Common Cents

Ethanol or Food

Ralph Murphy

(9/2013) If you've filled your tank up recently at a local gas station, you may have noticed a sticker indicating the petroleum is mixed with 10% ethanol. This wasn't a natural evolution at the pump, but the result of a federal government mandate. A legislative act that, by some estimates, has tripled food prices. It also has contributed greatly to green house gas (ghg) emissions.

The "Energy Policy Act" of 2005 demanded that ethanol and biodiesel were to be "blended" with petroleum from 2005 to 2012 to create a "biofuel". The impetus for the legislation was to reduce U.S. dependency on foreign oil that provides over 60% of our current, energy needs. The legislation was successfully followed by the "Energy Independence and Security Act of 2007" which required, by law, that nine billion U.S. gallons of crop-based fuels be made available in 2008 ….and to 36 billion barrels in 2022.

Most of the biofuel was ethanol, and most of that was made from corn in the United States. The legislation echoed a 1976 Brazilian directive that legally demanded a blend of 25% ethanol as fuel for their specially designed, car engines. The rest were to use conventional petroleum. The big difference is the Brazilians made their ethanol with sugar cane- hardly a nutritious food source, Also, a fuel that could be produced with little, conventional energy to yield a high level output for engine performance.

Corn requires a gallon of gasoline to produce 1.3 gallons of ethanol. The problem here is that once produced and introduced into the motor it burns at only 2/3rds the efficiency of regular gasoline. Sugar cane produces 8 gallons of gas per gallon of petrol to produce it. To the Brazilians - a cost effective equation. The USA also derives its ethanol from wheat, potatoes, milo, and sugar beets, but corn, subsidized with a federal government subsidy of over 2.7 billion in 2012, is the principle source of the American fuel. By doing this, we are also subsidizing dramatic price increases at the food store.

A study by Farm Econ LLC. recently noted that the agriculturally- blessed fertile fields of the United States provided in inflation-adjusted (nominal) terms gradually decreasing food prices between 1950 and 2005, that all changed with the new federal legislation.. It noted that "since 2006, prices have risen sharply with a typical family of four now paying $2,055 more in food bills than would be the case without mandatory ethanol legislation." The report went on to claim "rapidly increasing corn prices, caused primarily by ethanol subsidies and mandates, are the most important factor in rising food prices." Not just the direct lack of corn on the table, but also that used for feed stock, and associated expenses, caused an "explosion" in the commodities market from 2006 until now. Corn supply had a scant increase and the new government- induced demand resulted in "more than triple" the cost of related foods.

A 2013 National Geographic Association report claims 39% of U.S. corn is used in ethanol production. An earlier "New York Times" article claimed 40% of corn was used for that purpose, 13% was exported, and the rest made it to your stomach.

David Pimente of Cornell University’s College of Agriculture claimed that " If the entire national corn crop were used to make ethanol, it would replace a mere 7% of U.S. (petroleum) production." Government actions are taken both for survival and altruistic purposes depending on the issue, times, and relevant official. A lot of the ethanol legislation was an attempt to take a commodity that we had in abundance (corn) and reverse the need for foreign oil imports. The rest of it was about opportunists who were making a fortune at the expense of the American consumer.

Ethanol isn't as desirable as even the most bellicose advocates might suggest. It can't be pumped long distances through pipe lines, as it must be tightly sealed to avoid absorbing water from the atmosphere. Once in your car it has the potential to damage the engine, particularly the carburetor. It freezes up in cold weather; causes metal corrosion, and initiates clogs in the fuel system.

The ethanol does appear to burn a little cleaner, but as explained earlier, it is less efficient in the engine requiring more of it for the same task. That coupled with the high expense of its "cycle of production" really makes this a candidate for former, Senator William Proxmire's "Golden Fleece Award" for government ineptitude. Aside from the food loss, engine damage, and related poor performance, a Stanford study concluded by its estimate "air pollution deaths will increase 9% relative to gasoline in Los Angeles". Gas is a problem, but mandatory ethanol use is clearly a mistake.

The "fracking" revolution sweeping through America's heartland might be a more convenient alternative that most could endorse. An EPA study of the process by which oil and natural gas are blasted out of shale and rock is due in 2014, but early indications appear that the process will be permitted. They still are dirty hydrocarbons, and the green house gases will have to be eventually addressed, but clearly America's production of over 62% of the world’s ethanol cannot continue- and is clearly NOT the answer to our future, energy needs.

Ralph Murphy is a former economist with the CIA