New at Reason

June 22, 2007

Ronald Bailey explains why the ethanol craze might be folly, but it isn't funny.

Comments

|6.22.07 @ 12:30PM|#

Also of note, after the congress voted to drive up production of ethanol, the oil industry said it would cut back on building new or upgrading old refineries. All that additional ethanol is going to cut demand on oil, so why invest in refineries.

We need some equivalent of "first thing, do no harm" for elected officials.

highnumber|6.22.07 @ 12:32PM|#

Finally, you mention the tequila shortage. Thank you, Mr Bailey, for addressing the really important issues. I thought you only cared about scotch.

|6.22.07 @ 12:32PM|#

related query for the bright folks on H&R:

I saw the other night on a Cable Access show that discusses marijuana decrim and access to med-mar that hemp is actually a potential source for ethanol. Do the current technological limitations on cellulose-whatever apply to hemp as well?

|6.22.07 @ 12:37PM|#

How much corn based ethanol would be produced without susidies/mandates?

If the answer is, as I strongly suspect, very little, then to hell with it, lets burn gasoline. Gas goes up - ethanol becomes more competitive. Gas goes down, the reverse. Why is this so damned perplexing to your average congressperson? Hell, I think all of them went to high school. This ain't rocket science, people.

|6.22.07 @ 12:44PM|#

cecil

I'd be afraid that if I tried to run my car on hemp-based ethanol it'd go really slow and I'd have to be filling it all the time.

Paul|6.22.07 @ 12:46PM|#

There are now 110 ethanol plants operating in the United States and 74 more are on the way.

Not in my backyard, there won't be.

|6.22.07 @ 12:46PM|#

One huge upside of the potential increase in commodity prices -- the claims that huge subsidies currently paid to U.S. farmers are necessary would go away. The reasons that those subsidies were deemed necessary in the first place was because prices for commodities were so low (because of increases in supplies due to modern farming techniques and increases in production in developing countries).

So if ethanol creates more demand for these commodities, then we can quit spending money on farm programs that subsidize these activities.

Granted, a mandate that x% of our fuel supply be ethanol is an example of government interfering with the free market, but I'd rather see that happen than to pay farmers to grow food because the prices are too low.

I suspect that if commodity prices go up due to the demand for ethanol, that wise farmers around the world will happily then plant more of those crops and spend the money to get the latest technologies to produce high yield crops. And I wouldn't be at all surprised if they overshoot demand with their production once again and lead to lower commodity prices, just as they have in the past.

ed|6.22.07 @ 12:49PM|#

Why is this so damned perplexing to your average congressperson?

Because said congressperson is a functioning retard who doesn't have a real job and who wouldn't know the difference between a chicken and a corn dog?

highnumber|6.22.07 @ 1:03PM|#

Why are the corn dogs in my grocer's freezer always made from chicken or turkey?
(I don't mind, but it perplexes me. The hot dogs are usually beef, except for the cheap crappy pork ones.)

It's a Friday. I have a short attention

|6.22.07 @ 1:04PM|#

Hey Ron:

"Senate Majority Leader Harry Reid (R-Nev.)"

Last time I checked, Reid was a democrat ;)

SPD|6.22.07 @ 1:05PM|#

So if adding ethanol to fuel to gas-gazzling SUV's is a waste, and it costs 3 kilograms of feed to produce 1 kilogram, is the best solution for addressing the food shortage situation to scrap ethanol production altogether and become hybrid-car driving vegetarians?

Horrors!

SPD|6.22.07 @ 1:06PM|#

*1 kilogram of meat, sorry.

|6.22.07 @ 1:10PM|#

Brad: Maybe the farmers won't get subsidies but ethanol producers will. According to the WaPo:

Bush and members of Congress stress energy independence and environmental benefits of federal requirements for a massive increase in the use of biofuels in motor vehicles. But so far they have muted discussion of the prosaic details of how to pay for the subsidies and other incentives seen as crucial for meeting the new biofuels targets.

If the current tax credits, grants and loan guarantees are extended, the package would cost taxpayers $140 billion more over the next 15 years. New proposals under consideration in Congress could raise that tab to $205 billion.

The taxpayers still lose. As I have constantly and plaintively asked in all my reporting on bioethanol, if it's such a good idea why does it need a subsidy?

|6.22.07 @ 1:10PM|#

Don't some people blame subsidies that keep US crop prices artificially low for starving people in developing countries because their farmers can't compete? Now a new demand is driving crop prices up, for corn at least. Wouldn't this make farming more lucrative for farmers in developing countries, which would increase wealth in said countries?
I've gotta be missing something.

