Ethanol as an Alternative Fuel Won't Solve the Real Problem

The ethanol band-wagon might have a flat tire.

Many people are beginning to realize the economics of ethanol production and use are more complicated than they've been told. They might even begin to think they wouldn't solve the fundamental problem: a society shaped by an addiction to the automobile.

We've been told using ethanol - fuel produced mainly from corn - will reduce U.S. dependence on imported oil, thereby increasing national security and reducing dependency on regimes we might not wish to be identified with. There's some comfort in knowing Canada is the largest source of imported oil, but there's a little less comfort in knowing Mexico is the second largest source, and far less comfort in knowing the third, fourth, and fifth largest sources are Saudi Arabia, Venezuela, and Nigeria.

But in fact increasing our use of ethanol wouldn't reduce our dependency on fossil fuels. Each unit of energy provided by ethanol made from corn requires 1.29 units of fossil fuel energy. Each unit obtained from ethanol made from switch grass requires 1.45 units of fossil fuel energy, and ethanol made from wood requires 1.57 percent. Turning soybeans into biodiesel fuel takes 1.27 units and using sunflower plants takes nearly 2 units of fossil fuel energy.

If ethanol production increases, will oil imports increase? Not likely.

Ethanol really isn't cheaper, either. Its real costs are masked by corporate welfare subsidies of at least $3 billion annually. In California alone, oil refiners adding 5.6% ethanol to gasoline received $500 million in subsidies in 2006. Even so, in 2006 ethanol-based fuel became at least as expensive as regular gasoline.

As the price of ethanol increases, more corn will presumably be diverted to ethanol production.

One likely consequence will be an increase in food prices since corn is used for livestock feed and to produce a myriad of other foods. Another likely consequence of these competing uses will be further increases in corn prices which will tempt farmers to switch crops to grow more corn. This may stabilize or even reduce corn prices, but it would almost certainly increase other food prices.