Carpe Diem

More on the lunacy of turning corn into demon ethanol

From Robert Bryce, senior fellow at the Manhattan Institute, writing in Slate last summer:

You don’t have to be an economist to understand why the ethanol sector is driving food prices higher. This year, about 4.3 billion bushels of corn will be converted into motor fuel. That means that nearly 37 percent of this year’s corn crop will be diverted into ethanol production.

But to fully understand why prices for meat, eggs, cheese, and other grain-intensive foods are soaring, consider this fact: America ’s corn ethanol sector now consumes about as much grain as all of this country’s livestock. This year 4.6 billion bushels of corn will be used for livestock feed, an amount approximately equal to the 4.3 billion bushels that will be used for corn ethanol production. Thus, American motorists are now burning about as much corn in their cars as is fed to all of the country’s chickens, turkeys, cattle, pigs, and fish combined.

Need another comparison? This year, the American automobile fleet will consume about twice as much corn as is grown in the entire European Union. Put another way, the U.S. ethanol sector will burn almost as much corn as is produced by Brazil, Mexico, Argentina, and India combined.

When you look at the really big picture, the numbers are stark: This year, the United States will use about 13 percent of global corn production—that’s about 4.6 percent of all global grain production—so that it can produce a quantity of ethanol that contains the energy equivalent of about seven-tenths of 1 percent of global oil needs.

But what makes the ethanol charade even more perverse is that the entire rationale for ethanol has evaporated. For decades, the bogeyman of foreign oil has provided a handy canard that the ethanol industry could use to justify its subsidies and mandates. No longer. Foreign energy is becoming increasingly irrelevant to the United States.

Thanks to the shale revolution, U.S. natural gas production now exceeds the previous record levels that were hit back in the 1970s. Oil production from shale and other tight rock deposits has resulted in a glut of oil in some parts of the country. U.S. oil exports—which hit 2.8 million barrels per day the week of July 20—are soaring. Analysts at Citigroup are now predicting that U.S. oil production could increase by more than a third by 2015. If that happens, America could surpass both Russia and Saudi Arabia and become the world’s biggest oil producer.

Paul Krugman weighs in on the “rise of demon ethanol” in the NY Times:

Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels. The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a “scam.”

This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly “good” biofuel policies, like Brazil’s use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation.

And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states.

MP: As I mentioned back in 2008, anytime you have Paul Krugman agreeing on ethanol with such a diverse group as the Manhattan Institute (above), the WSJ, Reason Magazine, the Cato Institute, Investor’s Business Daily, Rollingstone Magazine, the Christian Science Monitor, the New York Times, John Stossel, The Ecological Society of America, the American Enterprise Institute and the Brookings Institution, the Heritage Foundation, George Will, and Time Magazine, you know that ethanol has to be one of the most misguided public policies in U.S. history.

21 thoughts on “More on the lunacy of turning corn into demon ethanol

  1. If food prices are soaring because of ethanol, why is inflation so low and predicted to be low for some time into the future?
    (To be clear, I personally consider ethanol a politically and environmentally motivated disaster.)

      • Where do you live that has no inflation? A cave in Outer Mongolia? Everything I buy is costing more each day. Add in food and energy, unlike the wackos running this country, and inflation is almost reaching Carter days.

  2. Food constitutes about 13% of the Consumer Expenditure Survey, and it is excluded altogether from the Core Inflation Calculation.

  3. “With its corn-based diet and proximity to the United States, Central America has long been vulnerable to economic riptides related to the United States’ corn policy. Now that the United States is using 40 percent of its crop to make biofuel, it is not surprising that tortilla prices have doubled in Guatemala, which imports nearly half of its corn.

