Economics Of Ethanol

Politicians have one goal in mind. That is to get elected. Rhetoric is geared toward getting the votes. For instance, Hillary Clinton voted 17 times against ethanol, that is before she decided to run for president. Since then, it seems that her stance on ethanol has changed.

Legislators want to promise farmers ways of producing bigger incomes. This is politically expedient, knowing that in rural states farming is the main industry. This would be plausible if biofuels were made from nonfood sources.

Is ethanol really a viable solution toward reducing dependency on foreign energy? Is this really a myth?

Jerry Taylor, a senior fellow at the Cato Institute, says that there is absolutely no way that ethanol can reduce dependency on foreign oil. Taylor says that it takes just as much energy to produce ethanol; “net energy balance is zero”. Time magazine correspondent Michael Grunwald adds: “for the amount of grain it would take to fill up a SUV you could feed an adult male a year!”

An article at the University of Minnesota  reads:

“Already, 14.3 percent of corn grown in the United States is converted to ethanol, replacing just 1.72 percent of gasoline usage. Even if all the remaining corn were converted to ethanol, the total ethanol would only offset 12 percent of gasoline.”

Senator Kay Bailey Hutchinson of Texas has fought to freeze the mandates on ethanol. Hutchinson states that besides the subsidies, there is a tariff on ethanol that is imported from other countries, such as Brazil. Ethanol could actually be purchased cheaper from abroad.

A report from CNBC suggests that since February of 2006, the price of corn, wheat, and soybeans has increased over 416 % ! Within the last several years global food prices have increased 83%. How can America justify turning valuable food into fuel? Isn’t ethanol farming partly to blame for this?

According to Senator Hutchinson, ethanol has competed with other crops, creating an unintended rise in food prices. Another unnoticed problem – the tremendous amount of water to grow greater amounts of corn. This could create a water shortage.

Boone Pickens has stated that the only way to reduce oil imports is natural gas. Is natural gas the answer?

Sources:
* ABC Report: Myth – Corn Ethanol is Great - YouTube
* CNBC Report: Sen. Hutchison talks about her bill to halt ethanol mandate - YouTube
* France 24 Report : Ethanol making Midwest farmers rich - YouTube
* Glenn Beck: Food vs. Fuel - YouTube