Ethanol’s Potential as an Oil Replacement

According to http://www.ethanol.org/FAQs.htm, ethanol
production used 14% of the corn crop in 2005. If the
entire 2005 corn crop was converted into ethanol, this
would have produced 27.9 billion gallons of ethanol.
But this is only the BTU equivalent of 16 billion
gallons of crude oil (about 390 million barrels). This
equals less than 10% of our current oil imports, but
these are only the gross barrels displaced. This is
the upper limit for how much oil could currently be
displaced by corn ethanol, if the energy inputs into
the process were all free, or were supplied by fuel
sources (like coal) that can’t be used as
transportation fuel, AND we used the entire corn crop.

However, the energy inputs aren’t free. Fossil fuels
that can themselves be used as transportation fuels
are consumed in significant quantities. So, the only
energy “created” is the slight excess that is made
during the production process. According to a 2002
USDA report on corn ethanol, “The Energy Balance of
Corn Ethanol: An Update”, it takes 77,228 BTUs of
fossil fuel inputs (natural gas, gasoline, and diesel)
to produce 83,961 BTUs of ethanol. This gives a ratio
of ethanol output/fossil fuel inputs of only 1.09. The
energy balance is improved by including the BTU value
of the byproducts – 14,372 BTUs of animal feed
byproducts per gallon of ethanol according to the USDA
report. If byproducts are included, the net energy
production is 27%. That reduces the net ethanol
production potential of the entire 2005 corn crop to
27% of the gross, down to about 105 million barrels.
This is equal to about 2% of our total oil imports, or
a little over 3% of annual U.S. gasoline consumption
if we turned 100% of the corn crop into ethanol. That
scenario also assumes that there is a market for all
of those byproducts.

What does this mean? There is certainly no point in
putting E85 pumps across the country, because the U.S.
can’t make enough ethanol to justify them. Even as
grain ethanol production scales up, it will displace
less than 2% of U.S. oil imports. The reduction in
fossil fuel usage is also next to nothing, because
ethanol production is heavily dependent on fossil
fuels. Likewise, this means greenhouse gas emissions
are reduced by a very modest amount. The Department of
Energy recently concluded that E85, the 85% ethanol
blend, would reduce greenhouse gas emissions by a mere
4%. That’s because ethanol is primarily a recycled
fossil fuel, with a very small portion of renewable
energy thrown in.

The Brazilian Example

There are some fundamental differences between the
U.S. and Brazil that explain Brazil’s energy
independence. The first is that Brazil has a far lower
per capita demand of energy than does the U.S.
According to BP’s recently released “Statistical
Review of World Energy 2006”, Brazil consumed 664
million barrels of oil in 2005. With a population of
186 million, annual per capita oil consumption was 3.6
barrels per person. The U.S., on the other hand,
consumed 7.5 billion barrels of oil in 2005. With a
population of 296 million, annual per capita oil
consumption in the U.S. was 25.3 barrels per person –
seven times that of Brazil.

On the production side, in 2005 Brazil produced 627
million barrels of oil, for an annual per capita oil
production of 3.4 barrels per person. The U.S.
produced 2.5 billion barrels of oil in 2005, for an
annual per capita oil production of 8.4 barrels per
person. The annual shortfall between oil consumption
and oil production in Brazil was 0.2 barrels per
person in 2005. In the U.S., the shortfall between
consumption and production was much larger at 16.9
barrels per person.

The question then arises: “Just how much did
widespread use of ethanol in Brazil contribute toward
their energy independence?” The answer is: “Not much”.
In 2005, Brazil produced 4.8 billion gallons of
ethanol, or 114 million barrels. However, a barrel of
ethanol contains approximately 3.5 million BTUs, and a
barrel of oil contains approximately 6 million BTUs.
Therefore, 114 million barrels of ethanol only
displaced 67 million barrels of oil, around 10% of
Brazil’s oil consumption. In other words, Brazil’s
energy independence miracle was 10% ethanol and 90%
domestic crude oil production. Brazil did not farm
their way to energy independence.

The reason the U.S. should not expect to emulate
Brazil’s success becomes clear based on the
production/consumption imbalance. If the ethanol
produced by Brazil is added to the production side of
the equation (0.4 annual barrels of oil equivalents
per person), then Brazil’s oil equivalent production
number increases to 3.8 barrels per person per year,
which is 0.2 barrels greater than their consumption.
Therefore, they are independent of imported oil, and
even have a slight excess of ethanol to export to
countries like the U.S.

However, the situation in the U.S. is quite different.
Ethanol production in the U.S. was approximately 4
billion gallons in 2005. This is about 0.2 annual
barrels of oil equivalent per person, or about 0.8% of
U.S. oil consumption. Brazil had a very small 2005
petroleum production/consumption gap – 0.2 barrels per
person per year – that ethanol was able to fill. The
U.S., on the other hand, had a 2005 petroleum
production/consumption gap of 16.9 barrels per person.
This gap is currently filled by oil imports. Again,
due to the lower BTU value of ethanol, the U.S. would
require 29.0 barrels of ethanol per person per year,
or 8.6 billion barrels of ethanol each year to replace
all oil imports. This is approximately 90 times the
amount of ethanol that is currently produced in the
U.S.

What does this tell us? Brazil’s ethanol experience
can’t be extrapolated to the U.S. because of the
vastly different consumption numbers in the respective
countries. It is simply fiction to suggest that
Brazil’s path to energy independence can be followed
in the U.S.



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