Can ethanol really energize our economy?

by Anne Law, November 10th, 2006, 7:00 am

Skyrocketing oil prices over the summer led corporate investors and farmers alike to jump on the ethanol bandwagon. But with fuel prices lower and naysayers questioning the alternative fuel’s true value, ethanol’s future as an energy star looks less than assured.

Supporters tout ethanol as the cure for many evils — the foremost being reducing our dependence on foreign resources and helping struggling farmers. Businesses such as ADM and VeraSun, the largest US ethanol producers, promote the fuel’s environmental rewards while reaping the profits.

Investment firms are entering the game by putting money in smaller ethanol producers like Pacific Ethanol and Aventine Renewable Energy and farmer cooperatives like United Wisconsin Grain Producers and Mid-Missouri Energy. Farmer co-ops are less willing to sell what they see as a long-awaited cash cow. (Corn farmers get more dollars per bushel when they sell to ethanol plants, and co-op members receive profit dividends as well.)

However, some scientists and environmentalists express doubts over whether ethanol will prove its worth, arguing that it takes more energy to process corn into ethanol than the ethanol itself provides. Also, while automakers like Ford and GM are building more “Flex-Fuel” vehicles that can run on VE85 (an 85% solution of ethanol sold at select gas pumps), the numbers of such vehicles and the pumps that provide their fuel are still extremely low. (Ethanol is more widely used as a 10% additive in gasoline.) Added to that, the price of ethanol must stay below that of regular gas to entice consumers to switch.

At some point the wisdom of our nation’s investment in ethanol production – whether by farmers, processors, retailers, or consumers – must be evaluated to determine whether ethanol is a blessing or a blunder.