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Policy Makers Call for Increased Use of Ethanol

posted on July 22, 2005


Hello, I'm Mark Pearson.

There was significant news this week on the future of the U.S. economy, both at home and abroad.

*For starters, an important gauge of future economic activity jumped sharply in June. In fact, the Index of leading Indicators saw its sharpest rise in 18 months. *At the same time, Federal Reserve Chairman Alan Greenspan told Congress the economy should enjoy sustained growth with low inflation in coming months.

Greenspan also welcomed China's decision this week to move to a more flexible currency system. For a decade, China had pegged its currency, the yuan, to the U.S. dollar. Critics said by fixing its exchange rate, China was able to build a huge trade surplus with the U.S. ... and in the process bring the American textile industry to its knees.

For American farmers, analysts say a more flexible Chinese currency should have little impact in the short-term on the grain and oilseed trade.

More long-term benefits for farmers may be found in the completion by Congress of a comprehensive energy bill, which would mandate the increased use of ethanol and biofuels. But as we learned this week, there still are some dicey issues to be resolved.

Policy Makers Call for Increased Use of Ethanol Rep. Gil Gutknecht, R - Minnesota: "The bad news is that oil prices are hovering around $60 per barrel. The good news is we in the United States can grow an enormous amount of our energy and, in fact, I think we're only scratching the surface&"

Representative Gil Gutknecht of Minnesota is a leading proponent of renewable fuels. Last month, the Minnesota Republican introduced the Renewable Fuels Act of 2005. The legislation would establish a renewable fuels standard of eight billion gallons by 2012

Rep. Gil Gutknecht, R - Minnesota: "And you may hear from some people today that that is far too aggressive. I think in many respects it's far too timid. Right now, with $60 per barrel oil and $2.20 per bushel corn, ethanol is cheaper than gasoline."

Spurred by strong consumer demand, abundant corn supplies, and wide profit margins, ethanol plants across the country pumped out an estimated 3.4 billion gallons of the corn-based fuel in 2004. That's up more than 20 percent from the previous year's total and marks the sixth consecutive record year of ethanol production.

Supporters of ethanol and other biofuels claim they burn cleaner than fossil fuels, reduce America's dependence on foreign oil and provide a market for U.S. corn and soybeans.

But even as farmers, businesses and governments invest millions of dollars in ethanol and biodiesel production, a recent study suggests the alternative fuels actually burn more energy than they produce.

Researchers at Cornell University and the University of California at Berkeley claim it takes 29 percent more fossil fuel to convert corn into ethanol than the amount of fuel the process produces.

According to the study, "ethanol production in the United States does not benefit the nation's energy security, its agriculture, the economy or the environment."

The Renewable Fuels Association, or RFA, calls the research "erroneous." RFA cites a 2004 study by USDA that concluded ethanol actually had a positive energy balance, producing 167% of the fossil energy that is used to grow, harvest and refine the grain and transport the ethanol to gasoline terminals for distribution.

Ultimately, the government will decide just how much renewable fuel is mandated in the energy bill. And Gutknecht says the time to make that decision is now.

Rep. Gil Gutknecht, R - Minnesota: "We either have to lead follow or just get out of the way. I think we've reached a point right now -- it may be necessary for the federal government to simply get out of the way."

Tags: biofuels Congress ethanol government news oil renewable fuels