The real reason ethanol won't—and can't—cut American oil imports.

In June, the Energy Information Administration released its Annual Energy Outlook, which expects domestic demand for diesel fuel to grow about four times faster than that of gasoline through 2015. Looking further out, toward 2030, diesel demand is expected to increase about 14 times faster than that of gasoline. Indeed, by 2030, the EIA expects U.S. diesel consumption to rise by 51 percent over 2006 consumption levels while gasoline use will increase by just 3.6 percent.

In July, the Paris-based International Energy Agency released its medium-term oil market report, which said that "distillates (jet fuel, kerosene, diesel, and other gasoil) have become—and will remain—the main growth drivers of world oil demand." Between 2007 and 2013, the IEA expects distillate demand to increase nearly double while global gasoline demand will grow only slightly.

The surge in diesel demand is due in large part to the ongoing "dieselization" of the European automobile market, as well as continued economic growth in Asia and the United States. This increasing demand for diesel, combined with a global lack of refineries that can produce the type of low-sulfur diesel that is now mandated in the United States and Europe, means that diesel will continue selling for a premium relative to gasoline. And given a chronic shortage of high-quality refining capacity in Europe, that price differential will likely persist for a decade or more to come.

That increasing diesel demand (and the increasing value of diesel fuel) means that U.S. refineries are buying more foreign crude, not less. That's a bitter fact given that cutting dependence on foreign oil has been cited ad nauseam as the justification for the corn ethanol mandates as well as continued federal research funding for the mirage of cellulosic ethanol.

As an executive at a large domestic oil refiner (who asked that his name and company not be disclosed) explained it, "ethanol is making diesel more expensive relative to gasoline because it's expanding the pool of gasoline. But to make diesel, we have to process more crude, which in turn is raising the price of crude." He went on, saying that for some refiners, "gasoline is being thrown into the market as a diesel byproduct."

In other words, ethanol is doing absolutely nothing to reduce overall U.S. oil consumption or imports because refiners have to buy the same amount of crude (or more) in order to meet the demand for products other than gasoline—that is, jet fuel, diesel fuel, fuel oil, asphalt, etc.