Ethanol is as ethanol does

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With gas prices soaring to above $3/gal in parts of the country it is no wonder that people are talking about alternative energy. Here in Iowa, of course, we like to talk a lot about ethanol, because we grow a lot of corn, one of the materials that can be turned into ethanol.

The Department of Agriculture announced this week that increased demand for ethanol is driving corn prices up, so at least Iowa farmers can receive some benefit from the high gas prices.

Meanwhile, lawmakers in Washington are considering legislation that would mandate an increase in the amount of ethanol used for fuel. Both Democrats and Republicans from the Midwest are proposing legislation, and while they think that it is useful to both be working on similar proposals, it seems unlikely that any bills would actually pass as midterms approach. There is concern that mandating the use of ethanol might not be the wisest move right now:

“To say that we have to incorporate these huge volumes of ethanol into gas regardless of what they cost is not very good policy if you’re trying to moderate gasoline prices,” said Bob Slaughter, president of the National Petrochemical and Refiners Association.

Furthermore, there is speculation that the dramatic increase in corn-derived ethanol costs may actually be contributing to high gas prices. So as a recap, so far we’ve got people saying high gas prices are driving up corn prices and other people saying that high corn prices are driving up gas prices. This economist though says that the only thing determining gas prices is good ol’ supply and demand.

So lets complicate things a little further: according to the same Register article there are also proposals in Congress to end the 54 cent per gallon tariff on imported ethanol. Places like Brazil are big ethanol producers, but they make it from sugar cane, not corn. However, it is uncertain if this would really reduce gas prices. Not to mention,

Latham, a close ally of House Majority Leader John Boehner, said the tariff cut would be unlikely to pass the House.

Another question that is being debated is how useful ethanol really is. While the debate over gas prices is one thing, the larger issue here is renewable energy. Is ethanol really a viable energy resource? Recent studies coming out of Cornell University have found that ethanol actually takes more energy to make than it produces. Basically that is bad. So even if ethanol could replace a sizable chunk of our foreign oil imports we might be better off looking for ways to power our vehicles with natural gas or coal (the biggest electricity producers in the U.S.).

What a lot of people are depending on in the future of ethanol is that there will be some technology advances. However, those advances are expected to come from finding new sources for ethanol, like plant wastes and wood chips. So what does this all mean? I don’t really know either, but it seems like the benefits Iowa derives from the ethanol industry might not be there in the future. (Maybe we should be focusing on that other renewable energy resource that we have a lot of…wind!)

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Entry Filed under: Miscellaneous, Environment, Agriculture

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