Inside Bush's Energy Proposals

President Bush last week called on the nation to invest in new technology to reduce dependence on foreign oil.

The president set specific targets for the U.S., calling for a 20% reduction in gasoline use over the next 10 years. He said that a boost in the use of alternative fuels such as ethanol would account for most of that reduction, cutting gasoline use by 15%. Stricter gas-mileage standards for vehicles, he said, should lead to the other 5% reduction. The president also proposed doubling the nation's strategic-petroleum reserves to hedge against oil-supply interruptions.

Increased calls for energy independence come as U.S. oil imports are set to grow from 58% to 68% of the U.S. supply over the next 20 years, according to government projections. Meanwhile, rapidly rising demand in the developing world is likely to keep oil prices high.

Alternative energy: Fuel suppliers would have to include 35 billion gallons of alternative fuels such as ethanol in the nation's vehicle fuel supply by 2017, up from five billion gallons produced last year. Production of corn-based ethanol could reach about 15 billion gallons. The rest could come from cellulosic ethanol, which uses fibers from switch grass and other natural products, or liquefied coal.

Some economists caution that ethanol demand could pressure the corn supply, driving up corn prices because of food-fuel competition. Ethanol demand has already increased chicken prices by six cents a pound, according to the National Chicken Council. The price of corn, 75% of the cost of ethanol production, has doubled to nearly $4 a bushel over the past six months. Almost half of the country's corn harvest could go toward the fuel with the addition of 79 planned ethanol plants in 2008...

Very, Very Big Corn (Excerpt)

January 27, 2007

President Bush made a big push for alternative fuels in his State of the Union speech Tuesday night, calling on Americans to reduce gasoline consumption by 20% over 10 years. And as soon as the sun rose on Wednesday, he set out to tour a DuPont facility in Delaware to tout the virtues of "cellulosic ethanol" and propose $2 billion in loans to promote the stuff. For a man who famously hasn't taken a drink for 20 years, that's a considerable intake of alcohol.

A bit of sobriety would go a long way in discussing this moonshine of the energy world, however. Cellulosic ethanol -- which is derived from plants like switchgrass -- will require a big technological breakthrough to have any impact on the fuel supply. That leaves corn- and sugar-based ethanol, which have been around long enough to understand their significant limitations. What we have here is a classic political stampede rooted more in hope and self-interest than science or logic.

Ostensibly, the great virtue of ethanol is that it represents a "sustainable," environmentally friendly source of energy -- a source that is literally homegrown rather than imported from such unstable places as Nigeria or Iran.

That's one reason why, as Jerry Taylor and Peter Van Doren note in the Milken Institute Review, federal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there's another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it -- despite recent high oil prices.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.