Thursday - May 01, 2008

Life on the other side of the looking glass

Did I miss the memo going around that says it’s now time for the Democrats to see reality and the Republicans to live in dreamworld? That’s how this story from Cybercast News Service seems to me.

Senators Ted Kennedy (D-Mass.) and Joe Lieberman (I-Conn.) told Cybercast News Service on Wednesday that they believe there is a connection between federally mandated consumption of ethanol, a gasoline additive made from corn, and world food shortages.

The Energy Policy Act of 2005 mandates that increasing amounts of ethanol be used in the United States to dilute gasoline. The law called for 4 billion gallons of ethanol to be used in 2006, 6.1 billion gallons in 2009, and 7.5 billion gallons by 2012.

As the demand for corn has increased because of increased ethanol consumption, the Washington Post reported this week, the number of acres used to grow wheat in the U.S. has contracted, contributing to a shortage of wheat on the world market and an overall increase in world grain prices.
...
When Cybercast News Service asked Lieberman if he thinks federal laws that mandate escalating domestic ethanol consumption ought to be repealed, he said such a solution ought to be considered.

Sen. Larry Craig (R-Idaho) expressed a different view.

“I don’t see the link between hunger and our requirements that ethanol be mixed into our gasoline,” Craig told Cybercast News Service . “We are still exporting food to the world. The world hunger movement is also tied to the environmental movement. Environmentalists have decided that ethanol is bad and so liberals are arguing that it’s connected with food and therefore it is all bad. There has to be a balance.”

“Ethanol today has brought the price of gas down by 20 cents,” Craig said. “American consumers may be paying a little more for food but they are also paying a little less for gas because of ethanol in the market. It’s a worthwhile trade. Let’s lower the subsidy on ethanol, and let the market stabilize, but our country is better off today because we are producing ethanol.”

What the heck? What planet is old Larry from anyway?

It takes a lot of corn to produce ethanol. Ask any moonshiner. There is only so much farmland; it’s the old “Guns & Butter” lecture from Economics 101. Grow more corn and you have less space to grow other things like wheat. Selling the corn to the government or the distillers at a premium increases the demand and the price. Higher corn prices means less corn for your money, and if you have almost no money, then you go hungry. Given a fixed demand level for wheat, growing less wheat also causes the price to rise, and once again, if you don’t have much money then you go hungry. Which is why there are food riots in Haiti, Mexico, Pakistan, and other poor areas around the world.

And ethanol has lowered the price of gas? Says who? As crude oil continues above $110 a barrel, and the price of regular gas hits $3.50 a gallon, I’m not seeing any savings at all. And where is this ethanol stuff anyway? I’m not seeing any signs on the pumps at the gas station. I’m not seeing a special little truck following the gas tanker around, yet I remember hearing that ethanol couldn’t be added to the gasoline pipe network because it would rot out the pipes, and therefore had to be added at the local level. And if there has been a miraculous technological advance that has made the distillation of ethanol calorically efficient I haven’t heard of it. It still takes more energy to heat the mash to get the alcohol out then the alcohol itself provides. And what are they using to fire the stills? Oil. D’oh!

And ethanol is suddenly out of favor with the enviro squad?  Come on, the stuff is made FROM PLANTS. You can’t get any greener than that. WTF, I guess I’ve been hiding under my rock again if I missed that one.

The whole ethanol thing is a dumb idea. Especially if you have oil and gas you can drill for. Like we do. 

Posted by Drew458     on 05/01/2008 at 10:31 AM   
Filed Under: • Economics •  
• Comments (5) • Trackbacks(0)  Permalink •  

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