Columns
Friday, May 27, 2005
for ethanol, the future is now
Rising gasoline prices are not only wreaking havoc with family budgets, they are now a real threat to our economic recovery. With the average price of gasoline pushing $2.25 a gallon, it costs Iowans nearly 50 bucks to fill up a Ford Explorer, and farmers pay more than $500 to fill up a John Deere combine. Meanwhile, the U.S. is importing 12 million barrels of oil a day, driving up our trade deficit and deepening our entanglements in the Middle East.
The good news is that there is an alternative fuel produced right here in Iowa. Ethanol is clean, renewable, home-grown energy that can easily replace gasoline made from oil. At current gas price levels, it’s a bargain. A recent study by the Consumer Federation of America found that the price of gasoline could be lowered by eight cents a gallon if ethanol were being used in greater quantities by oil companies. But, for reasons that defy economic logic, oil companies continue to blend petroleum rather than ethanol. I’ve asked the Department of Energy to investigate this matter. Consumers deserve to know why they’re paying more at the pump than they should, and Iowa farmers deserve to know why the oil industry is not using their low-priced products in America’s gasoline.
Recent studies suggest that ethanol, and other renewable fuels such as biodiesel, could produce as much as 50 percent of our vehicle fuel needs within the next 20 years. One report found that by 2025 the U.S. could supplant 85 percent of what we now import from the Persian Gulf – and, in the process, we would create 750,000 to 1.45 million jobs in the biofuels and biobased-products industries.
But while ethanol has a bright future, it is already giving a boost to Iowa’s economy. Iowa now leads the nation in ethanol production, with over 860 million gallons produced last year, roughly a fourth of production nationwide. A recent Iowa State University study found that Iowa’s ethanol production generates $2.49 billion in total sales to local communities, and in the near future that will ramp up to nearly $4 billion. As new plants come online, more than 5,100 new jobs will be created in our state.
This is great news for Iowa agriculture. Corn purchases are expected to rise to 507 million bushels annually. These additional corn purchases could raise the price per bushel by about 4 cents (and by 12 cents per bushel near ethanol plants), generating an additional $81 million in revenue to Iowa farmers annually.
But we need to move much more aggressively into this future of clean, renewable, homegrown fuels. Recently, the Senate took a step in the right direction by including a renewable fuels standard of eight billion gallons a year in the energy bill. I had joined my colleague Dick Lugar (R-IN) in calling for such an RFS earlier this year and was pleased it was included in the Senate Energy Bill. A strong commitment of eight billion gallons of ethanol and biodiesel a year should be a cornerstone of any energy bill passed by Congress.
This is just common sense. When we draw our energy from the corn and soybean fields of Iowa rather than the oil fields of the Persian Gulf, we do four things: We increase America’s energy security. We boost our rural economy. We create a cleaner environment. And we put downward pressure on prices at the pump. Passing an aggressive RFS – coupled with other clean-energy and energy-efficiency policies -- would send a powerful message to OPEC that the United States, at long last, is serious about energy independence. This would have the added benefit of giving OPEC a powerful incentive to bring down oil prices as soon as possible.
