Friday, March 30, 2007

The Great Ethanol Swindle

1. While a boon to Midwestern corn farmers and big ethanol producers like Archer Daniels Midland (see chart above: ADM vs. SP500), ethanol has been bad news for the driving public. Ethanol costs more than gasoline, so adding it to gasoline increases fuel prices at the pump.

2. There is a 51 cent per gallon tax credit to ethanol producers. Other incentives include payments to corn farmers and subsidies for small ethanol producers. These add up to $5.1 billion to $6.8 billion per year—roughly $1.00 per gallon of ethanol. ("Ethanol is made by mixing corn with tax dollars.")

3. Ethanol lowers fuel econ­omy because a gallon of ethanol has only two-thirds of the energy content of a gallon of gasoline.

4. Ethanol can’t be sent in an energy-efficient way through pipelines like gasoline can, because it would be contaminated by moisture. Ethanol must be shipped instead by trucks, barges and railroads, which uses lots of fossil fuels. So the more ethanol we move, the more fossil fuel we use.

5. Ethanol use at current levels has also led to sky­rocketing corn prices as the available supply is split between food and fuel uses. This has led to higher prices for corn products and things such as corn-fed meat (see chart above).

6. The current ethanol mandate will supplant only 1.1% of petroleum imports by 2012, without taking into account the petroleum inputs in ethanol production and use. Once these inputs are taken into account, that figure falls by half to about 0.5%.

7. Eliminating tariffs and regula­tory barriers to lower-cost sugar ethanol imports from Brazil and other produers would expand access to global sources, thereby lowering prices. Predictably, such proposals have provoked strong opposition from the domestic corn lobby.

Despite all of these problems with ethanol, what is the political solution? More ethanol.

From the Heritage Foundation's "The Ethanol Mandate Should Not Be Expanded."


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