Ethanol and Biodiesel Fuels

Liberty is not simply a political concept divorced from economic realities. It is no mere coincidence that countries with the greatest political freedom are the wealthiest and most progressive. Liberty means free markets. It means the absence of political interference in economics. It means that labor and capital are employed and distributed by people exercising their free choices in their pursuit of happiness—rather than by politicians diverting human actions to less profitable, less beneficial directions.

In a free market, people will always pursue the most efficient, most profitable way of doing things, because it is in their interest to do so. If a course of action is not profitable or efficient, the company will be driven out of business by the superior action of competitors. Society is better off when that happens. But it’s not happening with biofuels, because of government interference in the market.

If ethanol and biodiesel fuels made sense, they would be profitable to produce without the government subsidies of 50 to 71 cents per gallon, in the case of ethanol. No political action would be necessary. Politicians cannot revoke the laws of physics and mathematics; they can only force other people to pay the losses from the uneconomic schemes imposed upon them.

Ethanol, which in this country is made from corn, is more expensive to produce than gasoline and furnishes fewer miles per gallon. Furthermore, there have been many studies of ethanol, almost all of which show it is a net energy loser; that is, it takes more energy to grow the corn (for planting, fertilizer, pesticides, harvesting, transportation) and for distilling the corn than you can get from burning the fuel. A U.S. Dept. of Energy study found that “131,000 BTU [British Thermal Units] are needed to make 1 gallon of ethanol. One gallon of ethanol has an energy value of only 77,000 BTU….there is a net energy loss of 54,000 BTU.” However, the ethanol industry disputes this.

So, using the net gain figure claimed by the corn ethanol industry, Ted Lofstrom recently made some interesting calculations (See TWTW Aug. 6 on www.sepp.org for details.) In 2004 there were record harvests of both corn and soybeans in the United States. (Biodiesel is made from soybeans.) If the entire 2004 U.S. harvests of corn and soybeans were devoted exclusively to producing biofuels to replace petroleum, they would account for just 12 days of U.S. petroleum consumption. This includes the 40 percent of petroleum usage that is produced domestically as well as the 60 percent that is imported. Of course, virtually all of our corn and soybean crops are already committed to other uses. Even if the politicians forced us to give up corn flakes, corn on the cob etc., biofuels still couldn’t make a significant dent in petroleum imports. And they certainly wouldn't reduce the cost of fueling the nation's automobiles.

A favorite study quoted by ethanol advocates is by Shapuri et al, who claim a 24 percent energy gain based on the best corn yield, least amount of energy used for fertilizer, pesticides, operating equipment etc., and, in general the most favorable (but still credible) numbers for all aspects of ethanol production. Without disputing Shapuri’s numbers, Prof. Howard Hayden, a physics professor at the University of Connecticut for 32 years, shows how puny even a 24 percent gain really is. He converts this to watts per square meter and shows that the net around-the-clock average power available from one acre of corn would be enough to continuously light one 60-watt light bulb. He concludes we would need “nearly seven times the land area of the U.S. devoted to ethanol production, using the most efficient methods on the planet, with no land set aside for cities or National Parks, to produce the energy used in the U.S. Maybe we can buy Russia, China, Canada, Brazil….”

“If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.”
—Thomas Jefferson

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