, released its report saying that “ethanol increases the price of fuel, reduces competition and,” by the way, “may not have the environmental benefits claimed” for it. Now the disclaimer on that last word of warning, as published in the Canberra Times on April 3, shows that it’s how one gets the ethanol to begin with that determines whether it’s good or bad for the environment. Meaning if you are growing it where you are already growing crops, maybe it’s OK. But if you are clearing the land so you can grow crops for ethanol, it’s not environmentally smart.
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The NSW government in Australia dismissed that report out of hand. But just four days earlier, Missouri Farmer Today had published a story under the headline, “Ethanol Advocates Work to Boost Demand.” Huh?
Let’s get this, at least, straight: There is actually zero demand for ethanol. If one doubts that, open a gas station with two pumps, one with ethanol in the gas and the other without ethanol, and price the two fuels the same. See how much ethanol is purchased under those conditions. In fact, ethanol is a government mandate — one of those regulations that does little that the government promises to get rid of. It’s the kind of thing that everyone running for election campaigns against, until they realize they might lose the Farm Belt.
Oh, and that story was followed by another in the Washington Times discussing small engine manufacturers’ continuing major problems with this fuel. Here one has only to ask anyone working in lawn mower, edger or chain saw repair about the problems ethanol in the fuel causes; you’ll get an earful. Looking back on the Sandia National Laboratory’s testing of these fuels, it should be remembered that they concluded that this fuel burns hotter. It could jump small gas motors’ RPM, with the unexpected consequences of chain saws’ roaring to life when one had them idling in neutral while hanging off your belt.
The crux of that story is that, as bad as it is now, once E15 covers the nation it could get worse. Of course, the ethanol industry denies that any of this is true. However, that last article did point out that some of the problems are the equipment owners’ fault: Leaving their gear sitting for long periods, like in the winter when you don’t mow your lawn, which can cause separation. And not paying attention at the pump, buying E15 gas when the equipment specifically calls for E10 or pure gasoline. Or you own that much older car.
This is the perfect example of how real research is out there, and yet the entire discussion is between people pointing out the problems with ethanol in our fuels and lobbyists saying it’s all untrue.
Of course, if this issue had been handled differently, none of these problems would have arisen. If one wants to mandate a renewable fuel, the first order of business is to work with automobile and small engine manufacturers and have them engineer their products to handle whatever you are substituting for gasoline. That’s exactly how Brazil handled the problem, starting in the 1970s when that country could not afford to import oil at prices that had jumped nearly 400 percent. Officials there understood they could grow sugar cane to create ethanol, and so they first mandated that cars be built that could handle blends up to 100 percent.
Here we enacted a mandate that all gasoline contain certain percentages of ethanol, first.
But many cars in the national automotive fleet are either too old or poorly maintained to deal with these new biofuels. The only redeeming thing about ethanol is that it’s better than our first renewable fuel, MTBE. That cocktail managed to pollute so many water sources that no one could justify its use anymore — but that doesn’t make ethanol itself any better. Yet as long as ethanol’s mechanical problems don’t affect those who can afford to drive newer vehicles, no one really seems to care much about those problems. Nor will they.
The Blue Pill’s More Fun
This week the price of stock in Tesla Motors rose to where it became the most valuable car company in America, with a market capitalization higher than either GM or Ford. This just days after Barclay’s automotive analysts released a report using an analogy from the movie The Matrix, saying that Tesla investors live in a constructed reality, swallowing the blue pill to keep that dream alive. Then they added that these shares are disconnected from fundamentals; i.e., this company can’t make money.
And the fun didn’t stop there. Keith Crain, publisher of the Automotive News, was scratching his head over how Wall Street has managed to make this the most valuable car company in America “based on past performance.” Meanwhile, Larry Vellenquette said it much better when he wrote, for the same publication, “Tesla’s vehicles are fine pieces of machinery, but we can talk more when it outsells the ancient Dodge Journey in a quarter.”