    In a country where most families must spend about two thirds of their income on food, ‘the average Guatemalan is now hungrier because of biofuel development.’. . .Roughly 50 percent of the nation’s children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.” — Open Market.org

    “BRUSSELS (AFP) — The EU Commission on Monday rejected claims that producing biofuels is a “crime against humanity” that threatens food supplies, and vowed to stick to its goals as part of a climate change package. “There is no question for now of suspending the target fixed for biofuels,” said Barbara Helfferich, spokeswoman for EU Environment Commissioner Stavros Dimas. … Their comments came amid growing unease over the planting of biofuel crops as food prices rocket and riots against poverty and hunger multiply worldwide. UN Special Rapporteur for the Right to Food Jean Ziegler told German radio Monday that the production of biofuels is “a crime against humanity” because of its impact on global food prices. EU leaders, seeking to show the way on global warming, have pledged to reduce carbon dioxide emissions by 20 percent by 2020. …” — AFP

    Hey, if you’ve got to starve a few Third World children to make the environmental left feel good about themselves, well … small price to pay, no?

    • The shoe was literally on the other foot when leftists were attacking American capitalists for depriving third world countries of decent wages by setting up low-paying sweatshops to make clothing and shoes in such countries and Haiti, Bangladesh, and Vietnam. Why were those dirty guys at Nike were actually paying Vietnamese laborers less than the $45/month minimum wage?

      Unanswered was the corollary question: How much does a job have to pay above zero in order to attract otherwise unemployed workers?

    • When I was growing up I was told by the left that we had to make sacrifices because the “poor people in China and India” didn’t have jobs. Today I’m told by the left that we shouldn’t be sending our jobs to India and China.

  4. Lets face it the ethanol mandate is pure and simple another form of farm subsidy. Since Iowa has the first caucuses of the presidential selection lottery, it means that candidates have to support the farm income support program that is the whiskey ethanol mandate (made from corn). It keeps the price of corn up which is good for Iowa. Until you make Iowa not the first entry in the presidental nomination process it will stay.

  5. The scope and scale of pink GOP moonshine—ethanol—is astonishing.

    10 percent of every gasoline tank (automobile) in the USA, is filled with ethanol. Every car you see driving by (okay with the exception of diesels) is filled 10 percent with ethanol.

    800,000 barrels a day of federally mandated ethanol—that’s barrels, not gallons.

    This program easily dwarfs all of Obama’s misguided green-weenie programs put together.

    Ethanol is the most subsidized energy program in the USA.

    Not only is the program subsidized—and then use of ethanol mandated, by diktat, by the federal government—everything in Rural America is subsidized to help grow the corn, from highways, to rail stops, to phone service, to power and water systems. Even airports. Entitlement outlays are especially heavy in rural zip codes, btw.

    The knock-kneed, inbred, pink-o, socialist, subsidized federalized ethanol program is a hit with the GOP–can you explain that?

      • She is Dead-

        Okay, and I will leave you with this:

