The Inarguable Idiocy of Ethanol

Have you heard of ethanol?

Chances are good that you’ve probably been using it for years without giving it much thought. Come to think of it, even if you have heard of it, you’ve probably still been using it for years without giving it much thought.

In the United States, almost all of our gasoline is actually a blend of gasoline with 10% ethanol. 94% of said U.S. ethanol is produced from the starch in corn grain, which then requires energy to distill the grain into the final product.

Originally introduced to replace an existing fuel additive in the 1970s, ethanol really gained widespread adoption as a gasoline blending agent in the 2000s due to the adoption of several renewable fuel standards that aimed to lower greenhouse gas emissions and increase U.S. energy security. Since then, the non-industry-backed scientific community has largely coalesced around the idea that ethanol blending, in practice, does not lower greenhouse gas emissions.

I distinctly remember learning in college (probably circa 2005) that ethanol basically required more energy to create, based on its full lifecycle, than it ended up yielding. I filed ethanol fuel-blending away in my brain files as “dumb policy” and moved on with my life.

Enter High Gas Prices

Cheri Bustos, a democratic member of the U.S. House of Representatives from Illinois’ 17th District, recently published an opinion piece praising ethanol as a tool to bring down gasoline prices and freedom America Jesus guns liberty, or whatever. I just assume all that was in there because politicians are generally the worst.

But I digress…

Ms. Bustos’s article brought ethanol back into the forefront of my mind, so I decided to re-examine it with my own data-driven approach. I’d like to look at the points she brought up and explain why ethanol is not a great thing. But first, a quick primer on ethanol (courtesy of Wikipedia, which conveniently just calls ethanol’s sustainability and environmental impact “debatable” to avoid controversy):

In the U.S, ethanol fuel is mainly used as an oxygenate in gasoline in the form of low-level blends up to 10 percent, and, increasingly, as E85 fuel for flex-fuel vehicles. The U.S. government subsidizes ethanol production. Historically most U.S. ethanol has come from corn, and the required electricity for many distilleries came mainly from coal. There is a debate about ethanol’s sustainability and environmental impact. The primary issues related to the large amount of arable land required for crops and ethanol production’s impact on grain supply, indirect land use change (ILUC) effects, as well as issues regarding its energy balance and carbon intensity considering its full life cycle.

So now that we’re past that, let’s dive into Cheri Bustos’s op-ed.

The Hook: Gas prices are high

She starts her argument by pointing out that gasoline prices are quite high at the moment. Makes sense. This is why people would read the article to begin with. Americans have to buy gas to run their vehicles. And isn’t it sad (sarcasm alert) that they have no choice whatsoever in how much and how often they buy gasoline to fill up their automobiles? People have to live far from where they work, have to leave their cars idling while parked (for their air conditioning to work), and have to drive far more than they should ever do anyways. It’s the American way! 

I haven’t noticed any increase in what I pay at the pump, luckily, since I don’t go to gas stations. My gas-equivalent costs are about $0.84/per gallon. Yet another reason that electric vehicles aren’t just the future—they’re the present. 

Point #1: Ethanol is home-grown and American-made.

The patriotism is just spilling out of this article. “Importing foreign oil involves costs for transportation and tariffs…” “…so instead of supporting oil moguls in the Middle East or Russia, we’re boosting demand for corn grown by American farmers.” America!

I usually agree with the idea of buying American-made. With manufactured items, it’s usually a good indicator of quality, especially compared to items made in China. However, in this instance when we’re comparing American-grown corn to foreign oil, it just isn’t that simple. 

First of all, according to the U.S. Energy Information Administration, the U.S. simply doesn’t import very much oil from the Middle East (9.6% of total imports) or Russia (6.8%) as of March 2022, the most recent month that data was available. What we do buy is largely to supply U.S. refineries that were often purpose-built to handle those grades of crude. It also helps to diversify some of our energy security demands so as not to rely largely on a single foreign source for oil. Canada, by the way, is our largest foreign oil source—the U.S. sources approximately 55% of its oil imports from our northern neighbors. And Russia? Well, the U.S. stopped importing Russian crude after it invaded its Ukrainian neighbor. And one last point on this first issue—according to data from BP, the U.S. surpassed Saudi Arabia once again in 2017 to become the world’s largest oil producer. We import based on convenience and pragmatism, not need.

