The Ethanol Problem

Congress enacted a law that mandates we use 35 billion gallons of ethanol by 2022, with the ethanol mixed into our gasoline.

The law said that 20 billion gallons of this must come from cellulosic materials, leaving 15 billion to come from corn.

In 2007, when the Energy Independence and Security Act (EISA) was passed, only about 7.5 billion gallons of ethanol were produced in the U.S.

Now we see the unintended consequences of EISA.

First, cellulosic ethanol is still experimental. It’s costly and requires billions of dollars of additional government funding – money we don’t have – to try to make cellulosic ethanol viable. Already the landscape is littered with failed cellulosic ventures, including that of the venture capitalist Vinod Khosla who touted cellulosic ethanol in Fortune magazine.

Second, by 2010, ethanol’s share of the corn crop had risen to 39.4%: Nearly 5 billion bushels of corn, out of a total crop of 12.45 billion bushels, were used to make ethanol in 2010.

Third, in 2010, ethanol only offset our use of oil by about 7%.  On average, we have been using over 8 million barrels of oil per day for gasoline, and ethanol only offsets about 0.7 million barrels per day. Huge amounts in gallons are really quite small when accounted for in barrels per day.

Fourth, the use of corn to make ethanol has driven up the price of food on American kitchen tables. The price of corn has doubled in the past year. Cereal and beef prices have risen because the price of corn has skyrocketed with so much of the corn crop being used for ethanol.

People have wondered whether the crop acreage planted in corn has also increased, which would offset the corn being used for ethanol.

Data shows that the acreage planted in corn increased only 11% from the 79.6 million acres planted in 2000, to 88.2 million acres planted in 2010. Increased plantings, therefore, have had only a small effect on reducing the impact of using corn for ethanol.  

Fifth, using corn, a food crop, to make ethanol has been seen as a threat to people worldwide. Using corn for ethanol has caused the price of basic foods to rise everywhere, and food is needed by poor people around the world. There have been food riots protesting the high price of food. Using food for fuel has been called a crime against humanity.

Finally, the U.S. administration wants to spend more money to increase the number of costly new “blender pumps”. These pumps would allow pumping various mixtures of ethanol and gasoline. They cost $120,000 each. For starters, the government wants to add 10,000 “blender pumps” across the nation at a cost of $1.2 billion – again money we don’t have.

A bad law, foisted on us by lobbyists, should be repealed.

EISA has a minimal effect on our use of oil, is causing food prices to rise in America and around the world, and is costing billions of dollars we don’t have.

Farmers need to be protected from a sudden repeal of the law, so it would make sense to see ethanol requirements remain frozen at today’s level for three years before the law is repealed in its entirety.

America was once called the bread basket of the world. With population growing around the world, our farmers could once again feed the world by exporting corn, wheat and soybeans grown here.

Rather than wasting government money on subsidies, food exports can provide income to farmers while improving our balance of payments.


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