Saturday, June 18, 2011

Ethanol no saving, a ripoff in corporate welfare

U.S. Senate moves to end biofuel subsidy in 73-27 vote

Washington – Provided by tax credits, the U.S. Government gives refiners who add 10% ethanol to motor fuel gasoline 45 cents per gallon.

The additive comes from distilled corn mash produced on American farms.

Republican Senators aligned with Tea Party activists forced a vote to end the $5 billion a year subsidy, sending a strong message to the White House last Thursday.

Similarly, Sierra Club environmentalists have arrived at the opinion that since ethanol does not burn any cleaner than unleaded gasoline, the additive should not be subsidized, but sustainable and renewable alternative methods of providing energy should be developed.

The Senate measure will be added to a bill renewing a federal economic development program. The matter is still up in the air, but unless Congress renews the ethanol subsidy, the measure passed last week will end the subsidy immediately.

Calculations show that the net energy ratio of of the fuel and other petroleum derivatives it takes to produce ethanol is in theory 1.25 to 1. However, real time observations show it's much less than 1 to 1, meaning it takes a net of more that one gallon fuel to produce a gallon of ethanol.

This negative factor has other ramifications.

Crops are displaced by corn intended to produce ethanol; food, animal feed, cotton and wheat are among them.

Since 2003, corn acreage increased by 12.2% while wheat acreage decreased by 13.7%.

Similarly, other acreage devoted to such crops as sorghum decreased (42.6%); hay (5.5%); cotton (18.6%; barley $46.3%; oats (31.7%), according to figures furnished by the Department of Agriculture.

What's more, high gasoline prices drive ethanol prices up while high ethanol prices drive corn prices up. Corn averaged $5.40 per bushel in 2010, bringing farmers a yield of $756 per acre. When cattle feed lots have to pay $5.40 per bushel for corn, along with poultry and hog producers, food prices rise accordingly.

Cotton prices are up 86% over the past 12 months as a direct result of the smaller amount of acreage devoted to cotton cultivation.

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