Ethanol in the U.S.

Although it was championed by early automotive pioneers such as a Henry Ford, it was not until after the Arab oil embargo of 1973 that ethanol became a household word—and potential source of energy salvation for American motorists fed up with long gas lines and their nation’s dependence on foreign oil.

ethanolAided by government clean air standards and initiatives to reduce the nation’s dependence on foreign oil, ethanol production has boomed in recent years, with billions of gallons being produced annually at more than 200 plants. At its most basic, ethanol is produced by fermenting and distilling a “feedstock,” such as corn, in a chemical process similar to making beer or wine. Ethanol is the most common of the fuels produced using biological matter such as plants, plant products or algae, which are generically referred to as biofuels.

Much of the gasoline sold in the U.S. today contains 10% ethanol—a blend known as E-10. And nearly eight million “flexible fuel vehicles”—in models that range from Buick Regals to Volkswagen Routans—are now on the road and capable of running on E-85, a blend that includes 85% ethanol and 15% gasoline. But a scarcity of outlets—there are currently fewer than 2,000 stations in the U.S. selling E-85—is one obstacle to putting this biofuel into more tanks.

Much of the groundwork for the American ethanol industry was laid out through energy and environmental policies and long-term subsidies. Those subsidies, which provided ethanol refiners with billions of dollars in tax breaks over more than three decades, recently came to an end. The expiration drew only muted comment from many ethanol proponents, who are confident that their industry is robust and that demand will remain high. This confidence is propped up by policies that require increasing renewable fuel production to 36 billion gallons by 2022.

Others have claimed that the corn-based fuel is taking away land that should be used to grow food crops. With close to 40% of the corn grown in the U.S. used to make ethanol, some have sought to link it to higher food prices. And some have even suggested that corn-based ethanol is contributing to hunger in poor countries.

The truth reveals a different picture. In 2010, the United States exported unsubsidized ethanol to Brazil, United Arab Emirates and Canada at roughly $2 a gallon. That’s significantly cheaper than gasoline—and represents a positive trend for world food markets because transportation is actually the biggest cost of food aid in poor countries. In fact, high oil prices are a major culprit in the rise of food prices, affecting not just transport costs but the price of fertilizer used to boost crop yields. Decreasing oil consumption by increasing biofuel production in the U.S. and eventually in Africa could lower oil prices substantially, helping to combat famine and starvation by reducing the cost of food.

Despite ethanol’s long and successful track record, more needs to be done to ensure its future as a next-generation biofuel. Some of the advances are highly technical, such as finding a path to widespread commercial production of cellulosic ethanol. Others are simpler, like facilitating low-cost conversions of existing cars to run on biofuels and blends.

In either case, ethanol represents a major alternative to gasoline and one of the keys to breaking our foreign oil addition. Henry Ford stated the potential in his often-cited 1925 prediction: “The fuel of the future is going to come from fruit like that sumac out by the road, or from apples, weeds, sawdust—almost anything. There is fuel in every bit of vegetable matter that can be fermented.”