Tuesday, May 29, 2007

Politicians Drunk on Ethanol, The State Religion

American legislators and policymakers seem oblivious to the scientific and economic realities of ethanol production. Brazil and other major sugar cane-producing nations enjoy significant advantages over the U.S. in producing ethanol, including ample agricultural land, warm climates amenable to vast plantations and on-site distilleries that can process cane immediately after harvest.

Thus, in the absence of cost-effective, domestically available sources for producing ethanol, rather than using corn, it would make far more sense to import ethanol from Brazil and other countries that can produce it efficiently — and also to remove the 54-cents-per-gallon tariff on Brazilian ethanol imports.

Our politicians may be drunk with the prospect of corn-derived ethanol, but if we don't adopt policies based on science and sound economics, it is consumers around the world who will suffer the hangover.

From an editorial in the LA Times (free subscription may be required) "Why Ethanol Backfires"

1 Comments:

At 5/30/2007 11:32 AM, Blogger juandos said...

Hmmm, well as an old farm back long time ago I don't understand the why there seems to be a, "nothing but corn" mantra with the federal government on this use of ethanol...

Then again the government in its July '06 USDA study titled: THE ECONOMIC FEASIBILITY OF ETHANOL PRODUCTION FROM SUGAR IN THE UNITED STATES makes a rather bizzare and questionable claim right in the summary: "Ethanol is a high-octane fuel which is used primarily as a gasoline additive and extender."...

Obviously someone flunked basic chemistry...

People in the commondities game who do know something about corn and sugar noted the following: Technologically, sugar-based ethanol is simpler to convert than corn-based ethanol with half the energy needed to convert sugar vs. corn. However in the US, a USDA study found that it costs as much as twice as much to convert sugar to ethanol vs. corn to ethanol. Current Crude Oil prices and the US’s tariffs on Brazilian sugar ethanol still make US corn ethanol a viable competitor in the US.

So Congress in its wisdom sets the conditions on trade to end up with corn in this country at least looking to be the better choice for ethanol production...

Heck! Even those very questionable folks at the New York Times seems to know better and that's quite a trick in and of itself...

Greg Mankiw an economist over at Harvard noted in a Thomas Friedman commentary the following: Thanks to pressure from Midwest farmers and agribusinesses, who want to protect the U.S. corn ethanol industry from competition from Brazilian sugar ethanol, we have imposed a stiff tariff to keep it out. We do this even though Brazilian sugar ethanol provides eight times the energy of the fossil fuel used to make it, while American corn ethanol provides only 1.3 times the energy of the fossil fuel used to make it.

Oh yeah! Nothing like a little government intervention to drive up prices...

 

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