December 1, 2007
Ethanol: why it matters to you, me, and the people of Bangladesh Ethanol, once thought a panacea for our environmental (and gas price) woes is wildly unsustainable. Why do I think this? Firstly, for every input of 1 fossil fuel used to make ethanol, 1.3 amounts of fuel output are produced (ie, a 30% return on the fossil fuel input). This really does not ameliorate our emissions problem, especially when E85 (85 percent ethanol, 15 percent gas) produces 30 percent fewer miles a gallon than gasoline does. Thus, the small benefit of making the fuel is negated by its inefficiency. The use of corn as fuel alternatives have caused the price of corn to skyrocket (a catalyst was the US’s mandate of 7.5 billion gallons of ethanol or biofuel by 2012). Check out the March 08 futures on corn (more to come on what futures, what commodities are often traded on, actually are). In comes economic intuition to realize that the emphasis on saving the earth and finding alternative fuel sources has caused the demand for corn to rise. Thus, the price rises. Farmers are really the only people benefiting from this biofuel craze as now the industry is thriving. On the flip side, we must think about the bigger picture. People are going hungry because we want cheaper gasoline. The number of people who have food insecurity is expected to rise by 600M by 2020 due to the increase in corn and food prices. Basically, now that corn is demanded (and farmers see great payoffs with higher prices), farmers are ditching their other crops (& cattle raising) to turn to corn. Thus, the supply of the other food is decreasing, which causes their prices to rise too! Fazle Hasan Abed, one of the world’s great social venture entrepreneurs, founder of BRAC (Bangladesh Rural Advancement Committee) noted in a speech at NYU that this biofuel craze is causing 30,000 Bangladeshi people to go hungry. So step aside Captain Cornelius (note that the above photo must be dated, because now Captain Cornelius is ethanol enthusiast’s mascot. Didion is a corn milling company that supports ethanol). Though I don’t think ethanol is going anywhere any time soon, there are plenty of other alternatives for fuel including sugarcane in Brazil which has an output of 8 amounts of energy for every 1 input, and cellulose and algae which both are a work in progress… In the case of the latter, we wouldn’t see increasing food prices, but rather an increase in the cost of breast augmentation. I think I can live with that..

Ethanol: why it matters to you, me, and the people of Bangladesh


Ethanol, once thought a panacea for our environmental (and gas price) woes is wildly unsustainable.

Why do I think this? Firstly, for every input of 1 fossil fuel used to make ethanol, 1.3 amounts of fuel output are produced (ie, a 30% return on the fossil fuel input). This really does not ameliorate our emissions problem, especially when E85 (85 percent ethanol, 15 percent gas) produces 30 percent fewer miles a gallon than gasoline does. Thus, the small benefit of making the fuel is negated by its inefficiency.

The use of corn as fuel alternatives have caused the price of corn to skyrocket (a catalyst was the US’s mandate of 7.5 billion gallons of ethanol or biofuel by 2012). Check out the March 08 futures on corn (more to come on what futures, what commodities are often traded on, actually are).

In comes economic intuition to realize that the emphasis on saving the earth and finding alternative fuel sources has caused the demand for corn to rise. Thus, the price rises. Farmers are really the only people benefiting from this biofuel craze as now the industry is thriving.

On the flip side, we must think about the bigger picture. People are going hungry because we want cheaper gasoline. The number of people who have food insecurity is expected to rise by 600M by 2020 due to the increase in corn and food prices. Basically, now that corn is demanded (and farmers see great payoffs with higher prices), farmers are ditching their other crops (& cattle raising) to turn to corn. Thus, the supply of the other food is decreasing, which causes their prices to rise too! Fazle Hasan Abed, one of the world’s great social venture entrepreneurs, founder of BRAC (Bangladesh Rural Advancement Committee) noted in a speech at NYU that this biofuel craze is causing 30,000 Bangladeshi people to go hungry.

So step aside Captain Cornelius (note that the above photo must be dated, because now Captain Cornelius is ethanol enthusiast’s mascot. Didion is a corn milling company that supports ethanol). Though I don’t think ethanol is going anywhere any time soon, there are plenty of other alternatives for fuel including sugarcane in Brazil which has an output of 8 amounts of energy for every 1 input, and cellulose and algae which both are a work in progress… In the case of the latter, we wouldn’t see increasing food prices, but rather an increase in the cost of breast augmentation. I think I can live with that..