U.S. ethanol production benefits consumers, increases energy security

It is time to recognize the many accomplishments of the renewable fuels industry. Through continued growth of ethanol production, the United States is not only addressing its most pressing need of improving its energy security, but also helping to moderate record gasoline prices by as much as 50 cents per gallon and creating economic opportunities in rural America. To hear detractors speak, advocating the expanded use of renewable fuels is worse than remaining dependent on foreign oil and continuing to eliminate our precious oil reserves. We simply disagree.

Today, the United States produces approximately 8.5 billion gallons of ethanol, which is blended in more than 50 percent of all U.S. gasoline. This significant, nationwide use of ethanol not only serves to extend our nation’s gasoline supply, but also plays a significant role in keeping gasoline prices from skyrocketing even higher. Francisco Blanch, a Merrill Lynch analyst, estimated that the use of renewable biofuels keeps gasoline prices 15 percent below what they might be. Iowa State University recently confirmed Mr. Blanch’s estimations with a study that showed ethanol has reduced gasoline prices from 29 to 40 cents per gallon. This is a meaningful savings, which is ignored or discounted by those who criticize ethanol.

Beyond this, ethanol plays a key role in reducing our reliance on foreign sources of fuel. Today, the United States imports about 12 percent (16.9 billion gallons) of the total refined gasoline consumed nationwide. When all ethanol facilities currently under construction are completed, the United States will have approximately 13 billion gallons of ethanol capacity. This will displace 77 percent of the total amount of gasoline imported into the United States each year.

Still, the renewable fuels industry is in its infancy and we can do more. United States farmers produced 13.1 billion bushels of corn in 2007, averaging 151.1 bushels per acre. The Agriculture Department estimates we will produce 178 bushels per acre by 2015. Additionally, many experts predict that we will produce 300 bushels per acre by 2030. If these projections are accurate, the United States will be able to produce 60 billion gallons of ethanol from corn in 2030 without diverting corn from other uses and without expanding planted acreage in the United States. Moreover, this projection does not take into account increased efficiencies that will be realized through new technologies.

Unfortunately, some ethanol detractors are blaming corn-based ethanol and higher prices for corn as the reason for driving up the cost of food worldwide. Despite all the rhetoric, the White House has recently stated that “production of corn-based biofuels is estimated to account for only 3 percent of the 43 percent increase in global food prices” and “U.S food prices have increased far less than global food prices and a similarly small percent of the increase is attributed to biofuels production.”

While critics speculate about corn ethanol’s impact on food prices, several studies have found that new ethanol demand is not the driving factor for higher food prices. An April Texas A&M report found it’s fair to conclude that “corn prices have had little to do with rising food costs.” Informa Economics has found that the marketing bill, particularly rising energy and transportation costs, is having a more significant impact on U.S. food prices than farm-level prices for commodities. Likewise, a recent report published by the Federal Reserve Bank of Kansas City concludes that marketing costs now make up 80 percent of the retail food dollar, with rising energy and labor costs featuring prominently in recent years.

Importantly, worldwide corn production increased by 2.7 billion bushels from 2006 to 2007 and during this period ethanol demand for corn increased by 600 million bushels — 2 percent of the total. This has left 2.1 billion new bushels of corn production available for feed, food and exports.

Critics also contend that ethanol is driving up the price of feed for livestock. What they do not acknowledge is that ethanol facilities are set to produce 31 million tons of distillers grains that provide superior livestock feed at a more economical price for dairy, beef and swine producers. The ethanol process only uses the starch of the corn kernel to make ethanol. The remaining protein, fat, fiber, vitamins and minerals are passed on to the feed market. Distillers grains provide more concentrated levels of protein and more total digestible nutrients than whole corn. Today, distillers grains are $66 per ton cheaper than feeding with corn. With corn at $5.56 per bushel, cattle feeders would pay $268 per ton of total digestible nutrients (TDN) for corn while only paying $201 per ton of TDN for distillers grains.

Not only is expansion of the renewable fuels industry reducing our dependence on foreign oil and helping to moderate gas prices for consumers nationwide, it is playing a key role in economic revitalization in rural America. In 2007, the ethanol industry added $47.6 billion to the nation’s Gross Domestic Product, created nearly 240,000 new jobs in all sectors of the economy, and added $12.3 billion to American consumers’ incomes.

The results are clear. Without ethanol, consumers would be paying more for gas at the pump and more for food at the store. Given record prices for oil, now is not the time to back off of ethanol production in the United States. It is time to ensure that we increase the amount of homegrown energy used in our economy. If we back away now, we will discard an essential tool in the effort to wean ourselves off dependency on foreign oil.

Johnson sits on the Senate Energy Committee and Thune is a member of Agriculture. Herseth Sandlin serves on the House Agriculture Committee and the Select Committee on Energy Independence and Global Warming.