Ethanol Update

Research shows: 1) Ethanol is 20-30% less efficient than gasoline, 2) It takes more than 1 gallon of fossil fuel to create one gallon of ethanol, 3) because ethanol contains water that cannot be distilled out, shipping cannot be done by pipeline, which is the cheapest and most efficient form of transport, 4) It takes 1,700 gallons of water to produce 1 gallon of ethanol, 5) it takes 450 lbs of corn (enough to feeds one person for a year) to fill up one SUV tank, 6) if all of the US corn crop were dedicated to ethanol production , it would reduce our dependence on gasoline by only 10% (see townhall). According to one estimate, the actual cost to the consumer per gallon of 85% blend ethanol in 2007 was $6.89 (see financialsense). If we’re really concerned about gas independence, we’d buy sugarcane ethanol from Brazil, which is cheaper and more efficient than corn ethanol. But Congress has done the opposite and imposed a stiff tariff on its importation.

In addition, the costs of producing corn are going up. In the past year, diammonium phosphate, commonly used as a corn fertilizer, rose from under $300 last year to $792 per ton. One of the reasons for the rise in cost is that nitrogen, an essential ingredient in fertilizer, is derived from . . .you guessed it, natural gas.

You may have noticed that the price of bread, milk, eggs, anything to do with grains or dairy products has gone up dramatically in the last year or two. You can thank ethanol for that as well, as farmers that used to feed their cows and chickens corn now use something more expensive; and by diverting corn from food to ethanol production, the price of other grains has gone up. At the same time that we use corn for non-food purposes, the US March wheat crop is selling at 79% higher than a year ago because inventories are at historic lows. In fact, the USDA projects that by June the world stocks of wheat will be at levels not seen since 1948.

It has been a minor inconvenience for US consumers, but as the world’s largest producers and exporters of grains we affect the worldwide price of these staple goods. The US food inflation rate was 4.9% last year, but in places like China, where nearly ½ of income is spent on food, prices are 18% over a year ago. The gov’t there is anticipating a shortfall in the upcoming crop, which will drive the prices up even more. South African wheat prices have risen 200% in the last year, and the Indian gov’t has recently announced a crackdown on grain hoarders.

Meanwhile, we’re feeding more and more of our corn crop to our cars. And the US Gov’t increases the demand for ethanol, by making it artificially more affordable through subsidies.

As far as I can see, the only ones getting fat are the cats in agri-business.


See also this.