Farm Policy Hinders Lower Fuel Prices
By Jeff Lukens (05/31/06)
We can go a long way toward addressing our fuel needs simply by importing ethanol. That, however, is not as easy as it sounds. Our energy needs seem to have collided head-on with farm policy.
Did you know the government imposes a 54-cent-a-gallon tariff on imported ethanol, and then subsidizes a gallon of domestic ethanol by another 54? Wow . . . Drop this special interest pandering and watch fuel prices come down at the pump.
While politicians from corn growing states support this tariff and subsidy combination on ethanol, using corn to make ethanol is not effective because the net amount of oil saved is minimal. Corn yields less sugar per acre than sugar cane, and refining it uses much more energy.
It takes two-thirds of a gallon of oil to make a gallon equivalent of ethanol from corn. Moreover, Brazilian sugar-produced ethanol however can be produce for less than half the price of U.S. ethanol from corn. This is partly because the starch in corn must be processed into sugar before it is distilled into ethanol.
At current prices, Brazil can make ethanol for about $1 a gallon. While cars use 25 percent more ethanol than gasoline per mile driven, the net result is that ethanol is still much less expensive.
"Well, just make ethanol from sugar," you might say. The U.S. sugar industry has had little incentive to diversify into ethanol production because of fat tariffs and price supports that prop them up too. Our sugar prices are far above world levels. Offshore sugar is cheaper, and it is logical imported ethanol can be produced less expensively as well.
They can produce ethanol so economically in Brazil that it provides 40 percent of automobile fuel and compete with gasoline without a government subsidy. How did they do it?
When the 1973 oil embargo hit, Brazil imported 80 percent of its fuel. Economic necessity forced them to look within for alternative energy sources. Sugar cane in is a bountiful crop in Brazil, and they can easily distill sugar into ethanol. Two years later, they mixed their gasoline supply with 10 percent ethanol, a level they raised to 25 percent a few years later. Today, Brazil is energy independent.
If we were serious about diversifying our fuel supply and lowering the price at the pump, we'd open our markets to ethanol producers worldwide, and especially to Brazilian ethanol. This measure would displace perhaps 10 percent of current gasoline use without any vehicle modification or taxpayer subsidy at all.
Creating a fuel with a 10 percent ethanol blend makes little difference to a car's performance. We already have about 4 million flex-fuel cars on the road in the U.S., and that's with 14 states that don't even offer ethanol at the pump.
Go to a higher mixture of ethanol and the costs come down still further. In parts of the Midwest, a few stations have begun to offer an 85 percent ethanol blend known as E85.
Higher ethanol mixtures can corrode metal engine parts because of its high water content. Adapting cars to pure ethanol can be done inexpensively by adding corrosion-resistant hoses and fuel sensors that adjust to whatever mix is available. Flex-fuel cars run on ethanol, gasoline, or any combination of the two; and they cost the same as regular cars.
We already pay farmers, and for that matter big conglomerates, not to farm; we often protect and subsidize what they do produce; and many times they are allowed to use illegal immigrants to do the work. To say this is a bit archaic is an understatement. Let's hope that politicians and the farm lobby will stop making misleading statements on the cost efficiencies of corn-based ethanol.
Imported ethanol can diversify our fuel supply and lessen the possibility of future price shocks. With Iowa holding the first presidential primary in 2008, however, don't expect changes anytime soon.
Brazil has already established itself a low cost producer of sugar-based ethanol, and can churn out large volumes of it for around $25 a barrel. We would be foolish not to tap into this important biofuel.
Jeff Lukens writes engaging opinion columns from a fresh, conservative point of view. He can be contacted through his website at www.jefflukens.com
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