President Bush has vilified our “addiction to oil,” in his February State of the Union address and has called for more research into alternative fuels – suggesting such pie-in-the-sky alternatives as hydrogen, which would require a total infrastructure overhaul, nationwide.

But what of Ethanol? Bush’s energy bill last year, put into effect this year a new ethanol mandate, requiring a certain percentage of ethanol blended in all gasoline. A recent article on CNN attests to the successful, largely private ventures that have contributed to Brazil’s multiple fuel structure over the past 30-odd years. In fact, it suggests that ethanol in Brazil sells at a 45% discount compared to standard gasoline. And I’d like to take a few to address this – after all, we’ve been told that Ethanol is a safer, cleaner, cheaper alternative to petroleum based fuel.

If it works in Brazil, people are inclined to ask, why wouldn’t it? Sadly it doesn’t seem to confer the same benefits in the US as it does in Brazil, because our Ethanol is made of corn, and theirs of sugarcane, which, unfortunately, doesn’t grow very well in Iowa. To be sure, we could import Brazilian ethanol for far less than it can be produced domestically – if it weren’t for the damned Sugar Lobby which all but forbids the importation of sugarcane products. Sugarcane-based Ethanol, when imported is subject to a whopping 54 cent/gallon tariff. (An aside: throughout most of the world, Coca-cola sweetens its soft drinks with sugarcane. In the United States, we use “corn syrup” because the subsidized, propped-up cost of domestic sugar led Coca-cola, and others, to use the cheaper corn-based substitute)

But all that aside, what if we were to use our corn – even to increase our corn production in order to satisfy the demand for a switchover to ethanol? For starters, we only produce about 3 to 4 billion gallons of ethanol annually. At our current consumption, we would need about 180 billion gallons to completely satiate our needs. This represents a 60-fold increase in our ethanol production/refining capacity.

There is likewise no reason to believe that corn-based ethanol will not be subject to wild fluctuations in price, as oil currently is. Corn is also a globally traded commodity, and indeed has seen about a 30 cent/bushel increase since the beginning of this year. (source: Chicago Board of Trade) Tying our fuel to a volatile farm commodity, such as corn would subject it to market fluctuations, not dissimilar to those of oil. In fact, a Princeton study submits that a modest increase in the bushel price of corn (50 cents) could increase the price of ethanol at the pump by 12 cents per gallon.

Coupled with the requisite 60-fold increase in production, this is no laughing matter. An augmentation of this magnitude would surely require that we expand our corn-production to areas that are not terribly well-suited to the production thereof. And by producing in less and less efficient locales, the cost of production will increase. It should be obvious that it is less efficient to grow corn in New York City than it is in Sioux City, Iowa. These higher prices in turn, will force consumers to sacrifice consumption of corn for non-fuel uses, such as feeding livestock (think about this the next time you want a steak, or poultry, etc.) Such an increase in the quantity demanded for corn will drive up the prices and the costs will be borne by all of us.

The next time you decide to curse the prices of gas at the pump, take comfort in the fact that you can still afford the occasional steak & eggs for breakfast.

I’ll be back with more on the efficiency and environmental concerns later. There’s way too much info to concisely contain in one post.