Ethanol scam drives up prices, stifles recovery

January 10, 2013 

TUSCALOOSA, Ala.

For more than two decades, special interests have persuaded Congress to mandate Americans buy ethanol whether they want to or not. As a result, 40 percent of the U.S. corn crop is now used for ethanol rather than food.

The ethanol mandate means that ordinary Americans pay more for a poorer quality automobile fuel and more for groceries. Ethanol proponents claim these costs will bring us environmental benefits and energy security. They are wrong.

A good first question about a mandate is “how good can a product be if you have to force people to buy it?”

The answer: not very good. Ethanol is vastly inferior to gasoline.

Consider these glaring drawbacks: Its energy density is a third lower, reducing cars’ emissions. It attracts water, so it cannot be transported in regular gas and oil pipelines, reduces lubricants’ effectiveness, and shortens engine lives. It is caustic, corroding engine parts and dislodging contaminants from fuel tanks.

While ethanol doesn’t make gasoline cleaner, the more intensive farming and water needs of ethanol refining harm the environment.

Moreover, mandates for ethanol don’t enhance national security because production of corn-based ethanol – the main type of ethanol in use in America – requires roughly as much energy as the ethanol contains.

Running tractors, combines and trucks, making fertilizer, and refining corn into ethanol all require energy – mostly from oil and natural gas. If the weather is good, corn ethanol shows a slight energy gain over the fuel used to make it; if not, it might be a net loss. The ethanol mandate just burns money to turn oil and natural gas into corn.

The mandate for corn-based ethanol also drives up food prices. Meeting the 2015 mandate will require using 5.3 billion bushels of corn. As a result of the forced conversion of corn to ethanol, any food containing corn – including pork, beef and ice cream – costs more.

The National Council of Chain Restaurants estimates the ethanol mandate costs each of its members $18,000 per year. An inconvenience for wealthy people, rising corn prices are disastrous for the poor, at home and abroad. A Tufts University study estimated that Mexicans paid $1.5 billion more for food from 2006 to 2011.

Why do we have an ethanol mandate? Politics, clear and simple.

According to the Center for Responsive Politics, ADM has contributed $10.46 million to politicians and spent $8.94 million on lobbying since 1990.

Moreover, holding the first presidential nominating contest in Iowa, a corn and ethanol producing state, means politicians seeking to be president must curry favor with ethanol producers.

Before his 2008 run for president, Sen. John McCain, R-Ariz., opposed ethanol subsidies and said “No one would be willing to buy it” without federal mandates. In 2008 in a speech in Grinnell, Iowa, he declared it “a vital alternative energy source.” That flip-flop from Congress’ most famous “maverick” illustrates the power of ethanol special interests.

It is long past time to get the ethanol lobby’s hand out of our wallets. If 20 years isn’t enough time for ADM, other ethanol producers and corn farmers to stand on their own feet without holding a gun to our heads to force us to buy an inferior product, how much time will be enough? It is time to end the ethanol scam.

Contact Morriss, professor of business at the University of Alabama, at amorriss@law.ua.edu.

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