Our oil problem is real. The world consumes 84 million barrels of oil a day. The United States, with about five percent of the world's population, consumes 21 million barrels a day, or twenty-five percent of the world's total, making it the largest consumer of oil. The United States imports approximately sixty percent of its oil or 12.6 million barrels per day. In 1970, U.S. oil production peaked. Even with the addition of Alaskan and offshore wells, our domestic production has been in a steady and sharp decline. Hence, our dependence on imported oil must increase over time even if our total consumption remains the same. Which it won't of course. It is increasing. If the average price for oil is $57 a barrel, the United States will spend $718 million a day on imported oil, or $262 billion a year. Every dollar added to the price of oil per barrel costs Americans $7.7 billion a year, and $4.62 billion of that goes for imports.

Equally troublesome is the fact that oil demand by other nations is increasing sharply, further driving up the price. The Chinese economic miracle is having a devastating effect on the oil market. China has replaced Japan as the second largest consumer with 8.5 percent of global oil consumption. Moreover, Chinese consumption is rising rapidly as the Chinese people are not only enjoying economic prosperity, but developing a love of the automobile similar to what occurred in the United States decades ago. At some point oil may not be available except at prohibitively high prices.

The grim reality is that Americans are feeling economic pain each time they fill up at the pump. We are mortgaging our children's futures by running high trade deficits due to oil imports. And we are skewing our foreign policy toward support for oil producers—most of whom aren't the friendliest people. With all of this at stake, Americans have turned to Washington for a way to break the oil habit.

Some of our leaders have the answer. Or so they say. ETHANOL. Let's take corn, which is grown in abundance in the United States and convert it into ethanol to power cars. Putting taxpayer dollars behind this concept, with pressure from powerful farm lobbying groups, congress has granted generous subsidies to encourage domestic production of ethanol from corn. Last year those subsidies cost taxpayers approximately $6 billion.

The proponents of ethanol are enjoying some success. In 2006, ethanol mixed with gasoline or used alone in specifically designed cars, accounted for 3.5 percent of American fuel consumption. Production is growing by 25 percent a year. Ethanol distillers are sprouting up like wild flowers throughout the Midwest. Currently there are 114 ethanol distillers in the United States. Another 80 plants and seven expanded factories are being built, doubling capacity by the end of the decade to 12 billion gallons.

Politicians believe that this ethanol craze is a win-win scenario. It seems too good to be true. Eliminating dependence on foreign oil suppliers while reducing greenhouse gas emissions and helping the farmers. Unfortunately, it's all one big scam.

To start with, corn based ethanol is a net energy loser. As Tom Mast, an expert in the field of energy efficiency has explained, 131,000 btus are needed to produce a gallon of ethanol, which has an energy value of 77,000 btu. Or, in other words, growing the corn and distilling the ethanol takes 1.7 times as much energy as the finished ethanol will produce.

In addition, the energy needed to produce ethanol comes from the burning of fossil fuels like coal, natural gas and even oil, all of which we wanted to avoid in the first place. Thus, the claims of lower greenhouse gas emissions from switching to ethanol are misleading.

There is a further hidden cost to the American people. Increased use of natural gas drives up its price. But natural gas is used to heat American homes and burned by electrical utilities to supply electricity. Thus one impact of this ethanol insanity will be to drive up all of our gas and electric bills.

But energy impacts are only the beginning. Production of corn based ethanol requires large quantities of water which is in short supply in much of the United States agricultural heartland where the plants are being built.

Then there's the effect on food production and hence food prices. Not surprisingly, the price of corn has sky rocketed because of demand by ethanol producers. Since corn is also used for animal feed, the prices of beef, pork and poultry have risen, as well as a myriad of other foods and beverages, including milk from cows and, even Coca Cola, which uses corn syrup.

Not surprisingly, farmers are shifting production of wheat, soy and other crops to corn in order to gain the governmental subsidies. Last year, 78 million acres of corn were planted. There will be more than 90 million this year. It doesn't take an agricultural economist to realize that farm land is limited in the United States. Growing more corn means that other crops will be in short supply and their prices will rise. This has already happened with wheat. We are literally diverting our food from feeding people to feeding cars. Americans are paying not only in taxes to cover corn subsidies but at supermarket checkout counters.

Some people argue that corn based ethanol is "bad" ethanol because of its energy inefficiency. On the other hand, there are two kinds of "good" ethanol, for which this its not the case.

The first is ethanol derived from sugar cane which is widely used in Brazil to alleviate that country's dependence on imported oil. That approach makes sense in Brazil which has acres and acres of sugar cane. We don't have it here. That's not a viable option.

Then there's cellulose ethanol. Instead of corn, the concept is to burn wood, grasses and shrubs. This truly is pie in the sky. No commercially viable process has been developed and none is on the horizon despite massive research efforts. DuPont, for example, has 100 scientists working on the problem.

For now and the foreseeable future, filling up our tanks with ethanol in the United States means using corn based ethanol. It's costly to produce. Even with governmental subsidies, we may still pay as much at the pump, or more, then we do now. Those subsidies are buried in our tax bills. We feel the impact at supermarket check out counters and in our utility bills. Meantime, we're crippling our food supply and destroying the Midwestern countryside. Isn't this great?

Allan Topol / AllanTopol.Com E-Mail: readermail@AllanTopol.Com