Second, the previously-mentioned Russian invasion of Ukraine is already causing what is expected to be a global food crisis. Ukraine is the world’s largest contributor of wheat to the U.N.’s World Food Programme, the world’s largest humanitarian organization. Unfortunately, Ukrainian farmers who would traditionally be growing wheat are instead fighting in defense of their country or using their tractors to stalk disabled Russian military vehicles to tow back to their properties.* 

So I circle back and ask the question—why are we using our policies to artificially inflate demand for corn-based ethanol when we could instead be using it to produce food to fill this void? Just because its “home-grown” and “American-made” doesn’t mean it’s weaning us off of foreign oil, or that it even needs to for that matter.

Point #2: Ethanol blending increases America’s fuel supply.

Yes, this is true. Much in the same way as you could blend any other fuel source into a fixed volume of fuel and it would increase the total amount of fuel supply (like biodiesel into diesel, or hydrogen into compressed natural gas). This is a math problem. When you add two positive numbers together, their sum is larger than either of those positive numbers on its own. Congratulations, Rep. Bustos, you proved a basic mathematical principle!

Point #3: Ethanol is less expensive per gallon.

“Because ethanol is less expensive per gallon than traditional gasoline, a gallon of E15 blended gas can be up to 50 to 60 cents per gallon cheaper. With the average American purchasing 421 gallons of gas a year, this could mean savings up to $252 annually for consumers!“ 

Here’s where her argument gets tricky. On its face, this is true. There’s even a picture in the article that proves it!

Cost Savings From Ethanol

As you can plainly see from said photo, the numbers that Representative Bustos cites are simply wrong. With 10% ethanol, there is a $0.05 savings at $2.59 per gallon of switching to E15 ethanol. If you were to double the price of gas (which, coincidentally, is about the national average as of this writing), your savings by using E15 vs E10 would correspondingly increase to… wait for it… $0.10 per gallon. A $0.50-0.60 savings per gallon might be accurate if Americans were paying $25 per gallon at the pump. So instead, a more honest and accurate estimation of the savings for the “average American” who uses 421 gallons of gas per year would be $42.10.

For the 228 million licensed drivers in the U.S., this amounts to a collective savings for Americans of about $9.6 billion per year.

Remember that number: $9.6 billion.

Consumer Loss From Government Subsidies

Switching gears–remember the primer I posted above? There’s this little phrase:

“The U.S. government subsidizes ethanol production.”

How much, you ask? According to the U.S. Government Accountability Office, about $5.7 billion in foregone revenues in 2011. In 2011, the U.S. produced over 22% less ethanol than it did in 2021, so that would equate to more than $7.3 billion in lost revenue last year.

So: $9.6 billion – $7.3 billion = $2.3 billion. We’re still coming out ahead!

Consumer Loss From Increased Food Prices

In addition to the U.S. government subsidizing ethanol (at the cost to its taxpayers), a recent study co-published by researchers at the University of Wisconsin, Kansas State University, University of California, and University of Kentucky, determined that ethanol production led to sustained price increases in corn (31%), soybeans (19%), and wheat (20%). This is because ethanol mixing policies stimulated 5.5 billion gallons of annual ethanol production, which required 1.3 billion bushels of additional corn (and the farmland to go along with that, hence the spillover into soybean and wheat prices).

So, taking into account the $7.3 billion in foregone revenues as estimated by the U.S. GAO, plus the price increases of the two largest crops grown in the U.S. (corn and soybeans), I’d say the American consumer is absolutely not saving $252 annually, as Ms. Bustos would have us believe. Nor would they really be saving the more-accurate $42.10 that we worked out above.

