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Posted: September 19, 2007

The corn-based ethanol industry is a disaster in the making and it must be reined in before it causes major damage to the farm industry.

So says Matthew Simmons, the noted Houston investment banker, part of EnergyTechStocks.com’s new series in which important thinkers ponder the future of the global energy industry.

In previous stories about what needs to be done to secure the world’s energy future, Simmons has called for:
a systematic scaling back of global oil production to make remaining reserves last longer,
greater transparency in oil production data,
development of new sources of oil from the oceans;
greater use of waterborne transportation to reduce traffic congestion, and
major repair of energy infrastructure before there’s the equivalent of a Minnesota bridge collapse.

Simmons also believes that corn ethanol production in the U.S. is a national embarrassment that will do little to supplement motor fuel supplies, but is placing at risk the long-term future of America’s farm industry.

Simmons said that corn ethanol production is damaging the land and draining available water supplies, two criticisms that an increasing number of other observers are now also voicing.

“One year of drought and the farm industry collapses,” Simmons warned.

These criticisms are in addition to the other many others’ major criticism of corn-derived ethanol – that it is raising food prices because it is diverting too much land away from food crops and into so-called energy crops.

Factoring into Simmons’ thinking is his belief that ethanol has been oversold to Americans as a way to reduce dependence on foreign oil. He doesn’t think biofuels will help in any appreciable way. Asked about the potential for cellulosic biofuels – which would make use of wild grasses and other nonfood sources – Simmons somewhat caustically said that they haven’t been developed yet and that it’s always a good idea to bet against things that don’t exist.