The price of ethanol

Every time we fill up at the gas station in the United States, we’re met with a seemingly innocuous notice.
A message informs us that the gasoline we are paying for is not really pure gasoline.
“Contains up to 10% ethanol,” the sticker reads.
The result of this rather frustrating yet well-intentioned policy, turbocharged by Congressional subsidies, has been bad.
It has negatively affected both the consumers and the environment.
Initially promoted as a way to rid America of reliance on Middle Eastern petroleum, ethanol was promoted as a home-grown solution for American energy independence.
Supporters often cite Brazil’s use of sugarcane for ethanol as a positive example of how ethanol can revolutionize the economy.
Sadly, this seemingly noble goal has not only been subverted, but it has been turned into an albatross around the necks of Americans as well.
The difference in American and Brazilian production of ethanol is important. The ethanol yield of sugarcane far exceeds that of corn.
This, in conjunction with ethanol subsidies and production quotas, has resulted in inflated corn prices during the past 10 years.
Though inflation and a sagging economy might be to blame, the price of corn in particular has risen to astronomical levels.
Corn on the cob is a summer classic.
But corn is particularly vital to many other foodstuffs, such as meat, where it is used as feed.
So rising prices in corn contribute to rising overall food prices.
To make matters worse, ethanol is no white knight here to save us from the evils of gasoline.
Consumer Reports conducted a series of tests with a 2007 Chevrolet Tahoe, which is a flex-fuel vehicle.
It used both standard gasoline and an 85 percent-ethanol, 15 percent-gasoline blend.
The results were fairly stark.
Though smog-forming nitrogen oxides were reduced compared to the normal blend of gasoline, E85 resulted in regular losses of six to nine miles per gallon.
As a result, the price for removing smog emissions is filling up on gasoline more frequently.
To add insult to injury, this loss in efficiency makes E85 more costly than purchasing regular gasoline.
What’s funny about the whole situation is that the government encourages it through both subsidies and regulation.
Car manufacturers get to count vehicles that run on ethanol at 1.67 times their actual fuel economy toward their Corporate Average Fuel Economy standard.
This is a crutch some brands are relying on in the wake of recent increases of Corporate Average Fuel Economy standards.
Furthermore, ethanol blenders receive $0.51 per gallon in tax credits to encourage corn farmers to have more of their crop converted into ethanol rather than for consumption.
This leads to rising overall food prices as described above.
The people who really benefit from these policies aren’t Americans strapped for cash or concerned with the environment.
They’re the farm lobby and corn growers.
As a citizen of Missouri, a corn-growing state like Indiana, I sympathize with farmers who defied the doom-and-gloomers who once said we would hit peak food a long time ago.
But these policies reverberate across the entire American economy, and I fear for the worse.

mjsu@indiana.edu