One of the many mandates of the Energy Policy Act of 2005 calls for
oil companies to increase the amount of ethanol mixed with gasoline.
President Bush said, during his 2006 State of the Union address,
"America is addicted to oil, which is often imported from unstable
parts of the world." Let's look at some of the "wonders" of ethanol as
a replacement for gasoline.
Ethanol contains water that
distillation cannot remove. As such, it can cause major damage to
automobile engines not specifically designed to burn ethanol. The water
content of ethanol also risks pipeline corrosion and thus must be
shipped by truck, rail car or barge. These are far more expensive than
Ethanol is 20 to 30 percent less efficient than
gasoline, making it more expensive per highway mile. It takes 450
pounds of corn to produce the ethanol to fill one SUV tank. That's
enough corn to feed one person for a year. Plus, it takes more than one
gallon of fossil fuel — oil and natural gas — to produce one gallon of
ethanol. After all, corn must be grown, fertilized, harvested and
trucked to ethanol producers — all of which are fuel-using activities.
And it takes 1,700 gallons of water to produce one gallon of ethanol.
On top of all this, if our total annual corn output were put to ethanol
production, it would reduce gasoline consumption by 10 or 12 percent.
is so costly it wouldn't make it in a free market. That's why Congress
has enacted major ethanol subsidies, about $1.05 to $1.38 a gallon,
which is no less than a tax on consumers. In fact, there's a double tax
— one in ethanol subsidies and another in handouts to corn farmers to
the tune of $9.5 billion in 2005 alone.
Something else is
wrong with this picture. If Congress and President Bush say we need
less reliance on oil and greater use of renewable fuels, why would
Congress impose a stiff tariff, 54 cents a gallon, on ethanol from
Brazil? Brazilian ethanol, by the way, is produced from sugar cane and
is far more energy efficient, cleaner and cheaper to produce.
production has driven up the prices of corn-fed livestock, such as
beef, chicken and dairy products, and products made from corn, such as
cereals. As a result of higher demand for corn, other grain prices,
such as soybean and wheat, have risen dramatically. The U.S. position
as the world's largest grain producer and exporter means the
ethanol-induced higher grain prices will have a worldwide impact on
It's easy to understand how the public, looking
for cheaper gasoline, can be taken in by the call for increased ethanol
usage. But politicians, corn farmers and ethanol producers know they
are running a cruel hoax on the American consumer. They are in it for
the money. The top leader in the ethanol hoax is Archer Daniels Midland
(ADM), the country's largest producer of ethanol. Ethanol producers and
the farm lobby have pressured farm state congressmen into believing it
would be political suicide if they didn't support subsidized ethanol
production. That's the stick. Campaign contributions play the role of
The ethanol hoax is a good example of a problem
economists refer to as narrow, well-defined benefits versus widely
dispersed costs. It pays the ethanol lobby to organize and collect
money to grease the palms of politicians willing to do their bidding
because there's a large benefit for them — higher wages and profits.
The millions of gasoline consumers, who fund the benefits through
higher fuel and food prices, as well as taxes, are relatively
uninformed and have little clout.
After all, who do you think a politician will invite into his
congressional or White House office for a heart-to-heart — you or an
Archer Daniels Midlands executive?