In fact, a quick back-of-the-napkin shows that the 31% increase in corn prices and 19% increase in soybean prices would lead to an $11.8 billion price increase and $6.6 billion price increase, respectively, based on figures from the USDA’s Economic Research Service. Not all of this cost is borne by the American consumer, of course, since the U.S. is a huge exporter of agricultural products. But to quote a long-deceased U.S. Senator (who was apparently misquoted in an interview, but liked the sound of it so much he never bothered to correct the record): “A billion here, a billion there; pretty soon you’re talking real money.”

So: $9.6 billion – $7.3 billion – ((let’s just say 25% of($11.8 billion + $6.6 billion)) = -$2.3 billion

Consumer Loss From Loss Of Vehicle Efficiency

A final factor to consider on the ethanol price front is that ethanol does not have the same energy density as gasoline, according to Michael Lynch, a Distinguished Fellow at the Energy Research Foundation. He wisely points out:

“…the price per gallon of ethanol is not better than the price of gasoline except by volume: ethanol contains about 30% less energy than gasoline and the price per gallon is thus misleading. Adjusting for this… shows that ethanol in gasoline equivalent gallons is rarely cheaper than gasoline, typically 5% of the time. Ethanol advocates describing it as cheaper than gasoline, as so many do, are usually overlooking this inconvenient truth.”**

The result, then, is that the already-horrendously-inefficient*** gas engine in your vehicle has to compensate for the even-more-inefficient ethanol blend. Increasing the blended ethanol content from E10 to E20, by way of illustrating an example, could decrease vehicle mileage by as much as 4-5%.

Let’s say conservatively that a jump from E10 to E15 would lead to a 2% reduction in vehicle mileage across the board for all American drivers (half the low-end efficiency loss of E10-E20 cited above). There are about 228 million passenger vehicles on the road in the U.S. According to Ms. Bustos, those vehicles use an average of 421 gallons per year.**** With an average cost of gasoline of $5 per gallon, a 2% efficiency loss represents an additional economic loss to Americans. It amounts to an additional 8.5 gallons purchased by for each vehicle per year, at $5 per gallon, 228 million times. Put another way: -$9.69 billion.

Final Thoughts

So as you can plainly see, ethanol is not cheaper overall for the American consumer.

In math terms, to recap:

$9.6 billion (initial savings) – $7.3 billion (subsidies) – $4.6 billion (food price increase) – $9.69 billion (efficiency loss) = -$11.99 billion per year

The only reason the ethanol blending policy has stuck around this long is that some powerful lobbying interests, in conjunction with congress members from agriculture-heavy districts, have pandered to keep it that way. Ethanol blending usually only comes up in policy circles now when an incumbent in/hopeful candidate for the White House wants to appease corn farmers.

Currently, the President and the White House Economic Council are weighing whether to reduce or increase the requirements for ethanol blending (hence why Bustos’s op-ed was written to begin with). Appease a crucial base of voters in the midwest to hold onto power? Or lower overall consumer costs?

Increasing ethanol blending might provide a short-term approval bump and temporary increase to the supply-side to show that the administration is doing something. But, it’s simply the wrong move.

I would argue that demand-side policies like fuel efficiency mandates and vehicle electrification, while they take longer to implement, are the long-term solutions that leave Americans better off.

If a policy decision is to be made–the facts should stand on their own. There’s no reason that our congressional representatives should have to embellish data to goad readers into supporting their unsupportable policy positions. People are entitled to their own opinions (i.e., we need to support American farmers), but not their own facts (i.e., ethanol is cheaper for American consumers).

And for the record, I’ll say it: Get rid of fucking ethanol.

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*At least they don’t have to declare these captured military vehicles as income for tax purposes, according to this statement from Ukraine’s tax agency.

**Hey, look at that! He used the same turn of phrase!

***Today’s gasoline engines are only around 30-35% efficient, which means about 65-70% of the gasoline used to power them goes to waste. Compare that to about an 85% efficiency in electric vehicles. ‘Nuff said.

****This is factually incorrect. Her math would indicate that the average American drives approximately 10,000 miles per year, when in fact that number is over 14,000, according to the Federal Highway Administration. I’m using this just for the sake of comparison.