Tuesday, September 18, 2007

Ethanol Recipe: Midwest Corn + D.C. Pork + Taxes

"Washington might have a love affair with ethanol for political reasons, but increasing ethanol production will only lead to higher taxes, higher prices for both food and fuel, and damage to the environment, making us all worse off in the process. Congress needs to say no to the ethanol hustlers and end its political addiction to corn."

From my editorial in today's Sacramento Bee, "Ethanol: Midwest Corn, D.C. Pork," also appeared in the Fresno Bee, the Saint Paul Pioneer Press, and the Charlotte News and Observer.


At 9/18/2007 8:34 PM, Anonymous Anonymous said...

Since you consider yourself such an expert on oil and ethanol economics, I have a few questions for you:
How much has oil increased the cost of food over the last 5 years? (Remember what things are made out of oil? Almost everything plastic, including the packaging for your food, the fuel that drives the truck to deliver the food to the grocery store, the fertilizer that grows the food,etc.)
How long has gas with 10% ethanol been available? I remember buying it in college in the early 90's. Now the FTC says that refineries are still "transitioning" it? How much longer is this transition gonna take?
Did anybody say that the 36 billion gallons of ethanol that we need by 2022 will entirely come from corn? I was told that Iowa State University was developing economical methods of making ethanol from switchgrass and would have a proven methodology in a year or so.
If the government is giving farmers like me such generous subsidies, how come the IRS paid me after I filed my tax return? (govm't payments are taxable income, and no, I didn't cheat on my return). My corn averaged 200bu./acre last year, and while I may not a top notch marketer of my grain, I think I do better than avg.
I thought the oil fields in Alaska were a fragile environment or ecosystem and Bush should be shunned for wanting to drill there?
Mr. Perry, I don't doubt that, on a worldwide basis, supply has not kept up with demand. Your story on why oil companies have not increased production is quite plausible, though I just figured it was a case of oil prices kept artificially low for years through politics. And I would quite agree that the farm subsidy structure needs an overhaul. After all, I don't think Scottie Pippen and multinational companies need a government subsidy. Let's have the payment limitations that secretary Johanns suggested. Better yet, let's get rid of the direct payment portion of the farm bill. Let's return farm programs to their original intent: to help farmers out when commodity prices are below profitability. Guess how much money I get from the government for 2007 then: zero. Better yet, Scottie Pippen gets zero, too. The political will to do this gets destroyed every year by Senators and Representatives from southern states where rice and sugarcane, not corn, are grown.
One last question: If ethanol contains one-third less energy than gas, why does E10 gas have a higher octane rating than plain unleaded?

At 9/19/2007 12:40 AM, Anonymous Anonymous said...

I have to admit that corn farmers just want subsidies which is closer to free markets, unlike peanuts and tobacco which have a monopoly with marketing quotas and stiff fines. I support the free market in everything, including my vocation which is susceptible to outsourcing real easy. I don't demand call centers get subsidies or impose tariffs on calls from India. Corn gets a subsidy of about $40/acre (100 acre farm) about the price of seed and a 14% tariff on imports. I know everyone benefits from lower prices, except democratic candidates who want higher prices and to duplicate the protectionist prosperity of Mexico like 20% tariff on a drill versus 5% US. As for high prices in the oil markets, it's actually a good thing. It's the free market subsidizing alternatives unlike the $.51/gallon ethanol blender subsidy. Actually, I think switchgrass and butanol are better fit unless Thomas Gold was right.


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