Big Corn and Ethanol Hoax

Big Corn and Ethanol Hoax/By Walter E. Williams
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 shipping methods are far more expensive than pipelines.
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.
Ethanol is so costly that 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 the form of ethanol subsidies and another in the form of handouts to corn farmers to the tune of $9.5 billion in 2005 alone.
There's something else wrong with this picture. If Congress and President Bush say we need less reliance on oil and greater use of renewable fuels, then 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.
Ethanol 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 fact that the U.S. is the world's largest grain producer and exporter means that the ethanol-induced higher grain prices will have a worldwide impact on food prices.
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 that it would be political suicide if they didn't support subsidized ethanol production. That's the stick. Campaign contributions play the role of the carrot.
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 to have a heart-to-heart -- you or an Archer Daniels Midlands executive?
Walter E. Williams is a professor of economics at George Mason University.

Comments

[Sunny Fry]

Okay, Walter Williams. I have great respect for you, so you HAVE to know this is a bait and switch.

You can derive ethanol from a kazillion places, up to and including cellulose refuse. Meaning, walnut husks that will be discarded after shelling, or sawmill pulp.

Corn is like the worst possible place to look for ethanol production, not least because producing it in any real quantity depends on actually using lots and lots of petroleum based fertilizer (which, incidentally, has all flowed down river and created a huge dead zone in the Gulf).

As to corn-based ethanol being subsedized, of course it is -- CORN is subsedized.

How about a comparison of ethanol using waste products, or less optimally, something like switchgrass? There are some details to work out, like how much you increase a carbon footprint by plowing up a fallow area and planting that switchgrass, but I'm sure interested in waste-products ethanol. The real issue is water.

But that's why we're Americans, dang it! We're on the left side of the learning curve at present, but profit is a wonderful motivator.

[Spanky]

Corn is not the way to become independent of oil. Elec cars, solar etc. It wont be long till Mexico South Amer. etc start to import corn oil to the US. Then they will become a area of stratic value to the US and we will have to send in our army to protect our intrest. At 12 Bil a mo. how many elec. cars could you buy and passt out to US drivers instead of a check?

[Ralph Short]

Sunny, I think you have to admit though this is a boondoggle enterprise the government has launched. He might have some of the details wrong but once again it seems to me our lawyer driven government is stumbling around in the dark without a flashlight trying to legislate "energy independence". I wonder how energy independent we would be today if a) we had more nuclear power built over the last 25 years and b) we had started drilling for oil in the 1% area of the Arctic preserve and the gulf of Mexico. Don't get me wrong, I am not against ethanol per se just the way congress has thwarted efforts in the other areas.

My own view is this is a cover for many in congress and the reality is their way to "independence" is for the rest of us to use bikes and busses for transportation and live in crowded high rise buildings while they jet around the world, live in mansions and drive SUV's. There might be a slight exaggeration there but only slight.

[Sunny Fry]

Hi, Ralph.

I don't think he got the details wrong. I actually think he's got a great point about the corn lobby and the push to use that as a source for ethanol, and the mandates for ethanol use. Government isn't the best entity for creation of market options.

However, I do think that sometimes the government has a role, in that a mandate necessarily means at least a certain market guaranteed for any given product. No company is going to start playing with alternate fuel sources if they can't be assured that at least *somebody* is going to buy it.

Dodge has come out with a hybrid car called the Volt, which can run something like 60 miles on battery power alone, has a standard plug, AND can run equally on gasoline or ethanol. Which means they've altered whatever internal parts would deteriorate with ethanol use.

I don't think ethanol is the only answer, frankly. I think it's going to be a combination of things. And I don't think corn is even close to the best option. I just would have appreciated the article more if it hadn't equated corn based ethanol with plain old ethanol derived from other sources.

For the record (and my husband disagrees with me) I'm not a big fan of drilling in Anwar at present, either. I think the response of America after the OPEC embargo is a pretty good indicator of market behavior -- if we increase the supply of oil, and the price subsequently goes down, we'll just relax again and use it -- and eventually, consumption will go up again, and supply will diminish, and we'll be right back in the same pickle. At some point, it might be necessary, but for right now, I'd much prefer that gas sort of slowly increase until there's real profit incentive to do something different than pander to the Arabs and Hugo Chavez. Plus, I love our national forests. We spent the weekend in Francis Marion. And I understand the philosophy that says you fight the first incursion, so you're not fighting a rear-guard action.

[Sunny Fry]

Oh, one thing.

I'd really prefer a sales job to the American people along with the mandate, rather than just the edict from on high. That approach has worked well in other times -- I'm thinking of WWII, where people willingly sacrificed because they were participants in a bigger thing, and felt like they were included. Whoever is running public affairs needs to do a much better job "selling" the notion that choosing alternate energy sources when possible equals less dependence on people we don't otherwise like very much.

[root]

Possibly 18 Months Until Custom-Made, Oil-Pooping Bacteria

http://www.ecogeek.org/content/view/1433/

[Ralph Short]

Hi Sunny,
However, (there is always a however somehow) we do need to look at short term and long term. The leadership part you mention has to embody both in my view so therefore I agree with your husband. Here are a few facts that I gleaned listening to the debate in the senate a few years ago:
1. The Senators who wanted to explore the 1% were the majority and included some democrats.
2. All but a few democrats (those that had immediate elections) did not break ranks with the leadership position to continue the filibuster. A variation on the "my way or the highway" concept.
3. The drilling and pumping of oil just like what is done in prudhoe bay is done between November and March when it is dark and barren. The rest of the year everything is capped so the deer and the antelope can play.
4. Prudhoe bay has been a success.

So, according to my logic, since we have over 100 million cars, an untold no. of homes, and other uses for oil and gasoline I think it is indeed prudent and necessary for the short term to take advantage of this natural resource while we develop and sell more fuel efficient technology. Good leadership should not have to depend on hardship to get it's message across.

I also enjoy the Francis Marion area but I wonder how many people are routinely visiting Anwar for a vacation or a weekend outing especially when it is dark. In fact I wonder how many visit during the daylight mos. as well.

I just don't think lawyer driven, liberal dominated government works for the common good of this country. Not that they don't always talk about us "common folk".

[Sunny Fry]

"therefore I agree with your husband."

Figures. You men just stick right together...

(-:

[Captain]

If oil hits $200 a bbl the whining will get worse but no one wants to admit refraining from drilling makes no sense. The rigs in the gulf have created habitat and have caused no grief. Drilling far enough offshore the rigs cannot be seen from shore would be a good thing. Adding nuclear power plants would be a great thing. Using corn or any food source to make fuel is rediculous, the only ones that benefit are those growing the food source. Those whining the most about the cost of milk, meat, & eggs are those wanting more human & animal food wasted on making fuel. $200 oil could be the only thing that forces the general population to become educated and see sensible changes are made. That may still put gas at only $6 or $7 per gallon, much less than other parts of the world. Add the fuel costs of transporting all products and consumers may decide nuke plants sound good- even though it takes years to build one- offshore rigs could become desirable too. We have seen the party get expensive, now we have to pay. No reason to whine- it has been known to be coming for years.