Politics & Policy

The Corn Ethanol Boondoggle Continues — See the EPA’s Latest Rule


Last Friday, the EPA decreed the amount of ethanol that retailers must blend into their gasoline. For 2015, it will be about 14 billion gallons. That decree provides an opportunity to ask a simple question: How have ethanol producers been able to garner a federal mandate that requires motorists to buy their low-heat-content, hydrophilic, motor-fuel moonshine?

The answer: For years, ethanol promoters have been telling a series of stretchers about the supposed benefits of ethanol. They’ve told them to the public and to farm-state politicians who dutifully repeat them. And they’ve used state-based associations and other arms of the farm lobby to repeat them again and again. While there are a myriad of reasons to object to corn-based motor fuel, the top three ethanol stretchers are as follows: Ethanol is cheaper than gasoline; it helps us be energy independent; and it’s good for the environment.

Let’s take those in order.

A few months ago, Tom Buis, the CEO of the pro-ethanol group Growth Energy (2013 budget: about $19.5 million) claimed that the ethanol industry gives American consumers “savings when they go and fill up at the pump.” The exact opposite is true: Ethanol is more expensive than gasoline. In fact, on an energy-equivalent basis — which is the essential factor in comparing motor fuels — it has been more expensive than gasoline for more than three decades.

As I showed in a recent report for the Manhattan Institute, the Renewable Fuel Standard now imposes about $10 billion annually in additional fuel costs on motorists over and above what they would have paid for gasoline alone. Since 1982, when measured on an energy-equivalent basis (ethanol contains two-thirds as much heat energy as gasoline does), ethanol has always been more expensive than gasoline.

Between 2007 and 2014, about 92.5 billion gallons of ethanol were mixed into domestic gasoline supplies. Over that eight-year period, the energy-equivalent cost of ethanol averaged about 90 cents per gallon more than gasoline. Motorists thus incurred about $83 billion — roughly $10 billion annually — in additional fuel costs over and above what they would have paid for gasoline alone. That means that each of the 200 million licensed drivers in the U.S. are now paying an additional $47 per year in excess fuel costs.

Ethanol has done effectively nothing to reduce oil imports.

Now to the second fib. The Renewable Fuel Association (2013 budget: $8 million) says it wants to help America become “more energy independent.” The reality: Ethanol has done effectively nothing to reduce oil imports. Over the past ten years, oil imports have fallen by more than half. But that decrease is due almost solely to the dramatic increase in domestic oil production over that time frame. How dramatic? Since 2005, just the increase — repeat, just the increase — in U.S. oil output, nearly all of it from shale deposits, equals more than five times the output of every ethanol distillery in the country.

Let’s walk through the numbers. In 2005, domestic ethanol output totaled about 170,000 barrels of oil equivalent per day, and domestic oil production was about 5.2 million barrels per day. By 2014, thanks to federal mandates that require its consumption, domestic ethanol output had nearly quadrupled to 620,000 barrels of oil equivalent per day. But that increase in energy output was a fraction of what was produced thanks to horizontal drilling and hydraulic fracturing in places such as the Bakken shale in North Dakota and the Eagle Ford shale in south Texas.

In 2014, domestic oil production soared to 8.66 million barrels per day. Thus, between 2005 and 2014, U.S. oil output grew by 3.4 million barrels per day, which is nearly five and a half times the energy output of the entire ethanol sector.

Corn ethanol’s ‘combined climate and air quality impacts are greater than those from gasoline vehicles.’

Finally, ethanol boosters claim their fuel improves “overall environmental quality.” A bigger fiction is difficult to conjure up. In December, a report published in the Proceedings of the National Academy of Sciences by researchers from the University of Minnesota found that while corn-ethanol-fueled vehicles emit marginally less greenhouse gases than those fueled by gasoline, “the combined climate and air quality impacts are greater than those from gasoline vehicles.” Jason Hill, one of the authors of the report, said flatly that “If we’re using ethanol for environmental benefits, for air quality and climate change, we’re going down the wrong path.”

More recently, the Environmental Working Group has found that corn ethanol produces more carbon dioxide than would Keystone XL — presuming, of course, that the beleaguered pipeline ever gets built.

In short, Congress has imposed a law that costs you more at the pump, has scant geopolitical value, and is worse for air quality and carbon-dioxide emissions than gasoline. And that’s the truth.

— Robert Bryce is a senior fellow at the Manhattan Institute. His latest book is Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong.


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