GUZZLE ALCOOL NOT OIL

On Monday George Bush sent to Congress his proposed budget for the fiscal year beginning in the fall of 2006. As would be expected “W” is set to spend a large portion of our tax dollars on protecting our “freedom”, with $513.03b earmarked for defense. (second only to medicare and social security, 980.15b). Amazingly, that is an 8.7% reduction from the amount we will spend on defense this year. In his official statement Bush said that “(he) has focused the nation’s resources on our highest priority – protecting our citizens and our homeland” and presumably fueling our “war on terror”. Following Bush’s remarks, Donald Rummsfeld came out on Tuesday to help articulate his boss’s “freedom, terror, homeland security” soup. The biggest winners in the defense lottery are naval shipbuilders (11.2b) and missile defense producers (9.3b). What is striking to me is the lack of congruence between our foreign policy and our defense spending. It is an indisputable fact that our foreign policy places a high level of importance on our energy interests in the Middle East and sewing up cheap oil in Iraq. So why can’t we spend, at least, 10% (51b) of our allocated defense funds on taking a pre-emptive strike against foreign oil dependency. Currently the budget only calls for 29b to be spent on “energy, environment, and natural resources”, a bit more than 5% of our defense budget. It is becoming increasingly important and urgent that we aggressively seek energy and fuel alternatives. While there are many proposals for alternative fuel sources floating around right now, I will focus the rest of this article on alcohol consumption, something that Bush touched on briefly in his state-of-the-union address.

The first time I was in Brazil I spoke very little Portuguese and found myself confused by a lot of things. One thing that I thought was particularly funny was that you could buy “alcool” at gas station pumps. I knew Brazilians liked to party, but why distribute alcohol from a gas pump rather than in a conventional bottle or can. When my Portuguese and overall awareness increased I realized that “alcool” was actually a combustible variety of alcohol called ethanol that was consumed by automobiles not human beings.

In the 1970s when global oil prices were going haywire the Brazilian government, which was largely autocratic, launched a program to help wean their country away from Middle Eastern oil dependency. In 1975 the government launched its ethanol program (Proálcool) which looked to provide ethanol, a combustible alcohol made from sugar or corn, as an alternative to standard petrol. In launching this program the government was set to incur huge costs and take on large risks. The government issued a mandate that forced all fuel stations to carry ethanol and made it affordable to consumers by subsidizing the price of ethanol to the point that it would always be cheaper than gasoline. This program was a success up until the global oil market re-stabilized and oil prices fell. In the 90s, the government took another decisive step towards making ethanol a viable alternative. They cut subsidies to sugar producers forcing them to innovate, become more productive and face world prices. Currently, with oil prices scrapping the $70/barrel mark ethanol is once again very popular (43% of vehicles run on alcool) and both ethanol producers and car manufacturers are scrambling to meet increasing demand.

While a similar plan seems unfathomable in the U.S.there are a few things to consider. At this point George Bush is a completely lame duck president and doesn’t have too much to lose. Not even his Neo-Con backbone like him anymore. So why not step up and do something that would be considered radical by American political standards? In his state-of-the-union speech Bush pledged to reduce 75% of America's oil imports from the middle east by 2025. Providing an affordable oil alternative would be a lot easier than finding Bin Laden or WMD in Iraq and could be seen as a move to stabilize and protect our country. There are a couple other reasons why ethanol would benefit the U.S. One of the EU’s and Latin America’s biggest gripes with the U.S, obviously second to our involvement in Iraq, is our unfair agricultural subsidies. In order to make ethanol more affordable the government would have to cut subsidies to the corn industry, for the same reason sugar subsidies were cut in Brazil. The money previously used to subsidize corn producers could be used to subsidize ethanol producers and distributors, thus replacing a very wasteful subsidy with something that might actually be useful. Slashing agricultural subsidies would create positive externalities in our trade relations with the EU and our neighbors in the Americas. It would also help to close the Doha round of WTO talks which have been limping along since 2001.

If you are still reading, thank you. I am finished.