The internal combustion gasoline engine has been a major target of many environmentalists in their efforts to reduce pollution and clean up our environment. Because of the large and growing numbers of gasoline powered vehicles, the pollutants emitted as by products of the operation of gasoline engines has contributed to our environmental pollution problem. However, industry has made great strides over the years in reduce the pollution generated by gasoline engines. And, progress continues in this area.

In addition to pollution produced by the burning of petroleum based fuels for energy, another concern of many is our supposed over dependence on petroleum, the supplies of which, like everything else on the Earth, is finite. Ever since political events in the 1970s caused the price of oil to jump (the embargo by, OPEC - the Organization of Petroleum Exporting Countries -, especially its Arab members, is usually cited as the reason for this, however, government imposed price controls in the United States did much to make the problem worse) people have been worried about running out of oil.

Again, while there is a limit to the amount of oil in the world, the real problem today is not one of running out of oil any time soon or even having our supplies cut off for political reasons by governments of oil producing nations in the Middle East, the real problem is the depletion or disruption of cheap oil from the Middle East. The Middle East is the world's leading oil producer because they not only have large supplies of oil in the ground but, more important, this oil is both very high quality in terms of being able to easily refine it and very easy to extract it. The ease of pumping and refining along with the large supply serve to make Middle Eastern Oil relatively inexpensive to produce. However, the historically low cost of this oil has served to increase demand which, combined with the monopolistic practices of the oil producing countries has led to an increasing demand which, in turn, has led to increasing prices.

Rising prices are the market's way of encouraging consumers to conserve and cut back on their consumption of the product whose price is rising while, at the same time, encouraging suppliers of the good to find more efficient (and less expensive) ways of increasing the supply of the product.

Unfortunately, while consumers and suppliers are trying to work their way through this problem, the government has decided to get into the act and solve the problem by, among other things, throwing billions of dollars of taxpayer money into an alternative fuel called Ethanol. Ethanol is an alternative fuel that is produced from plant material, in this case corn. There may be a future role for these fuels, known collectively as biofuels, however, more research, development and experimentation will be needed to see if biofuels can become an economical alternative source of energy to petroleum. But this should be left to investors in the market and not to politicians and bureaucrats who know nothing about investing wisely and even less about energy production. Private investors will seek new energy sources where the potential returns are greater than the cost of the resources being invested in them. Of course, private investors will make mistakes and lose money but it will be THEIR money which will cause them to exercise greater caution and prudence in their investments. Politicians and bureaucrats, on the other hand, are not only NOT using their own funds for these investments but they know that they can always replace their financial losses by hitting up the taxpayers for more money. They, unlike private investors using their own money, have no incentive to stop throwing good money after bad. In fact politicians tend to have an incentive to continue to waste taxpayer money on non-productive investments as they are heavily invested emotionally and in terms of their future career advancement in the projects and are thus willing to spend what ever it takes, of other people's money, to make the project seem worthwhile.

From an investment point of view, ethanol is a near disaster. First of all, corn is not the most promising of biofuels as there are other crops which seem more promising in terms of energy produced per dollar of investment. As critics have pointed out, for every gallon of ethanol produced a gallon of gasoline is needed to produce it. Gasoline is needed to run the farm equipment used to plant and harvest the corn as well as ship it to the processing plant which uses more gasoline power to refine it. Finally, since ethanol is not stable enough to be shipped via pipelines, it has to be transported by trucks which use more gasoline for this trip. The result is zero energy savings. Contrary to what its supporters claim, the fact that a gallon of gasoline is needed to produce a gallon of ethanol means that ethanol does noting to either conserve scarce petroleum or reduce pollution. Instead of consumers burning the gasoline and emitting pollutants into the air as a result, the producers of the ethanol do this. To all except politicians this is totally illogical. Left to itself, the market would quickly put an end to nonsense like this.

However, since the Federal Government is the chief backer of this project, there is no need to worry about the ever increasing losses on the investment. Unfortunately, in addition to the massive waste of the taxpayer's hard earned money, this wasteful project is resulting in additional damage to consumer's pocketbooks. Even with the government's overly generous subsidies, ethanol is still not a cost effective alternative to conventional gasoline which causes consumers, when given a choice, to opt for the relatively less expensive gasoline over ethanol. However, in addition to its ability to forcefully extract tax dollars to use for its so called investments in research and development, another difference between the free market and government is the government's ability to force consumers to purchase the output of its failed spending projects. Thus, gas stations must, by law, mix a certain amount of ethanol with the gasoline they sell thereby forcing the consumer to purchase, at additional cost, ethanol.

Worse yet, the massive subsidies and artificial demand created by law has made corn production extremely profitable for farmers. So profitable that farmers are converting acreage previously used for other crops to corn production. This, of course, reduces the supply of other crops which, as any first semester economics student quickly learns, causes prices of these products to rise. Also, with the rising government induced demand for ethanol much of the total corn production goes to ethanol resulting in an artificial shortage of corn for other uses. Since corn is a main ingredient in animal feed, meat prices are rising. Since corn syrup is the sweetener of choice (thanks to other government regulations protecting domestic sugar producers from foreign competition) practically every product requiring the addition of sweeteners has risen in price. The result is that, in addition to wasting billions of dollars of taxpayer money and contributing to the increase in the cost of gasoline, this misguided policy has also resulted in rapidly rising food costs - a triple whammy for American citizens. This type of misguided government policy has become so common that economists have coined a new term to describe it - Government Failure.

In the end, while politicians claim that they are trying to solve the twin problems (crisis is their preferred word) of the eventual disappearance of oil and air pollution resulting from the use of oil products as a fuel, their real reason is old fashioned special interest politics. In this case the special interests are farmers (especially the large corporate agribusinesses), the ethanol industry and environmental activists. The so called investment in ethanol is really nothing more than an old fashioned vote buying scheme that uses taxpayer money rather the politician's own money for the transaction.