Is the ethanol boom about to bust?

Yes

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by Daniel J. Gansle

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On December 19, 2007, President G.W. Bush signed into law the Energy Independence and Security Act which, among other initiatives, requires fuel producers to use at least 36 billion gallons of biofuel by 2022 (a sixfold increase). True to the Act's title, the increase in biofuel production reflects an attempt to wean Americans off of volatile sources of Mideast oil which in turn would increase security at home. But while the nations are drinking from the well of this ostensibly viable renewable energy source, questions are already being raised about its dramatic and conspicuous consequences.

By all accounts, it may seem an incredulous proposition to some that the ethanol boom will go bust. With increasing investment in this important renewable, its ability to wean the world off oil is simply too critical. But in recent months, the question of using food for fuel has launched a new debate over whether worldwide increases in food prices in addition to increased global warming from biofuel production is tenable over the long term.

The period spanning the mid-1990s to our present day will be recognized historically as the "bubble decade." During a period of mass speculation and technological euphoria, both the dot-com bubble and now the housing bubble popped one after the other. Billions of dollars in wealth evaporated overnight. Today, a new bubble is forming; and that is the biofuel bubble. With millions of dollars invested every day in this emerging market, some are seeing fields of green for miles around.

But when a cash-strapped public continues to see rising prices for just about every food item they purchase, along with growing hunger and poverty in underdeveloped nations, the world may well realize the stark consequences of using food for fuel. From a moral perspective alone, it is a human rights disaster of epic proportions. And if recent legislation is any indicator, it will only grow worse.

Global warming from ethanol production is another issue to consider. As I like to point out, energy and the environment are mutually inclusive and are intricately interconnected. Energy production and use by any means always has some impact on the environment. Today, the search is on for a renewable form of energy that has minimal impact on the world's ecosystems. Unfortunately, ethanol comes up woefully short.

Because of factors including the denuding of the world's rainforests to plant corn and soybean crops for ethanol production in addition to agricultural and transportation activities, recent studies have shown that ethanol production emits an equal or even greater amount of carbon dioxide into our atmosphere as traditional fossil fuel production. With increased global warming comes a variety of other problems including even more hunger due to drought, topsoil erosion, and desertification.

To add insult to injury, diesel fuel prices are becoming so burdensome that truckers are now beginning to strike, thus leading to even higher food prices amidst decreasing supplies. So when one factors in higher food prices due to both transportation and the use of food for fuel via ethanol, it is clear to see that a breaking point is fast approaching. It is at this point, I believe, that the ethanol boom will see its demise.

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