More Production, Not Ethanol, To Resolve U.S. Energy Issue

U.S. policy makers should make oil production a priority, according to a brief analysis released April 8 by the National Center for Policy Analysis (NCPA). Advocates of Brazil's energy policies often cite Brazil's increased ethanol use as a reason for its recent independence from foreign energy. With average retail gasoline prices nearing the all-time inflation-adjusted high of $3.40 per gallon, analysts have been touting Brazil as an example the U.S. should follow on the road to energy independence.

"The facts about Brazil's energy policy are often misrepresented," said NCPA Graduate Student Fellow D. Sean Shurtleff, the paper's author. Although Brazil is nearing energy independence today after having imported more than 80 percent of its oil in the 1970s, advocates of Brazil's policies wrongly assume America's ethanol industry can displace the same percentage of oil as Brazil's. For example:

-- While Brazil consumes 20 billion gallons of fuel a year (ethanol, gasoline and diesel), of which 4 billion is ethanol, the United States uses 182 billion gallons a year -- more than 9 times as much.

-- Brazil has a major comparative advantage over the U.S. in producing ethanol from sugarcane which produces 8 times the energy of the fossil fuel used to produce it, while America's corn-derived ethanol provides only 1.3 times as much energy.

The Brazilian-U.S. comparison also ignores the most significant reason for Brazil's energy independence: after the 1980's ethanol shortages, Brazil began to recognize that ethanol production alone would not lead to energy independence and started promoting policies to boost domestic oil production.

-- Increased production and new oil discoveries played the most productive role in liberating Brazil from dependence on foreign energy sources.

-- In 2007, Brazil announced a huge oil discovery off its coast that could increase its 14.4 billion barrels of oil reserves by 5 billion to 8 billion barrels, a production increase of nearly 40 percent.

"There is one lesson that U.S. policymakers should learn from Brazil's path to energy independence -- make oil production a priority," Shurtleff added.