Oil, ethanol, drought, climate change, government – and the Australian farm

Today’s Sydney Morning Herald is running a very strange story on .. not sure, actually.

NSW has only one ethanol plant – the Manildra facility at Nowra with a capacity of 100 million litres a year – but earlier this year there were proposals and plans for enough plants to increase capacity to well over a billion litres.

When the rural newspaper The Land looked at the predicted biofuels boom six months ago, it noted: “Ethanol plants in NSW are set to consume a massive 4 million tonnes or more of wheat, barley, sorghum and maize annually by 2009 if all the projects approved or on the drawing boards go ahead.

“That’s about half the state’s average production of these grain crops, which averaged about 9 million tonnes annually in the past five years – and is more than the total grain tonnage produced from last season’s drought-depleted 2006-07 harvest. The figures suggest intense competition [for grain] is looming … in good seasons, and serious grain shortages in bad years.”

… which of course is among the reasons why ethanol is such a bloody terrible idea.

I do, truth be told, know why the story is there: because oil is USD90 per barrel, now – a price at which things like this were supposed to become wildly popular, and the Sydney Morning Herald has space to fill and advertising dollars to earn. Only now, really, are editorial pages beginning to get into why ethanol isn’t such a great idea (newspapers are nothing if not late to the game, after all).

The interesting part of the story, for me, was the reaction of the farmers/townships that had seen Big Ethanol as a cash-cow. For example:

At Condobolin, where the company wanted to build a 200 million-litre plant consuming 600,000 tonnes of grain a year, Lachlan Shire Council’s general manager, George Cowan, said the disappointed town had invested a lot of hope in the project.

Somebody will need to explain to me why we revere our “battler” farmers, while they’re going about giving up our food for fuel (no, you don’t: not for nothing do I teach Principles of Economics – that was more a criticism of the reverence itself). These demonstrations of agriculture’s sense of entitlement for a permanent place at the of government welfare stood out:

At Oaklands, near Corowa on the Murray River, grain grower Pat Day offered part of his farmland to Agri Energy to build a plant the same size as Condobolin’s.

“I’m just disappointed. Governments haven’t come up with the necessary mandating to encourage [Agri Energy] to keep going. They have got better opportunities in other parts of the world.”

The Swan Hill operations manager, Stewart Rendell, blames government and oil companies for Agri Energy’s troubles, rather than record-high grain prices.

“You can’t deal with big oil in this country when there’s no mandate,” he says. “Even when you bring the wheat price back to a reasonable level, big oil don’t need to deal with us.” Oil companies were prepared to buy the ethanol, but not at realistic prices.

Rendell says that if every state mandated 2 per cent ethanol, as NSW has, or the price of oil rose above $US100 a barrel, as some are forecasting for next year, Agri Energy would reconsider the viability of its Australian projects.

Yes, the solution to this “problem” is that the government has not passed legislation mandating that a product we don’t want – a product whose development is not profitable, and demands more water than we have to provide, not to mention exhausting food crops in a time when yields are declining – be made compulsory in fuel.

I’ve looked around: there isn’t much on Australia’s transport fuel consumption – almost nothing, in fact. Apparently the data is either commercial-in-confidence, or just not there. Back in 2000/1, though, we were up around 31bn litres:

AIP fuel use

according to the Australian Institute of Petroleum. So 2% of that, right across the country, etc. Irregardless of the cost to government (since they mandate it, they’ll need to subsidise it which is, of course, where a farmer’s ear perk up), hence to tax-payers; irregardless of the burden on the environment (through water use, monocultural agriculture, etc.), the argument is that we have a problem that only government mandating can fix.

Meanwhile, the same government, trying to mandate some manner of intelligent water use, is vilified by the same people.

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