        FCC to spend $115 million on rural broadband subsidies
        Comments
        By Roger Yu, USA TODAY
        Updated 2012-07-25 5:07 PM
        The Federal Communications Commission said Wednesday it’ll spend $115 million to subsidize broadband Internet providers in an effort to encourage extension of their services to rural parts of the U.S. The companies that accepted the subsidies from the first phase of the “Connect America Fund” – $775 per household connected – also will be required to independently invest in the network infrastructure that will bring high-speed Internet to about 7 million customers in the next six years. The infrastructure work must be completed within three years. About 400,000 residents in 37 states will gain access upon completion, the FCC estimates.”This is a big deal for rural America,” says FCC Chairman Julius Genachowski, in an interview, adding that the FCC’s goal is to ultimately connect by 2020 all 19 million Americans in rural areas that lack access to broadband Internet. “Your chances of getting a job is lower if you don’t have broadband. Job postings have moved online.” To be eligible for the subsidy, which is funded by “Universal Connectivity” fees charged to phone customers, Internet providers agree to follow oversight procedures, including reports on how the money was spent. The program’s critics question its scope and reach, but the FCC says subsidies are needed to nudge Internet providers to serve rural areas that lack customers. “In rural areas, where there’s low population density, the economics just don’t work,” Genachowski says. The FCC didn’t disclose how much broadband providers will invest, but says in a statement that it could be in “tens of millions of dollars.” “They have skin in the game,” Genachowski says. Frontier Communications, a telecommunications company based in Stamford, Conn., will receive the largest amount from the fund after agreeing to extend broadband service to about 200,000 customers in 16 states. CenturyLink, based in Monroe, La., will expand service in 22 states, the FCC says. The FCC launched the Connect America Fund last year when it made changes to the Universal Service Fund, which was established to deliver telephone connections to rural towns. A program in the Universal Service Fund – the High Cost program – called for funding telephone companies to ensure that consumers in all regions have access telecommunication services that are comparable to those in urban areas. The industry has lobbied for years to broaden it to include broadband Internet. Last year, the FCC agreed to transfer the money from the High Cost program to the Connect America Fund, which will have a budget of $4.5 billion a year. “This is a bit of an experiment. We don’t know how it’ll play out and whether it’ll pay off. But it’s a good thing to try to make some effort to reach the unserved,” says Michael Romano, senior vice president of policy for the National Telecommunications Cooperative Association, which represents small telecommunications companies that weren’t eligible for the Connect America Fund. While the recipient companies accepted $115 million, the FCC initially offered $300 million. That some Internet providers refused the subsidy, Romano says, indicates the $775-per-household limit may be too small. “It’s probably too low for a lot of areas,” he says.While small towns may benefit from the program, customers in rural countryside may be too remote for continual service from Internet providers, he says, calling for the fund to be open to companies of all sizes.
        The Federal Communications Commission said Wednesday it’ll spend $115 million to subsidize broadband Internet providers in an effort to encourage extension of their services to rural parts of the U.S.

        The companies that accepted the subsidies from the first phase of the “Connect America Fund” – $775 per household connected – also will be required to independently invest in the network infrastructure that will bring high-speed Internet to about 7 million customers in the next six years.

        The infrastructure work must be completed within three years. About 400,000 residents in 37 states will gain access upon completion, the FCC estimates.

        “This is a big deal for rural America,” says FCC Chairman Julius Genachowski, in an interview, adding that the FCC’s goal is to ultimately connect by 2020 all 19 million Americans in rural areas that lack access to broadband Internet. “Your chances of getting a job is lower if you don’t have broadband. Job postings have moved online.”

        To be eligible for the subsidy, which is funded by “Universal Connectivity” fees charged to phone customers, Internet providers agree to follow oversight procedures, including reports on how the money was spent.

  6. Is there any particular reason that the ethanol subsidy gets more hate directed towards it than any other subsidy? There are a large number of things that take money from all and give to a select few. Why don’t we direct our anger towards these as well?

    • “Is there any particular reason that the ethanol subsidy gets more hate directed towards it…”

      Because they make me put it in MY gas tank; which lowers my gas mileage and the life-expectancy of my engine.

    • Steve

      There are a large number of things that take money from all and give to a select few. Why don’t we direct our anger towards these as well?

      We do. This just happens to be a post on ethanol, which is perhaps the most blatant and longest lasting of the current scams involving government interference in markets for the benefit of a few, at the expense of many.

      Check some other threads at this blog for equally vehement expressions of anger against other forms of fascist government abuse.

  7. Here are a couple of things that concern me with this article and the comments.
    #1. You say more corn is made into ethanol than is fed to animals, but you don’t mention, or you you don’t know about, the by-product of ethanol called distillers grain that is actually a better animal feed than corn. Seems pretty misleading.
    #2. What subsidy are you talking about exactly? The blenders tax credit has been eliminated.

  8. Scott

    Your concerns are legitimate. Some of the assertions aren’t explained well or are incomplete.

    #1 – While you are correct that a byproduct of ethanol production is used for animal feed, the question is whether there are any legitimate reasons to mandate ethanol production in the first place.

    #2 – Yes, he blenders credit is gone, but subsidies to corn growers remain, and more importantly the Renewable Fuel Standard remains.

    If ethanol was an economically superior fuel the industry would thrive on its own without any interference from the heavy hand of government.

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