Monday, May 5, 2008

Fun with math

Note: the price has risen a bit since I wrote this. But it stands for the time it was written.

Lately I have been rantier than a bottle of Dr Bronner's soap. This double header doesnt even make a dent.

Part One

Take the following assumptions:

  • it takes 1.3 gallons of fossil fuel to make 1 gallon of ethanol
  • 1 gallon of ethanol is 15 percent less mileage
  • the current summer gas blend is 90% gasoline and 10% ethanol. (Lets assume last year was 100% gasoline, though that wont be quite true I am sure).
  • average annual inflation rate for US is 3.42 percent
  • average cost of gasoline in the US on Apr 28, 2008 was $3.61
  • average cost of gasoline in the US on Apr 28, 2007 was $2.96

Okay there are 2 important computations here: cost and value. Lets tackle both.

Cost Value
1 gallon fuel = ( 9/10(gasoline) ) + ( 1/10(ethanol) )
1 gallon fuel = ( 9/10(gasoline) ) + ( 1/10(ethanol) )
1 gallon fuel = ( 9/10(gasoline) ) + ( ( 1/10(ethanol) ) * (1.3(gasoline) / 1(ethanol) ) )
1 gallon fuel = ( 9/10(gasoline) ) + ( ( 1/10(ethanol) ) * 0.85 )
1 gallon fuel = (90/100 (gasoline)) + (13/100 (gasoline))
1 gallon fuel = (900/1000 (gasoline) + (85/1000 (gasoline))
1 gallon fuel = 1.03 gallons gasoline
1 gallon fuel = 0.985 gallons gasoline
in other words, you are really paying for the cost of 1.03 gallons of gasoline for each gallon you buy (not counting the price of corn or the processing of corn)
in other words, you are getting 0.985 gallons of gasoline in value for each gallon you buy

So, we are getting 1.5% less mileage out of burning 3% more gasoline (all in the effort to "conserve" and "use less foreign oil".

Now, last years gas was $2.96.
Add in inflation, you get $3.06.
Add in the 3% extra gas you buy (burn) for ethanol, you get $3.15 per 0.985 gallons
Adjust that for actual gallons and you get $3.20 per gallon of gasoline.

And that is before you pay for the raw materials of corn, the knowledge of processing it, the labor to grow/process. 1 bushel of corn costs $5.50 and will make about 2.5 gallons of ethanol. Thats about $2.20 for a gallon. Our blend uses 1/10 of a gallon for about 22 cents. That takes us up to $3.42 for raw materials. That leaves 19 cents to pay for processing and shipping (remember, it wont go through a pipeline, it has to come on a truck).

Yep the current cost of $3.61 is probably about right. I think you can pretty much equate the rise in cost of gas to ethanol.

And now the presidential candidates -- all of them -- want to tell you how to fix the cost of gas:

  • McCain - Dont pay the excise tax (18 whole cents of savings vs 55 cents difference of last years price vs inflation adjusted this years price). Oh, and dont worry, the government just will skip the taxes. Now I am no fan of taxes. In fact, I am pretty much opposed to all of them. But I know enough business to know that you have to bring in at least as much as you pay out. FAIL.
  • Obama - Dont do anything. FAIL on principle. If you cannot figure out this is out of control, go home.
  • Clinton - Dont pay the excise tax, but make the oil companies pay it. Now I did not major in economics, but I believe if you discount a product by 18 cents, then ask the producer to pay 18 cents extra, that producer will have a cost of 18 cents extra. And I think costs are part of the price.... which will be a net zero. This is a DOUBLE FAIL on principle.

The bad part of this is that there are so many cascading, synergistic, almost exponential side effects here that this is pretty much going to drive the economy for a short while... and while most
economic situations want to meet a stable center, it cannot happen when the economics are being government dictated. Noted side effects here are:

  • wear on car, lawnmower, weedeater, chainsaw engines due to ethanol (with emphasis on the small engines -- it harms them even more)
  • increase in cost of transportation drives up the cost of everything
  • increase in the demand for corn drives up the cost of all food. And this is pretty serious. It is actually really bad that our entire food supply is based on corn. Its like investing all of your
    money in one stock -- or worse investing it all in one stock and working for the company that stock represents. (Ask an Enron employee if that is a good idea.)
  • Not only is a monoculture of corn bad, but the resulting foods made from it have typically been extremely calorie dense. Could it possibly be why Americans are so fat? No, couldnt be.
  • And just to point it out (and say I told you so to a few folks) the latest studies showed that Americans overall health is terrible as compared to the rest of the modern world and that it was directly related to weight, smoking and high blood pressure -- NOT due to lack of national health care. But I am sure we will fix this with a higher corn subsidy and a good national health care plan.

Part Two

About once a year, there is a shocking story about how much better first born children do than the rest of us. (I am 3rd if I am showing bias.) I will both agree and disagree. (Its bad math). In fact, I will categorically state:

  • The majority of successful people are first born
  • The majority of abject failures are also first born

You see, whomever does this study has really not spent much time thinking about this. Allow me to extrapolate some data. I will make some assumptions because I do truck driver math.

According to 2006 US statistical data:

  • 1 person households: 27%
  • 2 person households: 33%
  • 3 person households: 17%
  • 4 person households: 14%
  • 5 person households: 6%
  • 6 person househouds: 2%
  • 7 person households: 1%

Now I will make wild incorrect assumptions to make my math easy for me. After all, I am lazy and finding good data is hard work. I am just going to assume a Leave It To Beaver world where all families have 2 parents. So I am going to throw out the 1 and 2 person households and assume the 3 - 7 person households have 2 parents and 1 - 5 kids. No disrespect to you single mothers -- its just easier this way. Really. And I guess according to my simplistic ways, we pretty much discard all the Catholic families too. Sorry about that.

With these assumptions, lets see how many first borns there are:

Kids 1st Borns 2nd Borns 3rd Borns 4th Borns 5th Borns
1 kid 17 0 0 0 0
2 kids 14 14 0 0 0
3 kids 6 6 6 0 0
4 kids 2 2 2 2 0
5 kids 1 1 1 1 1
Totals 40 23 9 3 1
Percentage 52% 30% 12% 4% 1%

So, you see, you are more likely to be successful if you are first born because you are more likely to be first born. EVERY family that has a child has a first born child. Not every family has a 3rd. Or a 5th.

So, yes, you are more likely to succeed. And you are more likely to fail. Because you are dealing with the majority of the population dumbass.

And the shocking statistics from the story I heard today was that:

  • 50% of US presidents were first born - this is probably margin of error, which says "birth order doesnt matter"
  • 43% of all CEOs are first born - which pretty much says first borns suck at being CEOs. If 52% of the population is 1st born but only 43% were able to make it to the top of the corporate ladder.

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