Common Sense vs. Ethanol

As I wrote in a previous post, "Adding up the Cost of Ethanol," the production of ethanol takes more fuel than it creates, it uses 10,000 liters of water for the 5 liters it returns, and it is made by using food crops. As you can imagine, this is about one of the worst strategies for decreasing dependence on foreign oil.

Finally, responsible adults have started to speak up. Governor Rick Perry of Texas has asked the US EPA "...to temporarily waive regulations requiring the oil industry to blend ever-increasing amounts of ethanol into gasoline." according to the New York Times. His contention is that ethanol is causing food prices to sky rocket, including animal feed. Of course, farmers and ethanol producers don't want any waiver.

Some big names have lined up on both sides of this issue. "Senator Kay Bailey Hutchison, Republican of Texas, has introduced legislation calling for a freeze of the mandate at the current level, saying it “is clearly causing unintended consequences on food prices.” The measure is co-sponsored by 11 other Republican senators, including John McCain, the presumptive presidential nominee." Some could argue that these Senators are in the pocket of ranchers and the preeminent boogie man, "Big Oil."

That same argument can be applied by those who are against the waiver, namely Senator Chuck Grassley of Iowa. He has been a major recipient of ADM largess. Grassley has stated that support of this waiver is "treasonous." Sure, treason. Good grief!

There is another way to look at this, though. Corn farmers are claiming that fuel costs, as well as those for fertilizer have gone up, thus his prices have to go up to cover his costs. That is reasonable. They also claim that they geared up to meet the regulations and demand for ethanol. If that demand changes because of a change in regulation, then they are stuck with way too much corn. While I sympathize with argument, hey, that's business. How did every liquor manufacturer feel when Prohibition went into effect? The same is true for Freon and other things that regulation has changed the market for.

So what does all of this mean? Probably not much. Oil is still expensive. Anything that uses petroleum and its associated products are going up in price. With or without ethanol, the cost of a bushel of corn will probably stay fairly high, because of the cost of fuel and fertilizer. However, it is good that folks are finally catching on that ethanol is a loser.

Adding Up the Cost of Ethanol

***Be sure to read the follow up article, "Common Sense vs. Ethanol." ***

While many believe that ethanol is reducing our dependence on foreign oil, many forget the real costs involved in creating ethanol from corn. It is energy intensive. Indoor gardens

In an article in Human Events titled, "Alternative Fuels are not an Alternative," A.W.R. Hawkins lays out the true costs of ethanol. From the article:

"...it takes 1.3 gallons of gasoline to produce one gallon of ethanol. Moreover, that one gallon of ethanol that is produced through the burning of 1.3 gallons of gasoline contains one third less energy than a gallon of gasoline, according to Iain Murray, senior fellow at the Competitive Enterprise Institute. This means that by the time you burn 1.3 gallons of ethanol, which is what it takes to equal the energy of a gallon of gasoline, you have actually already burned 1.73 gallons of gasoline simply to produce the cleaner burning 1.3 gallons of ethanol that “replaced” it.

Something that the article also mentions is the water requirement to produce ethanol. Water? That's right, "According to David Olive of the Toronto Star, ethanol requires us to pour 10,000 liters of water on a field of corn in order to receive 5 liters of fuel in return." According to Business Week, "By 2030 nearly half of the world's population will inhabit areas with severe water stress, according to the Organization for Economic Cooperation & Development." Water Barrels and Storage

Not only does ethanol production destroy a food crop, consume vast amounts of precious water, it also requires the burning of more fossil fuels than it generates. In a world of "feel good" solutions to real problems, ethanol continues not to make economic sense, nor is it economically efficient. Here is possible resource for fuel economy better than ethanol.

Corn and Sugar Cane for Ethanol?

Does the conventional wisdom about ethanol for fuel make economic sense? In general the answer is clearly "No!" If you are a corn or sugar cane producer, the answer is certainly "Yes!" With all economic analysis, measures of success vary among parties.

If one is just a consumer of gasoline in the US, which is mandated by law to have at least 10% ethanol, the answer is no. Ethanol, when blended with gasoline, is less fuel efficient and creates more emissions through incomplete combustion.

Although ethanol had been envisioned to reduce dependence on foreign oil, the opposite has occurred. It takes more fuel to plant, tend, and harvest corn and sugar cane, and then to process it, than the resulting ethanol saves. Additionally, ethanol blended gasoline is more expensive to purchase, and since it is less fuel efficient, it is less efficient to use.

Further, when existing crops such as corn and sugar cane are taken off of the food market to ethanol, the price of those crops goes up, as does the price of food. Higher food prices lead to both local and global insecurity. Is getting less mileage, creating more pollution, and spending more at the grocery store worth it?

From a farmer's point of view, using crops which are often subsidized, even sometimes subsidized to destroy, in a useful manner is good. Arguably, higher prices lead to higher output and that is better for the agriculture sector in general. A strong agricultural sector leads to greater food security.

So who is right? From an economic efficiency point of view, the consumer is right and the farmer wrong. The costs to the consumers far outweigh any potential and specific gains to farmers and the agricultural sector. Additionally, the detrimental impact of increased air pollution also tilts the scale in favor of the consumer.

Clearly, using corn or sugar cane to make ethanol for fuel doesn't make overall economic sense.

Here is some video discussing the issue further:

Dollars and Sense Topics for Discussion

The list of topics to be analyzed has grown! The new ones are in red:

1. Using Corn and Sugar Cane to Create Ethanol Fuel
2. Carbon Offsets
3. Gasoline Hybrids
4. Solar
5. Reformulated Gasoline
6. Nuclear Power

In each of the above cases, without a government subsidy, these very popular topics may be economically inefficient and not born out by the market.