Professor Mark J. Perry's Blog for Economics and Finance
"If ethanol and other renewable fuels were cost-competitive, they would not need to be mandated. The fact that oil is over $90 a barrel and yet the ethanol industry still felt it needed an expanded mandate to compete indicates how costly ethanol is."
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
5 Comments:
The federal government just needs to get out of the darn way. It needs to stop pushing ethanol in all the weird ways it is pushing it - they are driving up food prices. Also, the feds need to let industry drill oil in the U.S., where ever it is found. Then, we need them to get out of the way of building nuclear power plants. Heck, maybe if the govt really wants to help, they could start a crash nuclear power plan building spree - small ones like the Navy uses. Now that would help people out. But no, they just have to requlate and screw things up.
The invisible hand of capitalism is being trumped by the not so invisible foot of government again.
The government's absolute mishandling of the country's energy policies continues.
Of all the choices we have for alternative ways to run our cars (electric, hybrid) and alternative ways to make electricity (nuclear), we choose ETHANOL! An inneffective, costly and dirty fuel.
This is a sad, sad situation and does not bode well for our future. If I was a more cynical man, I would think the farm lobby has had a bigger hand in guiding our country's energy policy than the oil companies. But everyone just keeps piling on the oilmen and afraid to go after the real people who rip us off today: farmers!
Actually, farmers are driven by government farm policies that date back to the great depression that fuel the unreasonable demand for corn. All farmers do is attempt to meet this demand, like any other supplier. And in the process, farmers are actually getting ripped off too, since the USDA policies encourage industrialization, which in turns encourages farmers to overproduce...and farmers themselves can't handle anything beyond the raw production.
The money is in the agri-business firms, like Cargil and ADM, who are more dominant within the farm lobby than actual farmers. You'd be surprised at the number of farmers, big time and small time, who curse the farm lobby and the addictive beast of industrialization that the government has created.
And in the end, the government created and maintains this beast, not the farmers.
Alex, thank you for that post. I work in the farm community with small farmers, and what you have said is entirely correct. Family farms hate the subsidies and other government intrusions and mismanagement. There is a huge difference between farmers and agribusiness.
When people curse farmers now, they're doing so with their mouths full.
True, the ethanol industry still does need a mandate. But isn't the fact that the link between the value of corn to ethanol to oil has created an environment in which none of them are able to be priced independantly from one another? I'm not saying that this is necessarily a good thing, I'm just trying to say that it is the reality of the situation -- ethanol would be able to be more profitable with $90 oil if corn prices hadn't risen as high as they have due to oil prices, the falling dollar, and rising demand for grain from China.
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