Shucking the Hype: St. Louis Fed Analyzes Ethanol

ST. LOUIS, July 10, 2008 /PRNewswire via COMTEX/ — While increasing our use of ethanol for fuel may make a small dent in the demand for oil, the potential benefits must outweigh the potential costs if ethanol is going to be viable in the long-term.

The environmentally friendly nature of ethanol, when compared to crude oil, has been one of the major selling points used to increase its use. Government officials and some analysts believe that burning ethanol in place of gasoline has the potential to address global climate change by decreasing greenhouse-gas emissions. Yet, one study claims that when the environmental effects of land clearing for ethanol source crops are taken into account, ethanol actually produces more carbon emissions than standard gasoline.

A second benefit used to popularize ethanol is its ability to decrease the U.S. dependence on foreign oil. Even if all the corn grown in the United States were used to produce ethanol, however, it would replace only 12 percent of the gasoline used for transportation. And this is not expected to increase significantly anytime soon.

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