Energy and Agriculture I.Energy types, sources, and uses II.Ag use of energy III.Ag production of...
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Transcript of Energy and Agriculture I.Energy types, sources, and uses II.Ag use of energy III.Ag production of...
Energy and AgricultureEnergy and Agriculture
I. Energy types, sources, and usesII. Ag use of energyIII. Ag production of energyIV. Outlook
I. Energy types, sources, and uses
Energy types:• Coal• Natural Gas• Petroleum – Crude Oil• Nuclear• Renewable
U.S. Energy Production
05,000,000
10,000,00015,000,00020,000,00025,000,00030,000,000
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Coal Nat. Gas Oil Renew able Nuclear
I. Energy types, sources, and uses
U.S. Energy Use, Production, and Imports
020000400006000080000
100000120000
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Production Imports Consumption
I. Energy types, sources, and uses
I. Energy types, sources, and uses
Energy use in the US:• Commercial 18%• Residential 22%• Transportation 27%• Industrial 33%
II. Ag use of energyII. Ag use of energy
Uses:• Fuel• Nitrogen fertilizers• Crop drying/Ginning• Transportation
II. Ag use of energyII. Ag use of energy
• Proportion of expenses that are fuel and energy related?– From about 20% for dryland wheat to 70% for
irrigated rice
• Forecast impact of higher energy prices in 2005 on expected farm income:– Rice -81%– Feedgrains -31%– Cotton -29%– Wheat -7%– Beef cattle -10%– Dairy -3.5%
Diesel Fuel Prices: Nominal and Real
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Real (2005=1) Price
Nominal Price
Projections
II. II. Ag use of energyAg use of energy
II. II. Ag use of energyAg use of energy
Henry Hub Natural Gas, Annual Ave. Price
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US
$ /
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II. II. Ag use of energyAg use of energy
Energy efficiency in ag production:
• 1978: 2.5 quadrillion BTUs12,550 BTUs / real US $ of
prod.
• 2002: ~1.8 quadrillion BTUs7,600 BTUs / real US $ of
prod.
III. Ag production of III. Ag production of energyenergy
• Ethanol– Feedstocks– Fossil energy inputs– Net energy controversy
• Biodiesel– Feedstocks
• Wind– Dependability of wind resource– Space for towers and access roads
• Most energy produced by ag is clean and renewable• Some environmental concerns, however
III. Ag production of III. Ag production of energyenergy
Ethanol production capacity (gallons / year):• US (current): 4.7 billion• US (current + under construction): 6.4 billion• Brazil (2004): 4.0 billion• China (2004): 1.0 billion
Biodiesel production capacity:• US (current, dedicated): 0.2 billion• 1.5 billion in Houston ??????
III. Ag production of III. Ag production of energyenergy
Policy:• Decrease dependence on energy imports• Promote clean and renewable energy sources
Policy instruments:• Renewable Fuel Standard• Excise tax credits• Tariffs on imports• Caribbean Basin Initiative• Ultra-Low Sulfur Diesel Requirements• Conservation Reserve Program• Federal Production Tax Credit, rapid capital depreciation
(wind)• State programs• MTBE bans
III. Ag production of III. Ag production of energyenergy
• Renewable Fuel Standard (RFS) in 2005 Energy Bill– Amount of RF that must be used– FTC to study market power issues– 4 billion gallons in 2006– 7.5 billion gallons by 2012– Review and increase later– Biomass requirements
• RFS flexibility provisions– Waivers for economic or environmental harm– Tradable credits– Annual averaging
III. Ag production of III. Ag production of energyenergy
Federal excise tax reductions:• Ethanol: 51¢ / gallon• Biodiesel (virgin oil): $1 / gallon• Biodiesel (yellow grease): 50¢ / gallon
• Ethanol credit good through 2010• Biodiesel credit good through ????
III. Ag production of III. Ag production of energyenergy
• Tariffs on imports of ethanol: 54¢ / gallon
• Caribbean Basin Initiative:– Duty-free imports up to 7% of previous
year’s consumption– Duty-free imports on the next 35 million
gallons comprised of >= 30% indigenous commodities
– Duty-free imports on additional gallons comprised of >= 50% indigenous commodities
• Brazil
III. Ag production of III. Ag production of energyenergy
Ultra-low Sulfur Diesel (ULSD):• Staring in July 2006, only 15 ppm (down from 200+
ppm) of sulfur allowed in 80% of on-road diesel fuel• Lubricity concerns => increased use of biodiesel?
Conservation Reserve Program:• Biomass pilot projects – switchgrass, hybrid poplar,
willows
Federal Production Tax Credit (wind):• 1.9¢ / kWH on the first 10 years’ production• Through Dec. 2007
IV. OutlookIV. Outlook
• Crude Oil– Tight world oil market – esp. light sweet – Declining production rates in many
producing countries– Growth in developing economies– Inelastic demand
• Natural gas– Storm damage– Declining N. American production?– High prices likely to continue
IV. OutlookIV. Outlook
West Texas Intermediate Crude Oil, Monthly
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IV. OutlookIV. Outlook
Henry Hub Natural Gas, Monthly
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Energy Policy Issues
• Self-sufficiency– Food vs. Fuel– Technology Development (efficiency)
• Environmental
• Market Stability/Change
• Political Pressures