Hail ethanol, the savior?

Three decades ago, the United States imported about a third of its oil. Now the percentage is approaching 60 percent, and the U.S. Department of Energy predicts that it will increase in the next 20 years. If ever there were an opportunity for some bright bulb to shine, this is it.

But there remains an incredible amount of confusion about how best to proceed. Even though there's a general consensus on the need to develop alternative fuels, agreement breaks down when it comes to the specifics and setting priorities.

Maybe that's a reflection of a national propensity to leave for tomorrow what we don't want to deal with today. Every incoming U.S. president during the course of my adult life has promised to reduce America's reliance on oil and invest in new energy sources. So much for campaign pledges.

The Bush administration, which prefers encouraging oil exploration to reducing consumption, follows in that storied do-nothing tradition. But crude-oil prices hovering around $70 a barrel have a remarkable way of getting even the most pro-oil politicians to deal with the problem. (Gasoline is already more than $3 a gallon on both coasts of the country--and many places in between.) So it is that the administration has now come out in favor of increased use of alternative fuels.

Wonderful. I'd like to believe our government is sincere about curbing the national appetite for oil. Still, the cynical journalist in me wonders whether our ardor for developing fuel alternatives will wane if the price of crude falls to 40 bucks a barrel (as unlikely as that may be).

Still, the conversation has been engaged, and corn ethanol is the one idea that even political polar opposites like George Bush and Hillary Clinton can rally around. In fact, a new poll out shows that 78 percent of Americans support increased use of ethanol. Indeed, ethanol production is growing so quickly that farmers in this country expect to sell as much corn this year to ethanol plants as they do overseas.

But in the trenches, where the investments and the engineering work get done, the enthusiasm for corn ethanol doesn't match the hype.

Worthy alternatives?
Earlier this week, I hosted a panel sponsored by Silicom Ventures that brought together some very smart entrepreneurs and venture capitalists. These folks had very different ideas about taking the next step, but they were quite uniform in shooting down the idea of corn ethanol as a panacea.

Corn ethanol undoubtedly has the potential to become a good alternative fuel. First, we don't depend on other countries for the resource. Automakers--General Motors, in particular--are pushing the idea of E85, a blend of ethanol created from corn and gasoline. A recent University of California at Berkeley study concluded that ethanol is about 10 percent to 15 percent better than gasoline when it comes to greenhouse gas production. The current technology involves the use of bacteria to convert plants into starches that get fermented into ethanol. It's a relatively costly process, but prices will fall as more efficient methods get invented.

The pro-corn ethanol lobby is so loud that it's drowning out other voices. And there are better ways to go about it.

Sugar cane and sugar beet offer a better carbohydrate source than corn, when you consider how much less energy is required to do the conversion. Now comes the politics: The United States doesn't cultivate much sugar cane, while Brazil does. Our government years ago imposed a 54-cents-a-gallon tariff on ethanol imports from outside the Caribbean basin to appease big farm interests and corn-growing states.

The president says he plans to work with Congress to drop the tariff. That won't be easy. Just this week, lawmakers from five farm states--Byron Dorgan of North Dakota, Tim Johnson of South Dakota, Tom Harkin of Iowa, and Barack Obama and Dick Durbin of Illinois--sent a letter to Bush opposing any loosening of the tariff. Their argument: Any such move would pull the rug out from under the domestic renewable-fuels industry.

Yeah, sure.

With Brazil already closing in on generating nearly half of its power from renewable-energy sources, like sugar ethanol, the U.S. can tap the expertise of a friendly country ready to sell more to us. I hope somebody in Congress has the guts to ask why we're making it more expensive to buy a product that can immediately help cut our reliance on autocratic sheikhdoms.