Ethanol

I was more than a little off in my guestimate of how much ethanol the U.S. can produce from corn.

It is estimated that in 2009 4.2 Billion bushels of corn will be consumed in the manufacture of ethanol, while projected 2009 exports are 2.05 Billion. If the U.S. ceased to be a corn exporter, and we took the 2 Billion bushels and converted it to ethanol at 2.7 gallons per bushel... hmmm... 5.4 Billion gallons... divided by 42 (gallons per barrel)... 128 million barrels/365 = 352,000 additional barrels per day.

So I was off by half. Or 100%. Depending on which way you look at it. Max production of ethanol is somewhere around 1 million barrels per day. Said another way, with 9 million barrels of "blended gasoline" consumed each day, the U.S. might have the ability to replace 4% any future import decline with corn ethanol.

Of course, more corn production could be diverted toward ethanol at the expense of livestock feed, which would certainly have a deleterious effect on meat, milk, eggs, and foods processed from corn, though I doubt this will come to pass. Somewhere in there either the price of fuel brings down demand or the price of food brings down everything. Just kidding. I need to think on that some more, but there are certainly some unintended consequences.

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In other words, ethanol has saved our bacon in 2008 and 2009 (with help from increased domestic production of crude in 2009), and it was a one off. There is little room in the system to increase ethanol production. This also explains why gasoline consumption did not decline year over year, while vehicle miles traveled is down almost 3% from the peak in 2006 (because ethanol has only 65% of the energy, and hence miles-per-gallon, of gasoline).

So which came first? The chicken, or the egg? Did the economy contract from lower petroleum availability, or did availability decline because the economy did not require it? Does it really matter? Nope. Not even a little bit. What matters is the Oil import picture for 2010-2011.