Monday, January 29, 2007


A remedy worse than the problem?

Ethanol has been much in the news lately. Many are calling for ethanol production to reduce our dependency upon foreign oil, others believe it is better for the environment. Regardless, the FedGov is making a push for more ethanol and some 200 ethanol plants are going to be springing up shortly all around the country.

As ethanol is created from corn, its creation is going to place a huge demand on the market for that corn. In fact, it already is making a huge impact on the market. Bloomberg is reporting a 10 year high price for corn and the US is projecting the lowest global supplies of corn in 29 years. Keep in mind that those 200+ plants are not yet built. When they are built they will create further demand which will outstrip the ability of the market to supply.

What does this mean for the consumer? It means that as corn prices have risen, so have other, similar, crops. Wheat and soybean in particular. These two crops are going to be used to replace some of what corn is currently providing to our food supply. One can imagine that this might affect potatoes as well but to a lesser extent.

Corn is one of the staples of our diet. Its increased cost is going to be felt by every person on the planet. Already the cost of tortillas in Mexico have risen some 400% due to the reduced supply. Tortillas have always been a staple of the mexican diet, especially amongst the poor so this hits them the hardest. But corn isnt just for tortillas. Corn syrup is used in jams, jellies, syrups, and colas. It is used as a sweetener in teas, popsicles, candies and various baked goods. Various parts of corn, such as corn starch, are used in most every processed food known to mankind from the freezer aisle to the canned goods aisle to the cereal aisle. Even some yogurts. Very importantly, corn is also used as feed for cattle. Any increase in corn will also cause an increase to beef, chicken and eggs. Even tho you might continue to work as hard as you do now, you will be bring home less bacon. (bad pun intended)

Those previously mentioned higher prices for wheat and soybeans will cause the remainder of the foods to go up. Wheat is usually pretty obvious. Pastas, breads, baked anything but again, processed foods often contain wheat as well (I know, I had to go on a wheat free diet for two weeks and it was awful! Couldnt even eat french fries!) Soy shows up in everything. Read the label, its on there. If it isnt in the food, the food is cooked in it.

So we are going to pay higher food costs, but isn't it worth it to save the environment/reduce oil dependency? Well if it did that, than it just might be worth the higher costs. But we aren't going to see either benefit. Corn strips the land of nutrients and requires a large amount of fertilizer. This fertilizer ends up in the streams and causes the algae blooms in both the Gulf of Mexico an in the Pacific, as well as the Salton Sea. Algae blooms, as the algae dies, consumes all of the oxygen in the water and this causes mass die offs of the fish in the region.

The other environmental aspect to ethanol is its energy output versus the energy it takes to create it. At best, ethanol is a break even game when one considers the required energy input, from the initial tilling of the land to irrigation to harvesting, trucking, and processing. And once that is all done we get a product that doesnt have the energy output of gasoline. Ethanol gives us 26.8 megajoules per kilogram whereas gasoline gives us 45. This means that when we finally get it into the gas tanks of the SUVs they are moving less distance per gallon and must simply stop more to fill up. No net environmental gain.

This brings us to oil dependency. As above, there is less power in each gallon of ethanol than in oil making it an undesirable option at best. And supply is limited. It is estimated that if all the corn in America was used in ethanol production the most impact it could have is to replace 15% of our daily oil usage. Assuming we did utilize our entire supply for oil replacement, we must ask ourselves, how much are we willing to pay for it? How many people must be impoverished? How many ranchers are we going to put out of business? And just how much of our limited water supply are we willing to waste on corn?

Ethanol is not a cornucopia, it is more akin to a pandoran box.