Again, Biofuels Are a Foolish Diversion

Awhile back I posted a column pointing out that we Americans and Congress, in particular, are making a terrible mistake by encouraging the development of biofuels and by placing severe restrictions on domestic oil drilling. Ethanol and other biofuels can never supply more than a tiny fraction of our fuel needs, and we will continue to be largely dependent on Middle East oil for the foreseeable future if we do not resume extensive drilling and also start building lots of the new, safe, PBR nuclear plants.

I noticed the following column about ethanol that appeared in the Providence Journal that again states the case against biofuels:

J. Allen Wampler: Where we must drill -- Don't let ethanol blind us to crude

WASHINGTON

IF EVER THERE WAS A SYMBOL of hope clashing with reality, it is the much-publicized goal of producing ethanol at a price cheaper than gasoline. Despite generous federal and state subsidies, a mass market for ethanol does not exist, because it's too expensive and it delivers about 30 percent fewer miles per gallon than does gasoline.

But thanks to a mandate from Congress, the market for ethanol is about to expand, and consumers will be digging deeper into their pockets to pay the bill. An estimated 5.1 billion gallons of ethanol will be blended with gasoline this year, up from 4.2 billion gallons in 2005, and the amount will rise every year to at least 7.5 billion gallons by 2012.

Now some politicians want to push production still higher, in the mistaken belief that the United States should emulate Brazil's heavily subsidized ethanol program -- even though if it weren't for subsidies, the ethanol industry would cease to exist.

Ethanol mandates and subsidies are almost certainly contributing to higher gasoline prices. At 51 cents per gallon of ethanol, the federal subsidy comes to billions of tax dollars that wind up each year in the hands of the ethanol producers. And 14 states, mainly in the Corn Belt, also provide subsidies for ethanol production.

While blending ethanol with gasoline could extend gasoline supplies well into the future, the question is: At what cost to the consumer and taxpayer?

We know that ethanol isn't cheap. Consider how it's made. Large amounts of oil and natural gas are used to make fertilizers and pesticides for growing corn and to run the farm machinery and irrigation systems. Carrying the corn to ethanol plants requires fuel. There, the corn needs to be ground up, mixed with water, and fermented. Then a mixture of about 8-percent ethanol must be distilled, again and again, until it becomes almost pure ethanol.

If you add up all the steps in the process -- oil to run tractors, natural gas to heat the fermented corn, and fuel to carry the ethanol by truck or train to refineries -- it takes almost as much energy to produce ethanol as provided by the fuel itself, according to a study by Argonne National Laboratory.

So now biofuels advocates propose that the United States produce ethanol from sugar cane, since sugar-cane-based ethanol yields more energy than corn-based ethanol. It's ethanol, they say, that has let Brazil become energy-independent.

They are wrong. Brazil achieved energy independence mainly through increased production of crude oil. The fact is, in 2004-05 the jump in Brazil's crude-oil production was nine times larger than its increase in ethanol production, and it was four times larger between 2000 and 2005. By the end of this year, Brazil's crude-oil production is expected to reach 2 million barrels a day, which will be more than enough to cover its daily consumption of 1.8 million barrels. And the country has announced plans to raise oil production to 2.3 million barrels a day by 2010.

The irony is that the United States produces more ethanol than Brazil does. Brazil's ethanol program has not been the unqualified success that one would think from all the hoopla. In truth, for 30 years Brazil has relied on command-and-control policies to force the use of ethanol, but the effect of the policies has been to reduce flexibility in fuel markets and produce ethanol shortages.

Such problems mounted to the point at which the Brazilian government recently cut the ethanol content of gasoline to 20 percent, from a longstanding 25 percent, and announced that the rule would stick for the foreseeable future.

It would be an unwise and unnecessary move for the United States to launch an ethanol program patterned after the one in Brazil, even if large quantities of sugar cane could be grown in this country. It becomes even more unwise given that ethanol is a costly pork-barrel monster.

Here's what we should be doing: If we want to reduce our dependence on imported oil, the more sensible thing to do is open up the Arctic National Wildlife Refuge, the mountainous West, and the Outer Continental Shelf to oil exploration and production.

The Interior Department estimates that the coastal waters off the lower 48 states contain 59 billion barrels of oil -- enough to maintain the current level of oil production for 105 years. And there's plenty more oil and gas on land.

That's right: The oil is right under our nose. But it's in places that are restricted or off-limits. Not to tap it is absurd.

J. Allen Wampler, a consultant to business on energy matters, was assistant energy secretary in the Reagan administration.

Shortly after this column was written a huge discovery of oil was found in our area of the Gulf of Mexico that may eventually add 50% to our oil reserves.