Bryce Hoffman was even tougher at Forbes. He pointed out that since its inception Tesla has sold 186,000 vehicles; but Ford has sold over 560,000 electrified vehicles since 2005 and nobody cares about that. Hoffman then related that Tesla lost $675 million last year on 77,000 car sales, while Ford made $4.6 billion on 6.7 million sales. Obviously his column was written right after Tesla moved past Ford and before it topped GM.
Hoffman reminds his audience that in 1999 Yahoo paid $3.5 billion to buy the webhosting giant GeoCities. And where are those two firms today? Yeah, one’s gone and the other seriously impaired. That seems like a strange comparison. After all, that same year Yahoo purchased broadcast.com for $5.7 billion, which led to broadcast.com’s disappearing forever, leaving us with Dallas Fort Worth’s favorite billionaire, Mark Cuban. So, during the Internet bubble talk of the late Nineties, Yahoo spent over $9 billion on two companies in one year, in a complete waste of everyone’s time. We would have remembered that, but we were all using Google at the time.
“No, You Go First. I Insist”
Then again, the Tesla is small stuff; Elon Musk has already stated he is going to put people on Mars by 2026. Not to be outdone, Bas Landsdorp of the Netherlands started the Mars One mission a few years ago, and within weeks over 78,000 individuals had submitted video applications online to be among the first chosen for this mission to the red planet. By the end of 2014, over 200,000 had signed up — none of whom, apparently, were Matt Damon.
Here’s the best part of that plan. The advisory board of Mars One is quite impressive; it includes Dr. Mason Peck, a professor at Cornell who was NASA’s chief technologist from 2011 to 2013. But there are another 30 individuals listed at the Mars One website with similarly impressive backgrounds. OK, on their Ambassador page Alyssa Carson is listed. She attends 7th grade in Baton Rouge, but has visited all 14 of NASA’s Visitor Centers and speaks four languages.
As soon as this story swept the world, a group of engineering graduates at MIT pointed out that none of what was being proposed was going to happen because technology wasn’t ready to send anyone to Mars. Their study showed that Mars One was seriously underestimating the size of the rockets needed to first send all of the equipment to Mars that would be needed for survival. The bigger problem, of course, is that these colonists would start dying after just 68 days; their habitat on Mars would become too oxygen-rich, and no device exists to siphon off oxygen without removing other critical gases, such as nitrogen. One would think that the former chief technologist at NASA might have noticed problems such as this. But failing that, even our Baton Rouge 7th grader missed the obvious. Or maybe she didn’t; maybe she warned them in one of the four languages she speaks that they didn’t understand.
The point is that Mars One isn’t going anywhere. The cost of just shipping the bare necessities to Mars and the first colonists is somewhere around $4.5 billion. And, although they accept debit, credit cards or even Bitcoins on their website — that’s right, we’re crowdfunding to go to Mars — it seems a bit far-fetched that this might become a reality … at least, according to MIT’s graduate students. Still, years after MIT said it can’t possibly happen this quickly, Tesla’s Elon Musk is still making the same claims.
It’s called the fundamentals, which we used to call verifiable truths: A company never makes money; ethanol is not environmentally valuable, nor has it stopped our importing of foreign oil — and it has damaged cars and small engines; and, if we sent people to Mars today based on our current technology, they wouldn’t be around to watch the summer reruns of Angie Tribeca. And we ignore all of this.
It’s great to have dreams and aspirations. It’s how our world advanced so far and so fast over the past two centuries. But there’s a big difference between scientists and engineers, who have made those critical advancements for all of us, and carnival barkers claiming they can magically guess our weight. While having your correct weight seems like fun, it does nothing to advance our world.
© 2017 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, conferred by the Anderson School of Business at UCLA. He reviews new cars every Friday morning at 7:20 on Fox Four’s “Good Day” and hosts the top-rated talk show, “Wheels,” 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org