Ethanol: A Tragedy in 3 Acts

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But this assertion misses the entire point of my column: If you don’t like paying $3 a gallon for gasoline, then use E85 where available -- and your effective costs for fuel, because of the dramatically reduced gas mileage you’ll get, will make that $3 per gallon more like $4.

3. I don't believe the concept that Big Oil is "scapegoating ethanol to protect their market share" is accurate. According to my research on the subject, some oil investments cost upward of $5 billion or more. If there were a natural and viable market for ethanol, one would think that any oil company, rather than investing in large offshore platforms that are prone to hurricane damage, or doing business in regions of the world with known terrorist problems, would be better off simply buying millions of acres of farmland and growing ethanol crops to use in their fuel. Particularly as today there is a 51-cent-per-gallon direct tax credit on each gallon refined. Obviously, that would go a long way toward eliminating their federal taxes completely; so the very fact that oil companies don't grow or refine ethanol leads one to believe it might not be a good business model.

4. I thank the gentleman who wrote saying I was the first to mention that ethanol has the potential to create more smog due to its higher volatility. I've long had a problem with the description of reformulated gasoline as a "cleaner burning fuel." Then again, the one source I for that fact that I cite in the article is the EPA's own attorneys, who were arguing their case before one of our Court of Appeals.

5. As for the gentleman who suggested that there is room for choices in fuels, I could not agree more. We should do more research to make that a reality.

6. On the subject of which study was done that either proves or disproves the energy equation on ethanol, I've read both Dr. Pimental's papers and the more recent one by Alexander Farrell. The later paper suggests that ethanol is slightly positive on the energy scale, but Farrell points out that this is partially because of the byproducts from the process, from which one should subtract the energy used for those salable products. It doesn't change the fact that once ethanol is used in gasoline, the vehicle's fuel efficiency dives. Farrell also believes that the real answer for ethanol is cellulosic technology. The President mentioned that exact same thing in his State of the Union Address, days after Farrell's paper was published. (We have been working on this issue since Project Independence in 1974, and we still haven’t found a way to refine ethanol by using cellulosic technology in any sort of cost effective manner. However, should that technological breakthrough happen, I am capable of reversing my position -- but future technology is not the issue I addressed this week.)

7. I feel I did present both sides of the controversy: I cited two studies and two conclusions -- and then added that Brazil’s 31-year quest for energy independence had created an ethanol market. But nothing is going to change one fact: Use the E85 ethanol blend; if you think you're paying too much for fuel now, watch what your bills jump to then. (Or even with the 10% drop in mileage you get with less ethanol in the gasoline.)

8. While I have no proof on this comment concerning Bill Gate's investment, one would think that the 51-cent per gallon direct tax credit would be a strong reason to move into ethanol.

9. Finally, as for some who suggest that Peak Oil is around the corner, maybe not. In Dr. Hubert's time, the commonly held view was that the world started with 2 trillion barrels of recoverable oil. In the late nineties, the United States Geological Survey put that number closer to 3 trillion barrels. Now the head of Shell Canada has suggested that the Canadian Tar Sands holds 2 trillion recoverable barrels. Add into that mix the fact that the Rand Corporation released a study last August that claims the Green River Formation in Western Colorado likely has one trillion recoverable barrels and suddenly Peak Oil doesn't look like it is going to happen anytime soon. This is not to be confused with the end of cheap oil, which may well happen in our lifetime.

Thanks to everyone for caring enough about the issue to write.

Ed Wallace

570 KLIF AM Dallas

Fort Worth Star Telegram

Business Exchange related topics:
Global Power and Energy
Global Auto Industry
Oil and Gas
Biofuels
U.S. Energy Policy

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at University of California at Los Angeles, and is a member of the American Historical Society. His column leads the Fort Worth Star-Telegram's "Sunday Drive" section. He reviews new cars every Friday morning at 7:15 on Fox Four's Good Day, contributes articles to BusinessWeek Online, and hosts the top-rated talk show Wheels Saturdays from 8 a.m. to 1 p.m. on 570 KLIF.