Ben Lieberman
Interest in the various elements of the Senate energy bill has fluctuated along with energy prices, with the recent surge in the price per gallon of gas focusing the debate on the provisions affecting motor fuels. While much of this attention centered on the failed attempt to allow oil drilling in Alaska’s Arctic National Wildlife Refuge, there’s another part of the bill that could have a substantial impact on the future price at the pumps — the proposed ethanol mandate.
The measure, added to the bill by Sen. Tom Daschle, D-S.D., and other Midwestern legislators, would set rising targets for ethanol use over the next decade, culminating in a 5 billion gallon mandate by 2012. Ethanol, largely derived from corn, costs about twice as much per gallon as gasoline, so blending it into the nation’s motor fuel supply is sure to add to the price. Hardest hit will be the states on the East and West Coasts, as they are furthest from ethanol’s Midwestern home base, and ethanol’s properties render it expensive to ship over great distances.
Almost every argument in favor of ethanol is suspect, including the currently popular goal of "energy independence." Granted, gasoline is derived from oil, more than half of which is imported, while ethanol is largely a domestic source of energy. The corn is grown in the heartland and distilled into ethanol there by a few big producers. However, there’s no benefit to consumers in a domestic fuel that is consistently more expensive than gasoline. Indeed, recent OPEC production quotas and global unrest have not come anywhere close to making gasoline costlier than ethanol. We don’t need a solution that is more expensive than the problem. Further, while the 5 billion gallon ethanol mandate is enough to boost prices, it still leaves America dependent on oil to meet the rest of its motor fuels needs, currently at 125 billion gallons per year.
The conservation and environmental arguments for ethanol are also weak. For one thing, several studies have concluded that it takes nearly as much (if not more) energy to produce ethanol than is derived from its combustion. Furthermore, though ethanol was once championed by environmentalists as a ground-level ozone (smog) fighter, studies now question its impact on air quality. A 1999 National Research Council report concluded that the addition of ethanol or other so-called oxygenates to gasoline "has little impact on improving ozone air quality and has some disadvantages."
Ethanol has only one thing going for it — its producers comprise a powerful regional special interest that owns many corn belt legislators, both Democrats and Republicans. These legislators are willing to go to the mat for this mandate, while most others are unwilling to fight back.
However, senators from California, New York, and a few other badly impacted states are waging a last-minute counterattack. With little hope of defeating the ethanol mandate, Sen. Dianne Feinstein, D-Calif., has offered amendments to relax the targets and timetables for the ethanol mandate. Short of scuttling the entire energy bill, these may be the only means of protecting consumers from substantial future pain at the pumps.
Ben Lieberman is a senior policy analyst with the Competitive Enterprise Institute, in Washington, DC.
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