Are ethanol subsiudies worth keeping?

In the long ago days of January 2008, we did a report on the pros and cons of ethanol. It was a balanced view, highlighting the major factors that were affecting ethanol use at the time. 3 years later, as the Senate has voted to end the subsidy on ethanol in a vote of 73 – 27, we think its time to do a review.

One of the key thoughts we saw is that ethanol is not as efficient as gasoline. The estimate was that it was about 2/3 as good as gas, gallon per gallon. Today that has not changed. The energy balance of ethanol is currently 1.3 to 1.6 – meaning that the ratio of the energy obtained from ethanol/energy expended in its production is incredibly low.

Another factor that we touched upon was the fact that ethanol in the U.S. is primarily created from corn. The Energy Independence and Security Act of 2007 requires that ethanol, based on corn, must be used – in increasing amounts until it hits 36 billion gallon in 2022 – every year. The current amount is roughly 12 billion gallons, slightly over the Government mandate at this time.

The problems with using corn based ethanol are multiple. There is the increased cost of corn, which has raised the price of the staple food. It has also increased the cost of meat, and products made from cornmeal. According to the 2008 study by Organisation for Economic Co-operation and Development

“…current biofuel support measures alone are estimated to increase average wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years.”

As stated above, corn-ethanol has a poor energy balance. Comparitively, ethanol from sugar cane (primarily created in Brazil) has an energy balance of 8.3 to 10.2.

The benefit in terms of greenhouse gas emissions, the real source of the craze for corn-based ethanol, is 93 years. In other words, the resulting benefit from using ethanol will be realized at about the turn of the next century – maybe.

One of our biggest concerns was the availability of ethanol. In 2008, there were 2 states were ethanol could be readily available. Due to the influence of the Government mandate there are now 2,749 stations across the nation. A huge increase in alost no time. But that still does not even hit 2% of the gas stations in the country.

Also the arrangement of the stations, while far more plentiful today, is still centered on the midwest. 8 of the 9 top States with ethanol stations are in the mid-west, centered around Illinois. 6 States have from 101 – 200 stations, only 2 exceed that number. None exceed 400.

For perspective, there are 170,000 gas stations in the United States.

But looking at one of the more prominent issues today is the subsidy for ethanol. It costs taxpayers .45 cents for each gallon of ethanol produced. Thats a huge part in the reason that over 204 ethanol distilleries have opened, and more are planned to meet the Government mandate.

So, corn-ethanol today inflates the cost of food, costs taxpayers money, is inefficient to create, is relatively scarce, provides no real benefit to the environment, and is inefficient versus gasoline. A winning arguement in favor of ethanol yes?

It gets better.

A study by Environmental Working Group in 2010 found that at the current rate of subsidy, the cost of ethanol to taxpayers is estimated to be $53.59 billion in 2015. Thats an increase from today, approx. $5.5 billion, of nearly 10x in just 4 years – based on the Government mandate that requires the increase in ethanol production. An increase that has no connection to consumption and usage whatsoever. If it were a stock, we’d buy that kind of guaranteed growth and profit.

It costs taxpayers $1.78 roughly, for every gallon of gasoline NOT bought and used. That’s from the Congressional Budget Office.

Here’s the best part. According to research done by United States National Research Council, and found in Biofuels (Future Science), Environmental Science and Technology (American Chemical Society), San Francisco Chronicle, corn-based ethanol may be causing hypoxia. In 2008 we simply called it dead zones in the Gulf of Mexico. Dead zones of this nature are so depleted of oxygen that fish and plants die.

Considering all the great news, you have to wonder 2 things. 1) Why did we ever choose corn-based ethanol, and mandate its use? 2) Considering all the problems, why has the media generally avoided telling the public – though they have no problem filling the airwaves with news of any and every problem with oil and gasoline?

Lastly, since members of Congress have all this information and far more in their hands, what reason (besides votes in States like Iowa) would they have to not end ethanol subsidies?

Only your support allows us to provide election coverage, political event coverage, and our political commentary. Visit Alchemy at World of VASS, and/or World of Vass – help keep us going. We appreciate your support.

About the Author

Michael Vass
Born in 1968, a political commentator for over a decade. Has traveled the U.S. and lived in Moscow and Tsblisi, A former stockbroker and 2014 Congressional candidate. Passionate about politics with emphasis on 1st and 2nd Amendments.

Thank you for lending your voice. We appreciate hearing what you have to say.

%d bloggers like this: