Life As We Might Have Known It: What If Ethanol Was Our Primary Engine Fuel

By Marc J. Rauch 
Exec. Vice President/Co-Publisher 


I had the opportunity to engage in an exchange of emails regarding ethanol and energy with Robert L. Bradley, Jr. Rob is the author of several books, including "Energy - The Master Resource," "Capitalism at Work: Business, Government and Energy," and "Edison to Enron: Energy Markets and Political Strategies." Rob is also CEO and founder of the Institute for Energy Research and an adjunct scholar of the Cato Institute.

Our exchange began with his comments that government should not decide which fuel is the winner; that fossil fuels dominance over alternative fuels was due to consumer choice; and that society owes a great thanks to fossil fuels for giving us such a high quality of living.

In my response to these comments, I agreed that the government should not dictate which fuels win, but added that our government very definitely determined who the winner was. "The government did this," I wrote, "by placing burdensome taxes on alcohol right after the founding of the United States. The burdensome taxes became onerous in 1862. Alcohol was priced out of the market by the government. When the taxes were finally lifted for a short period after 1907, alcohol began to compete with gasoline, and virtually all objective scientists agreed it was a better fuel than gasoline." I then added that government interference culminated with the national prohibition of alcohol, which ended the competition.

I also wrote, "Consumers never had the opportunity to vote on which fuel they wanted; there was never a national referendum. And in the years since the repeal of prohibition the public has never been told the truth about petroleum oil fuels, nor has the public been given the opportunity to vote to discontinue petroleum oil subsidies." Ethanol was never given a fair chance.

On the point regarding thanking fossil fuels for our high quality of living, I wrote that any thanks owed was owed to the machines (and their inventors); alternative fuels were used and could continue to be used. The internal combustion engine wasn't invented because there was excess gasoline and diesel fuel lying around, but that gasoline and diesel fuel was developed because there was a glut of virtually tax-free cheap petroleum oil.

This response seemed to have caught Rob off guard. He replied, "I am very interested in the gasohol (ethanol) argument and taxation that you refer to... I have not studied it as much as you have. I need to."

Frankly, Rob's forthright reply caught me off guard; but it was a welcome change to the stonewalling or silence that I usually get in response to these points.

We continued our exchanges, and after providing Rob with answers to his questions, he wrote "Okay, I am finally getting educated. This is something I did not sufficiently understand when I wrote my treatise, Oil, Gas, and Government: The U.S. Experience (1996)¬...I have written notes in my treatise and will remember this going forward."

Rob then kindly asked if I would present my thesis, in less than 1,000 words, in a more formal manner that he would post on his website. The following is my position (in 1,163 words):

LIFE AS WE MIGHT HAVE KNOWN IT: What If Ethanol Was Our Primary Engine Fuel

Events of the American Civil War set in stone social and economic conditions that have been with us ever since, and they are certain to be with us long into the foreseeable future.

Perhaps the least considered of the events were the Revenue Acts of 1861 and 1862, which were passed by the U.S. Congress to fund the Union's military efforts. Ramifications of these bills included the first Federal income tax statute and the levying of excise taxes (often referred to as "sin taxes") on tobacco and ethyl alcohol (ethanol). Alcohol's tax rose to more than $2 per gallon, regardless of whether the alcohol was intended for consumption or industrial purposes. In today's money, that's purchasing power equivalent to about $120. In 1860, rent for 4 rooms was $4.45/month; land was selling for $3 to $5 an acre; and a laborer’s wage was 90 cents a day.

In 1872, some of the taxes were repealed - income tax, for example. The alcohol tax remained in place for decades until finally removed by the 1906 Free Alcohol Act.

The high tax on alcohol priced alcohol out of consideration for use as lamp and kitchen stove fuel, colloquially referred to as "burning fluid" or sometimes "camphene." The alcohol-turpentine fuel had come into wide spread use earlier in the 1800's as whale oil became too expensive and hard to come by.

The beneficiary of alcohol's forced decline in popularity was the nascent petroleum oil industry and their principal product, kerosene. Up until the imposition of the tax, alcohol burning fluid and kerosene were similarly priced. After the tax was levied, alcohol burning fluid cost as much as 10 times more than kerosene. Kerosene had also been taxed to help the war effort: a paltry 10 cents.

The earliest efforts at building stationary and mobile internal combustion engines used alcohol fuels: Samuel Morey in 1826; Nicholas Otto in1860; Henry Ford's Quadricycle in 1896. Other builders of horseless carriages, such as Charles Duryea, used the new fuel "gasoline" because of it's dramatically lower price. However, early automobile racers all used alcohol or alcohol blends for more power.

In countries that didn't have domestic petroleum resources and onerous alcohol taxes, alcohol fuels became the preferred engine fuel. In 1899 Germany, the price of gasoline and alcohol fuel were both equivalent to approximately 27 cents. Tests conducted in Germany and France showed that alcohol optimized engines were at least as efficient as gasoline optimized engines.

The first decade of the 20th century saw significant improvements in internal combustion engines for the new fangled automobile, as well as powered aviation. Higher compression engines were required for better performance and heavier vehicles. But higher compression engines revealed a gasoline problem: Gasoline in high compression engines caused engine knock - abnormal detonation that was so severe it could shake the engine apart. There were two solutions to this problem: The first was ethanol. The second was to add ethanol to gasoline. Either solution came with its own problem: Cost - the tax-bloated price of ethanol made it unattractive and threatened efforts to portray the automobile as a device that could be afforded by the masses.

There was another problem, a problem for the petroleum industry: they couldn't control ethanol production and supply - ethanol can be produced by anyone, anywhere, and from a variety of raw materials. But still, the oil industry was in the cat-bird seat, they had price on their side...until President Teddy Roosevelt.

