In May, the Wall Street Journal ran an editorial alleging that producing ethanol requires more energy than is released when the fuel is burned, suggesting the entire ethanol industry is a government-subsidized boondoggle. The Journal cited a study published last year by David Pimentel of Cornell University.
Pimentel relied on data at least 20 years old and not representative of either current ethanol technology or the present ethanol industry. More recent studies show that on an energy-equivalent basis, only 0.13 BTUs of petroleum are used to produce 1.0 BTU of ethanol. Nitrogen fertilizer, produced from natural gas and electricity, accounts for a substantial portion of the energy input in corn production and, correspondingly, ethanol production.
Increased plant efficiencies have resulted in an ethanol yield of 2.68 gallons per bushel of corn—not the 2.50 gallons claimed by Pimentel. The ethanol industry currently produces a net positive energy ratio of 1.2—that is to say, 20 percent more energy is produced than consumed in the process. That ratio is projected to increase to more than 1.4 by 2012.
The average spot price of ethanol is around $1 per gallon, plus or minus five cents. This is the real-world market, before any subsidy, in which 45 ethanol-manufacturing companies must compete and provide a return to their investors. To say, as Pimentel and the Journal‘s editorialists do, that it costs $1.74 to produce a gallon of ethanol strains the credibility of anyone who would make such a claim.
No one is suggesting ethanol is a miracle fuel. However, it is a practical way to address some of the energy challenges this country faces, including the need to import more than 60 percent of the crude oil utilized to make liquid fuel or gasoline.
Ethanol produces a clean-burning fuel beneficial to the environment and consumers, and its production adds value for the farmers who produce corn and other commodities. Ethanol also transforms the energy from natural gas and electricity (mostly coal and hydro-power) into a more desirable and useable form of liquid fuel.
The research cited by the Journal is not David Pimentel’s first foray into the abuse and misuse of economic data. Pimentel is an entomologist, not a trained economist, and he has a history of utilizing out-of-date information in his policy analyses.
Terry Francl is senior economist for the American Farm Bureau Federation.