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Wednesday, January 24, 2007

Robert Samuelson: Biofuels

Robert Samuelson is wary of the strong push toward biofuels because it might divert us from taking other, more effective paths to reducing our dependence on foreign energy sources:

Blindness on Biofuels, by Robert J. Samuelson, Commentary, Washington Post: President Bush joined the biofuels enthusiasm in his State of the Union address, and no one can doubt the powerful allure. Farmers, scientists and venture capitalists will liberate us from insecure foreign oil by converting corn, prairie grass and much more into gasoline substitutes. Biofuels will even curb greenhouse gases. Already, production of ethanol from corn has surged from 1.6 billion gallons in 2000 to 5 billion in 2006. Bush set an interim target of 35 billion gallons in 2017 on the way to the administration's ultimate goal of 60 billion in 2030. Sounds great, but be wary. ...

The great danger of the biofuels craze is that it will divert us from stronger steps to limit dependence on foreign oil: higher fuel taxes ... and tougher federal fuel economy standards to force auto companies to produce them. ...

Until now, most ethanol has been made from corn. ... Ethanol receives heavy federal subsidies. ... Naturally, corn farmers love this. They've been the program's main beneficiaries. Although ethanol displaces only tiny amounts of oil (slightly more than 1 percent), it's had a big effect on corn prices. ... They could go higher. ... Higher prices for corn (which is fed to poultry, hogs and cattle) raise retail meat prices. Ironically, fuel subsidies may boost food costs.

But corn harvests won't be large enough to meet either the 35 billion- or 60 billion-gallon targets. Large amounts of "cellulosic" ethanol would also be needed... Prime candidates are farm wastes, including wheat straw and cornstalks. Unfortunately, the chemistry for doing this is far more costly than it is for corn kernels. Without technological advances, cellulosic ethanol won't be economically viable. It could be supported only with massive federal subsidies or direct requirements forcing refiners to use the fuel, regardless of cost. Then the high costs would be passed on to consumers. ...

Biofuels are certainly worth pursuing. Up to some point, they're even worth subsidizing. Government can nurture new technologies, and breakthroughs for cellulosic ethanol -- hardly inconceivable -- would make a meaningful difference in the U.S. fuel balance. But there's also a real threat that the infatuation with biofuels is a political expediency that will turn into a classic government boondoggle, benefiting selected constituencies and providing few genuine public benefits. That has already happened with corn.

Our primary need is to curb reliance on foreign oil. If imports were dependable, they would not be dangerous, but they come from unstable or hostile suppliers. Although our dependence can't be eliminated, it can be reduced. The most obvious way is to improve the efficiency of vehicles by 30 to 50 percent over the next few decades. Americans need more hybrids and more small vehicles. Biofuels might be a complement, but if they blind us to this larger reality, they will be a step backward.

    Posted by on Wednesday, January 24, 2007 at 03:13 AM in Economics, Oil | Permalink  TrackBack (0)  Comments (35)

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