Don’t Count Ethanol Out
Aug 19, 2011
For more than a year now, the big city press has had ethanol in their cross hairs. They blame the increase in food prices on the fact that part of our corn crop is processed into fuel. The hot, dry summer has hurt our corn crop and that has helped to lift the corn prices to $7 per bushel, giving the ethanol critics even more ammunition.
Let’s put some facts on the table.
1. It’s not just corn land that is being diverted to fuel. Biofuel production uses 20 percent of the sugar cane crop, 9 percent of sugar beets. Ethanol uses 23 percent of the corn crop. I must add that the percent is 23 percent of our corn crop – not the 40 percent that many reporters inaccurately report. If we are so concerned about crop land that is not producing food, what about the millions of acres growing cotton – shouldn’t those acres be growing food?
2. An Iowa State study tells us that producing ethanol as fuel reduced the cost of gas by 89 cents per gallon in 2010. That’s huge. When you fill up your gas tank, 10 percent of the gas is ethanol. There are studies that project that if that ethanol were taken away overnight, your gas bill could jump maybe to $7 per gallon.
3. Let’s not forget that one of our national priorities is to reduce our dependence on Middle East oil. Already, ethanol is supplying more fuel than we import from Saudi Arabia. That’s a good start.
4. Now, let’s consider how much impact corn could have on the cost of food in the U.S. To begin, we need to be aware that less than 12 cents of every food dollar is spent on food. Let me explain. If you buy a box of corn meal for $2, only 24 cents is for the corn. The rest ($1.76) is for processing, transportation, labor, marketing, etc. The thing to remember is that when it comes to food, the real cost is not in the raw grain, but everything else.
5. The criticism of ethanol is probably going to eventually result in the elimination of the federal ethanol tax credit and imported ethanol tariff.
But don’t count ethanol out. Our first automobile ran on alcohol fuel (ethanol). And I expect even without federal subsidy, ethanol will continue to be a valuable source of fuel.
In closing, I would encourage you to access my website which archives my radio commentaries dating back 10 years and will go back 20 years when complete. Check on what I said back then. Go to www.johnblockreports.com
Until next week, I am John Block in Washington.