An Overview of the U.S. Ethanol
Industry: Implications for Consumers
Consumer Issues Conference
University of Wyoming
Tim Burkink, Ph.D.
University of Nebraska at Kearney
September 25, 2008
References Available Upon Request

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“Ethanol Sows Enthusiasm in the Heartland”
Beacon News
“Ethanol and Its Many Consequences”
LA Times
“Corn Prices Soar, Pushing Up Cost of Food
Globally”
WSJ
“EPA Report Questions Value of Ethanol in
Terms of Smog”
AP
“Rural Boon or Corn-Doggle?”
Rocky Mountain News

 Ethanol, an alcohol-based petroleumalternative fuel, is made by fermenting grain or other carbohydrates (sugar cane, sorghum)
 Ethanol and by-products
 97% of U.S. ethanol is made from corn
 Other cellulose feedstocks are suitable but not yet economically viable

4%
2% 2%
Source: Renewal Fuels Association

Source: Renewable Fuels Association

Source: Iowa State University – CARD

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Over 90% of U.S. ethanol is used as fuel
Although ethanol and gasoline can be blended in any proportion, in the U.S. it is largely:
 10% ethanol & 90% gasoline
 85% ethanol & 15% gasoline (E85)
Blends with high ethanol content require modifications in the automobile (flexible fuel vehicle)
 Sensor to detect ethanol/gasoline ration
 Corrosion resistant fuel tank & lines

 141 billion gallons per year
 If all U.S. corn were made into ethanol, it would produce 31 billion gallons per year
 Mandating 10% ethanol in all gasoline would require that nearly half of the U.S. corn crop be processed into ethanol, given current technology

 $0.51/gallon federal excise tax/tax credit
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Amounts to 5.1 cents/gallon for 10% blend
43 cents/gallon for E-85
 Between 2001 and 2006, ethanol traded
$0.41/gallon premium to gasoline
 In August, ethanol was $0.35/gallon less than gasoline
(Nebraska Energy Office)

 2007 federal energy bill mandates use of 36 billion gallons of renewable fuels by 2022
 20 billon gallons from non-corn based substances
 Ethanol production was 6.5 billion gallons in
2007

Agricultural
Producers
Agricultural
Suppliers
Technology
Government
Policy
Initiators of Change
Energy dependence
Geopolitical instability
Increase in price of oil
Global warming
Corn availability
Ethanol Production
Rapid increase in ethanol production
Increased demand for corn
Rapid rise in price of corn
Increased bidding for acres by all users of land
Food: Prices &
Availability
Rural Economic
Development
Natural
Environment
Model of the Ethanol System

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Demand for ethanol contributes to higher prices for corn, other crops, beef, eggs, etc.
World-wide grain stocks at historic lows
Compounded by global economic growth
Food prices increasing around the world
 75% increase between 2000 and 2007
(The World Bank)

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Most studies conclude GHS emissions are reduced
(Argonnne National Lab. 2005)
Some conflicting conclusions
(Pimental an Patzek 2005)
More corn -> more fertilizer -> more pollution
Less crop rotation
Water usage
Conversion of fragile lands from CRP to production

 Rising agriculture land values
 17% in Nebraska
 New plant investment
 $59-$112 million per plant
 Job creation
 Tax revenues
 The next boomtowns?

 Winners
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Land owners
Rural labor
By-product users
 Losers
 Consumers in the developing world

 Fossil fuels are not sustainable in the long-run
 Corn-based ethanol has limited continued growth potential
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Supply constraints
Competing demands
 Corn-based ethanol may be an important bridge to a more sustainable and significant biofuels sector