The ethanol crunch

Growing mandate putting pressure on prices

Published April 9, 2007 at midnight

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Politicians might soon wish they'd been a bit less star-struck by ethanol - or perhaps that they had curbed their initial enthusiasm just a bit.

Lawmakers in the Statehouse will have a chance to back off slightly next week, as the Senate Appropriations Committee considers Senate Bill 238. We'd urge them to seize that opportunity, and reject the bill.

Not likely, we know, but lawmakers should think before they embrace the bill's mandates. It would require all gasoline sold in Colorado to contain at least 10 percent ethanol by as early as Nov. 1 of this year, and at least 2 percent of all diesel fuel to be biodiesel (mainly from vegetable products) by as early as Nov. 1, 2008.

A minor blow for energy independence? We suppose. Green-friendly? It depends on your definition, given the rather high energy input into making ethanol. But a bargain? No way.

As ethanol use surges, consumers' pocketbooks will be depleted in unexpected ways.

Plans to increase ethanol use have driven the price of its key ingredient - corn - skyward. Corn futures, which in recent years have gone for about $2 a bushel in January trading, hit $4 this year.

As corn gets more costly, so will prices at the checkout counter for groceries. Cows, chickens and pigs need grain - livestock have eaten nearly 60 percent of the corn consumed over the past decade - so expect meat and dairy prices to rise.

Forecasters expect the price of a gallon of milk to rise by as much as 60 cents over the summer. Eggs and poultry prices could spike soon, too, because they enter the food supply more quickly than cattle and hogs.

And since domestically produced ethanol is too corrosive to be transported by pipeline, it has to be hauled by truck; that offsets some of its presumed environmental benefits.

Moreover, ethanol producers receive subsidies that gasoline refiners do not: 51 cents for each gallon of blended fuel (while imported ethanol faces a 54-cent- per-gallon tariff). Gas blended with ethanol may be cheaper at the pump, but the subsidies still hit taxpayers indirectly.

At some point, ethanol and biodiesel may evolve into more attractive substitutes for their traditional counterparts. We're not there yet, and proponents should acknowledge the hidden costs that make these fuels only appear like a good deal for consumers.

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