Overview

Rapid growth in domestic ethanol production has enhanced U.S. energy security over the past decade. But as the events of 2016 demonstrated, true energy independence remains elusive. As ethanol output set a new record in 2016, the nation’s crude oil production began to tumble. Drilling in places like North Dakota and Texas slowed significantly due to lower oil prices and robust global supplies. Meanwhile, lower pump prices led to record gasoline consumption. American oil refineries processed a record 16.2 million barrels of crude oil a day, but U.S. production fell to 8.8 million barrels per day.

As lower U.S. production collided with record demand, the result was an increase in imports. Oil imports in 2016 hit their highest level since 2012, with more than 40% coming from OPEC nations. OPEC continued to assert its influence, first by flooding the world market and suppressing prices, and later by setting output limits and spurring prices higher. At the end of 2016, the U.S. economy had sent about $160 million per day to OPEC, equivalent to an annual bill of nearly $500 for every household.

Fortunately, ethanol continues to expand domestic supplies and reduce reliance on petroleum imports. Net petroleum dependence was 25% in 2016, but would have been 33% without the addition of 15.3 billion gallons of ethanol to the fuel supply.  Ethanol production displaced an amount of gasoline refined from 540 million barrels of crude oil.

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Reducing America’s addiction to imported oil is important not only because of the risk that foreign governments will reduce supplies and raise prices, but also because of the dangers of shipping the oil from troubled regions such as the Persian Gulf.

FACT: Without 15.3 billion gallons of domestic ethanol used in the U.S. in 2016, the United States’ net import dependence would have stood at 33% instead of 25%.

Looked at another way, the ethanol produced in 2016 displaced an amount of gasoline refined from 540 million barrels of crude oil.

FACT: We are dangerously dependent on petroleum from volatile areas of the world.

Military leaders from all branches of the U.S. armed forces have recognized that our addition to foreign oil presents real dangers to our national security, economy and environment.  Secretary of the Navy Ray Mabus has said, “When we did an examination of the vulnerabilities of the Navy and Marine Corps, fuel rose to the top of the list pretty fast.  We simply buy too much fossil fuel from actual and potentially volatile places.  We would never allow somoe of these countries we buy fuel from to build our ships, our aircraft, our ground vehicles – but because we depend on them for fuel, we give them a say in whether our ships sail, our aircraft fly, our ground vehicles operate.”

FACT: Global fossil fuel subsidies reached almost half a trillion dollars in 2010. This figure is up $110 billion over 2009 and could reach $660 billion by 2020.

Source: “World Energy Outlook 2011 Factsheet,” International Energy Agency, October 2011.

FACT: According to the Congressional Research Service, $46.6 billion in tax expenditures has been granted to fossil fuels 1977-2010, and  more than $130 billion in government subsidies have gone to the oil industry from 1968-2000, as detailed by the U.S. General Accounting Office.

This does not take into account the billions spent since the turn of the century or the money spent to protect our military troops in the Middle East.

Sources: “Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures,” CRS Report for Congress R41227 (Congressional Research Service, May 2, 2011). [Molly F. Sherlock] “Tax Incentives for Petroleum and Ethanol Fuels,” GAO/RCED-00-301R (U.S. General Accounting Office, September 25, 2000).

“With more research and incentives, we can break our dependence on foreign oil with biofuels…We need to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”  Source: President Barack Obama, State of the Union Speech, January 25, 2010.

FACT: Ethanol constitutes a large and growing share of domestically produced fuel for gasoline-powered vehicles.

Ethanol presents the U.S. with a critical opportunity to expand domestic energy production and reduce imports.  Ethanol now accounts for one out of every four gallons of fuel offered for gasoline vehicles from domestic energy sources.   

FACT: All oil-related external costs are estimated to be $825 billion per year.

The U.S. spends between $27 billion and $137 billion a year on military operations securing the safe delivery of oil from the Persian Gulf, equivalent to adding an extra $1.17 per gallon of gasoline. And new oil supplies are getting harder and more expensive to find. Nonconventional reserves, like Canadian tar sands, pose significant environmental and economic risks.

Sources: “The Hidden Cost of Oil,” Milton R. Copulos, 2007, and “Securing Foreign Oil: A Case for Including Military Operations in the Climate Change Impact of Fuels,” Adam J. Liska and Richard K. Perrin, July/August 2010.

Page last updated March 2017