By Robert J. Samuelson
President Bush joined the biofuels enthusiasm in his State of
the Union address, and no one can doubt the powerful allure.
Farmers, scientists and venture capitalists will liberate us
from insecure foreign oil by converting corn, prairie grass and
much more into gasoline substitutes. Biofuels will even curb
greenhouse gases. Already, production of ethanol from corn has
surged from 1.6 billion gallons in 2000 to 5 billion in 2006.
President Bush set an interim target of 35 billion gallons in
2017 on the way to the administration's ultimate goal of 60 billion
in 2030.
Sounds great, but be wary. It may be a mirage.
The great danger of the biofuel craze is that it will divert us
from stronger steps to limit dependence on foreign oil: higher fuel
taxes to prod Americans to buy more gasoline-efficient vehicles,
and tougher federal fuel economy standards to force auto companies
to produce them.
?
True, Bush supports tougher but unspecified fuel economy standards.
But the implied increase above today's 27.5 miles per gallon for
cars is modest, because the administration expects gasoline savings
from biofuels to be triple those from higher fuel economy
standards.
Political thrust
The politics are simple enough. Americans dislike high fuel
prices; auto companies dislike tougher fuel economy standards. By
contrast, everyone seems to win with biofuels: farmers, consumers,
capitalists.
What's not to like? Unfortunately, this enticing vision is
dramatically overdrawn.
Let's do some basic math. In 2006, Americans used about 7.5
billion barrels of oil. By 2030, that could increase about 30
percent to 9.8 billion barrels, projects the Energy Information
Administration. Much of that gain would reflect higher gasoline
demand. In 2030, there will be more people (an estimated 365
million in the United States versus 300 million in 2006) and more
vehicles (316 million versus 225 million).
Suppose we reach the administration's ultimate target of 60
billion gallons in 2030. That would offset less than half the
projected increase in annual oil use by then.
Here's why. First, it's necessary to convert the 60 billion
gallons into barrels. Because there are 42 gallons in a barrel,
that means dividing by 42. Further: Ethanol has only about
two-thirds the energy value of an equal volume of gasoline. When
you do all the arithmetic, 60 billion gallons of ethanol displace
just under 1 billion barrels of gasoline. If that merely offsets
increases in oil use, it won't cut existing import dependence or
greenhouse gases.
The 60 billion-gallon goal and 35 billion-gallon interim target
are probably also unrealistic. When we rhapsodize about biofuels,
we're talking mainly about old-fashioned alcohol (aka ethanol).
Until now, most ethanol has been made from corn. If small amounts
of toxic gasoline were not added, it could become corn whiskey.
Heavy subsidies
Ethanol receives heavy federal subsidies. Oil refiners that
blend it with gasoline get a 51-cent-a-gallon tax credit. The
subsidy causes them to buy more ethanol, increasing corn
demand.
Naturally, corn farmers love this. They've been the program's
main beneficiaries. Although ethanol displaces only tiny amounts of
oil (slightly more than 1 percent), it's had a big effect on corn
prices.
They're about US$3 a bushel, up from US$2 last year and the
highest in a decade. Higher prices for corn (which is fed to
poultry, hogs and cattle) raise retail meat prices. Ironically,
fuel subsidies may boost food costs.
But corn harvests won't be large enough to meet either the 35
billion- or 60 billion-gallon targets. Large amounts of
"cellulosic" ethanol would also be needed the term referring to the
cellulose in other plants to be converted to ethanol.
Prime candidates are farm wastes, including wheat straw and
cornstalks. Unfortunately, the chemistry for doing this is far more
costly than for corn kernels. Without technological advances,
cellulosic ethanol won't be economically viable. It could be
supported only with massive federal subsidies or direct
requirements forcing refiners to use the fuel, regardless of
cost.
Worth nurturing
Biofuels are certainly worth pursuing. Up to some point, they're
even worth subsidizing. Government can nurture new technologies,
and breakthroughs for cellulosic ethanol hardly inconceivable would
make a meaningful difference in the US fuel balance. But there's
also a real threat that the infatuation with biofuels is a
political expediency that will turn into a classic government
boondoggle, benefiting selected constituencies and providing few
genuine public benefits. That has already happened with corn.
Our primary need is to curb reliance on foreign oil. The most
obvious way to do that is to improve the efficiency of vehicles by
30 percent to 50 percent over the next few decades.
Americans need more hybrids and more small vehicles. Biofuels
might be a complement, but if they blind us to this larger reality,
they will be a step backward.
(China Daily via The Washington Post January
26, 2007)
