What are the economic advantages of using biofuels?

Ka-ching! Cashing in on Biofuels

In 2007, Congress passed the Energy Independence and Security Act, which mandates the United States increase its use of biofuel in motor vehicles to 36 billion gallons by 2022 [source: U.S. Environmental Protection Agency]. For his part, President Barack Obama wanted the country to produce 60 billion gallons by 2030 [source: Ronge and Johnson]. He and others hope that by diversifying the nation's energy supply, the United States will not only reduce its carbon footprint and its dependence on foreign crude oil, but also resuscitate its sluggish economy.

Cashing in on green fuel will take time, however. Right now, producing a gallon of ethanol is more expensive than producing a gallon of gasoline. But all is not lost. As oil prices increase in the coming years, the cost of manufacturing biofuels from sustainable crops will diminish. How will that impact the nation?

For one thing, replacing imported oil with domestic biofuels will drive fuel prices down. When that happens, each household will spend less on energy. Researchers at Iowa State University say current ethanol production allows each household to save roughly $350 a year in fuel costs [source: Biofuels Digest]. If people spend less on fuel, they'll have more cash to spend on other goods and services. When consumers spend, companies hire and wages increase [source: Gehlhar, Winston and Somwaru].

Just as important, as Americans use less gasoline and more biofuel, experts say oil imports will fall by 16 to 17 percent by 2022. As such, the dollar will get stronger, reducing the cost of other imported goods. When that happens, the United States will be able to charge higher prices for exports [source: Gehlhar, Winston and Somwaru]. Furthermore, as scientists find better ways to turn home-grown crops into fuel, the cost of production decreases, opening the door for more investment. When companies invest, the economy expands [source: States News Service].