[Allan Topol / AllanTopol.Com]
Lightning paced thriller writer
of International Intrigue
National Bestselling Author

Ethanol Insanity
by Allan Topol, [IMAGE]2007


Photo Courtesy: Julie Zitin
[Allan Topol / AllanTopol.Com] Decisionmakers in Washington concerned about the adverse impact on national security of our obsessive dependence upon imported oil have embraced a syllogism. Imported oil is bad. Substitution of ethanol for gasoline will reduce our oil imports. Therefore let’s expand the use of ethanol.

With this objective in mind, politicians have granted generous subsidies to encourage domestic production of ethanol, which is made from corn in the United States. Last year those subsidies cost taxpayers approximately $6 billion. And they have succeeded. Ethanol, either mixed with gasoline or used alone in specifically designed cars, accounted for 3.5 percent of American fuel consumption in 2006. Production is growing by 25 percent a year. Currently there are 114 ethanol distillers in the United States. Another 80 plants and seven expanded factories are being built, doubling capacity by the end of the decade to 12 billion gallons.

Politicians believe that this ethanol craze is a win-win scenario. It all seems too good to be true. Farmers support it because they love government subsidies. The automobile industry believes it will divert attention from global warming. The oil industry is happy because inroads on gasoline consumption are not major. Foreign policy hardliners love the idea of reducing dependence on Middle Eastern oil.

Long ago, I learned that anything too good to be true isn’t true. This is the case with ethanol.

For starters, there are three types of ethanol in the world. Good ethanol made from sugar cane and currently produced in large quantities in Brazil. Very good ethanol produced from wood, grasses and shrubs by a process not yet commercially viable. Then there is “bad ethanol,” which we produce in the United States from corn. It’s bad because, unlike the other processes for ethanol production, our corn based process requires at least as much energy to produce ethanol as it releases when burned. It also requires large quantities of water which is in short supply in much of the United States agricultural heartland where the plants are being built.

Then there’s the impact on food production and hence food prices. Not surprisingly, farmers are shifting productions of wheat, soy and other crops to corn in order to gain the governmental subsidies. Last year, 78 million acres of corn were planted. There will be more than 90 million this year. It doesn’t take an agricultural economist to realize that farm land is limited in the United States. Growing more corn means that other crops will be in short supply and their prices will rise.

At the same time, not surprisingly, the price of corn has sky rocketed. Since corn is also used for animal feed, the prices of beef, pork and poultry will rise as well. Ditto for a myriad of other foods and beverages, including cereal made from grain and, even Coca Cola, which uses corn syrup. We are literally diverting our food from feeding people to feeding cars. Americans are paying not only in taxes to cover corn subsidies but at supermarket checkout counters.

Hedge fund managers have descended upon the corn market like flies in a field of dung. $60 billion has been bet on corn futures.

Adversely impacting a nation’s food supply for a national security objective is a dangerous game. Mao played it in China when he traded wheat Chinese peasants needed for subsistence to Russia for nuclear technology. As many as thirty million Chinese may have starved to death as a result of this bargain. This is not a parallel to our situation, but it’s ludicrous for financially pressed Americans to be hit in the pocketbook to support bad ethanol.

I am strongly in favor of cutting our payments of petro dollars to Saudi Arabia and other Middle Eastern oil producers. We must find a way to do that if we are to reduce our military operations in that part of the world. But let’s do it the right way.

There’s a solution. End all subsidies for domestic ethanol production. Lift the current duty on the importation of good ethanol. Let it flow into the United States from Brazil and Caribbean nations where there is plenty of land for sugar production. Let American farmers’ corn return to its original use as food for people and livestock.

This approach will cost politicians in Washington votes in the farm belt. But it will achieve our national security objectives and leave Americans with more money in their pockets.