Low crop prices due to subsidies: Bad for poor people.
High crop prices due to ethanol: bad for poor people.

|6.22.07 @ 1:14PM|#

stoneymonster: Can you really tell the difference between an "R" and a "D"? ;-) Thanks, good catch. It's fixed.

|6.22.07 @ 1:16PM|#

Hmmm - did we poll to poor? would they rather starve or be flooded/biten by bugs/heat exhaustion due to global warming

|6.22.07 @ 1:21PM|#

Any chance we could at least get rid of the sugar tariff?

Gilbert Martin|6.22.07 @ 1:35PM|#

"Some energy hawks might argue that breaking our dependence on foreign oil is worth higher food prices."

I would think a true "energy hawk" would be more inclined to argue that we should be drilling for oil in ANWAR and off the coasts of Florida, California, etc., building more nuclear power plants and increasing our use of the one fossil fuel we've got plent of - coal instead of trying to artificially boost corn based ethanol.

Ethanol is a les efficient store of energy than gasoline anyway and it is more expense to transport to boot.

KipEsquire|6.22.07 @ 1:38PM|#

The ethanaol mania is also indirectly driving up the cost of beer, as farmers switch from barley to corn, resulting in lower supply of barley and therefore higher prices, which translates into higher beer prices.

Cheers...

|6.22.07 @ 1:55PM|#

The ethanol subsidies are something Congress gives environmental radicals to 'bate over. The reality is that corn ethanol uses up roughly the same amount of fossil fuel energy as the ethanol contains itself, once you take into account the fossil fuel needed to produce fertilizer, fuel for tractors, transport costs, fuel to build the tractors, fuel to mine the raw materials used to build the tractors, etc. That's why, without a subsidy (or an outright mandate to use ethanol no matter how uneconomical, as in Hawaii) ethanol use would be a nonstarter. That's also why the sensible thing would be to eliminate the tariffs on ethanol imports so countries that can produce it more economically than in Iowa can supply it at market prices.

Bottom line? People will die so pandering politicians can prop up their electoral college prospects in corn farming states, and so environmentalists can pump up their egos and feel self-righteous, even while their policies harm the environment.

D.A. Ridgely|6.22.07 @ 1:58PM|#

The taxpayers still lose. As I have constantly and plaintively asked in all my reporting on bioethanol, if it's such a good idea why does it need a subsidy?

Don't you understand that good ideas need a subsidy the most, Mr. Bailey? That's why, for example and on another front, "commercial [radio] owners who fail to abide by enforceable public interest obligations [should] pay a fee to support public broadcasting."

(Okay, off-topic I admit, but same mindset. You just can't trust the market when it comes to "good ideas.")

|6.22.07 @ 2:06PM|#

It makes more sense to grow oil crops like rape seed to produce bio-diesel. No major refinery costs, no added expense creating alcohol from cellulose and sugars. Just grow it, grind it, pump it and go.

VM channeling|6.22.07 @ 3:01PM|#

"Just grow it, grind it, pump it and go."

*thinks of other situations where that phrase could be used... Stop! Innuendo time!

VM|6.22.07 @ 3:08PM|#

d'oh. I was channeling "the Todd"

Paul|6.22.07 @ 3:45PM|#

So if ethanol creates more demand for these commodities, then we can quit spending money on farm programs that subsidize these activities.

Yeah, Brad, except that if you look at the history of government payouts, you'll realize that the commodity prices will go up and the farm programs will continue.

wsdave|6.22.07 @ 3:51PM|#

highnumber,
"Why are the corn dogs in my grocer's freezer always made from chicken or turkey?"

Damn straight!! I want my corn dogs made from only CORN and DOGS; nothing else!!

|6.22.07 @ 5:06PM|#

highnumber,

The big agave shortage isn't supposed to hit until 2008. Given that the recent glut in agave has produced more tequila in production, we may have an additional year or two before tequila prices go through the roof.

By 2019, I predict that the world will see its last bottle of tequila consumed, by a guy trying to get some shot-slamming whore to sleep with him. That bottle was worth $28,000, too, the fool.

Obviously, an invasion of Mexico is the only option to preserve our sacred right to tequila.

SPD|6.22.07 @ 5:27PM|#

¡Viva tequila! (firing pistols into the air)

|6.22.07 @ 5:31PM|#

I've gotta be missing something.

Low crop prices due to subsidies: Bad for poor people.
High crop prices due to ethanol: bad for poor people.

You're not missing much. Some poor people are farmers. Other poor people are not farmers. So the two government policies hurt different classes of poor people.

Six of one, half a dozen of the other, you say?

Not quite... By directing the resources in ways that are not voluntarily chosen, the total wealth produced in either case is less than it would be were the trade left free.