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Last May ethanol was under a $1.30 a gallon. Prices are super high now because the demand exceeds the supply. The high demand is mostly government created. New ethanol plants coming on line should take care of the supply problem, but ethanol is never going to be really cheap compared to gasoline. It will always go up with gasoline prices because ethanol producers are businesses and they will charge whatever the market will bear. It is true that ethanol used in an E85 mixture reduces miles per gallon by around 25%, give or take a little depending on how well the engine is optimized for ethanol. A lot of people don't care and will pay more though because they would rather see their money staying here and supporting American farmers rather than supporting dictators and crazy Arabs. Just having all those people willing to pay more will always insure that ethanol is priced high enough that it will rarely be a better deal than gasoline when it comes to the price at the pump.

I think ethanol is part of the solution to our energy problems though. The technology is getting better improving ethanol yields and reducing production costs. New cellulosic ethanol technology allowing for use of all sorts of biomass as ethanol feedstock will increase our production capabilities substantially. That technology exists today and is getting cheaper and better every year. We'll never supply more than a small amount of our fuel needs with ethanol, but every little bit helps, and it does actually keep money here in this country and create jobs. World energy demand is growing, oil supplies are dwindling, and what is left is becoming increasingly harder and more expensive to find, get out of the ground, and refine. The days of finding good clean crude just bubbling out of the ground are over. It is time to start developing alternative fuel sources. We do need to keep drilling for more oil. But a little ethanol, a little biodiesel, some liquefied coal, fuel made from oil shale and tar sands, and so on, will help us stretch out existing oil reserves and if we can produce enough oil and various alternative fuels it should provide us some buffer as oil prices rise, which could be a real problem if something happens like a category five hurricane that destroys most of our refining capabilities, or a major war in the Middle East. We need to do this not only to ease the transition from oil but also to provide ourselves some protection against the problems that would come with catastrophic event that suddenly tightens our oil supply in a major way. As it is we have all of our eggs in one basket with oil and are at the mercy of oil cartels made up in large part by unsavory people and unstable governments.

Ethanol may not be a major part of our fuel supply decades from now, but in the near term the ethanol industry is going to boom because it is here and now technology. It's a fuel that is relatively cheap to produce that can fulfill a small but substantial percentage of our transportation fuel needs. Every car out there built in the last few decades can run fine on 10% ethanol, and while you might void your warranty if you did it, most actually could run without problems on more than 20% ethanol. In Brazil their cars have all been running on 24% ethanol for a long time now, most without modification. It's a fuel that can be produced locally and added to gasoline with very little changes in our existing infrastructure. Almost all cars will run fine with some ethanol and E85 compatible cars only cost manufacturers about $200 more to produce. Something like hydrogen powered cars may be the future but those are far too expensive now and the changes required in our infrastructure will come with monumental costs.