You probably know that there's a glut of ethanol on the market, thanks to government subsidies that primarily benefit producers and wealthy corn farmers. There's no stopping the government sop; it's got broad bipartisian support because it wears the patriotic gown of energy independence.
But what to do about falling ethanol prices? Yesterday, a study from American Coalition for Ethanol was released that shows (surprise!) a higher mix of ethanol to gasoline produces better car mileage. The ACE is the lead lobbying group in Washington for ethanol producers. Perhaps someone can help me with my science here, but ethanol produces less energy per gallon than gasoline. How is it that reducing the total energy in your tank (the ACE recommends 20 to 30 percent ethanol, above today's 15 percent) results in better mileage?
Detroit smells flimflam too. Read after the jump.
The results of the study weren't dramatic. A Toyota Camry and a Ford Fusion got slightly better mileage on 30 percent ethanol, while a Chevrolet Impala got slightly worse mileage. Of course, the way you drive affects mileage and a higher ethanol content may act like a tranquilizer on those jack-rabbit starts from red lights. Still, overall mileage is overwhelmingly proportionate to energy content in the fuel.
General Motors has been one of the noisiest cheerleaders for ethanol (for its own political reasons). And yet a spokesman yesterday said only that the study's results need much more rigorous testing. Not mentioned is that ethanol is much more corrosive to engines than gasoline and that a higher content of the corn fuel could reduce the life of your engine.
If government subsidies for ethanol are unstoppable, a better solution would be to take them away from farmers, and give them to gas stations as an incentive to sell ethanol. What's kept the lid on demand in the U.S. has been the problem of finding the stuff.
Sources: New York Times, Bloomberg, Motley Fool, CNNMoney
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