The history of Teddy Roosevelt's campaign against corporate monopolies is well known. Less well known were the Congressional Ways and Means Committee Hearings held in 1906, during his administration. These hearings resulted in the Free Alcohol Act that removed the exorbitant tax on alcohol production. By removing the tax, ethanol fuel became less expensive than gasoline for the first time. This meant that the top scientists and engine builders of the day could work towards better performing vehicles that relied on low cost ethanol and ethanol blends. Henry Ford's Model T was the most famous of new vehicles that could now be powered by gasoline or ethanol (the Model T had two simple adjustments located on the dashboard and steering wheel column).


The ethanol fuel industry would now get it's time in the sun, except for three obstacles: The first was the petroleum industry's head start. Three decades of kerosene dominance gave the oil industry an overwhelming financial war chest to be used for marketing and political tutelage.

The second obstacle was the First World War. Although the war ignited the need for mechanical innovation, the innovations were primarily used for military purposes. Had the war not occurred, higher compression engines in consumer automobiles would have been introduced, and these engines would have required greater quantities of anti-knock ethanol.

The third obstacle was National Prohibition. With the war out of the way, and the public ready to roar into the Roaring 20's, ethanol was eliminated from the scene; and nothing can kill competition like a law banning one of the two competitors.

In the early 1920's, ethanol still had its supporters in the top industry scientists of the day, including those at General Motors, the world's largest automobile manufacturer. Ethanol was the only solution to engine knock. However, after the GM scientists invented leaded gasoline (tetraethyl-lead), and combined their patents with Standard Oil and Dupont Chemical, the world's two largest companies in their respective industries, the prospect of billions of dollars in profits from leaded gasoline put aside any consideration of ethanol-gasoline blends in America.
                 • SEE ALSO: The Rise and Fall of General Motors and the Subjugation of the Industrialized World

In countries that did not have Prohibition, such as Great Britain, ethanol did compete successfully for many years. In fact, Standard Oil (and its derivative companies) marketed ethanol and ethanol-gasoline blends in those countries, advertising them as superior to leaded or unleaded gasoline. "The Forbidden Fuel" (written by Bernton, Kovarik & Sklar) points out how the ethanol-gasoline blends were labeled as "the most perfect motor fuel the world has ever known," and providing "extra power, extra economy and extra efficiency." A Standard Oil promotional pamphlet advises that with 10 gallons of their ethanol-gasoline blend in a fuel tank it is possible to pour almost a pint of water into the tank "without the slightest trouble - in fact in some circumstances with better running."

The end of Prohibition in America did mean that ethanol could once again compete with petroleum oil fuels, but what had been a significant head start for the petroleum industry prior to the Free Alcohol Act was now an insurmountable advantage. It would require industry acknowledgement that tetraethyl-lead, and then MTBE, was deadly; economic devastation caused by foreign oil dominance; and considerable environmental damage to finally compel government action that (still only) cautiously encourages ethanol use.

In conclusion, I reiterate that the U.S. government did choose the winner in the energy fuel war, and that its continued interference has made it impossible for a free engine fuel market to exist.

But what if the government didn't tax alcohol in 1862? What if alcohol was allowed to compete freely during the second half of the 19th century and all through the 20th century without Prohibition (or without Prohibition affecting ethanol production for fuel)? What might have happened?

We may not have engaged in so many wars; we may not have lost tens of thousands of servicemen in the wars; we may not have had to spend trillions of dollars to engage in the wars. We might not have needed to pour money into the Middle East oil countries to secure their oil as we wouldn't have needed it. Instead of making terrorist regimes rich, which allowed them to fund terrorist actions they might all have remained sleepy backwater countries.

If ethanol fuel was allowed to prosper our farmers might have required less aid. Our skies may never have become smog filled; we may have had fewer catastrophic oil spills and disasters. If we didn't have National Prohibition perhaps organized crime wouldn't have become so organized.



The Forbidden Fuel - Bernton, Kovarik & Sklar
Alcohol Can Be A Gas - David Blume
Sustainable Ethanol - Goettemoeller & Goettemoeller
Prosperity Beckons, Dawn of the Alcohol Era - William J. Hale
Turning Oil Into Salt - Korin & Luft
Auto Mania - Tom McCarthy
Petropoly - Luft & Korin
Fill Your Tank With Freedom - Evans & Khan
Internal Combustion - Edwin Black
America Adopts The Automobile - James J. Flink
British Petroleum and the Redline Agreement - Edwin Black
The Motor Gasoline Industry: Past, Present and Future - Robert Schmer
Fuel Economy of the Gasoline Engine: Fuel, Lubricant and Other Effects - Blackmore & Thomas
Ethanol Fact Book - CFDC & Growth Energy
The Chemistry of Corn Into Alcohol - Holm-Seto-Travaglini
The Energy Balance of Corn Ethanol (Update) - US Dept. of Agriculture (Shapori-Duffield-Wang)
The Prize - Daniel Yergin
The Quest - Daniel Yergin 


Pump the Movie - Josh & Rebecca Tickell
Gashole - Roberts & Wagener


Gasoline and Alcohol Tests on Internal Combustion Engines - Robert M. Strong 1909

Motor Fuels From Farm Products - Jacobs & Newtin 1938

Henry Ford, Charles Kettering and the Fuel of the Future - Wm. Kovarik 1998

The Ethyl Controversy - Wm. Kovarik 1993

Ethanol versus Gasoline - The Contestation and Closure... - Michael S. Carolan

THE MODEL T FORD CAR - Victor Wilfred Pagé

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