Monday, March 24, 2008

The Fairytale of Ethanol

Over at Capitalism Magazine I came across one of Walter Williams' incisive articles from March 12 "Archer Daniels Midland, Big Corn and The Ethanol Hoax". Folks I think we've been hoodwinked by big business in cahoots with government. But then I knew that environmentalists (read Al Gore) and government forcing this ethanol fairytale on Americans instead of allowing the marketplace to work things out would slap us in the face one day. And sure enough now you can stop wondering why prices are so high at the grocery store.

When you take good crop land that once was growing tomatoes, potatoes, cotton, vegetables and fruit and grow corn on it because of government induced incentives to do so, it doesn't take a degree in economices to figure out that the cost of our food would be rising. So now it's not just gasoline prices that are high because the government and environmentalists won't let us drill for new oil, but the very basic necessities of life are gobbling up more and more of our money.

"Ethanol is 20 to 30 percent less efficient than gasoline, making it more expensive per highway mile. It takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That's enough corn to feed one person for a year. Plus, it takes more than one gallon of fossil fuel -- oil and natural gas -- to produce one gallon of ethanol. After all, corn must be grown, fertilized, harvested and trucked to ethanol producers -- all of which are fuel-using activities. And, it takes 1,700 gallons of water to produce one gallon of ethanol. On top of all this, if our total annual corn output were put to ethanol production, it would reduce gasoline consumption by 10 or 12 percent."

"Ethanol is so costly that it wouldn't make it in a free market. That's why Congress has enacted major ethanol subsidies, about $1.05 to $1.38 a gallon, which is no less than a tax on consumers. In fact, there's a double tax -- one in the form of ethanol subsidies and another in the form of handouts to corn farmers to the tune of $9.5 billion in 2005 alone...

"Ethanol production has driven up the prices of corn-fed livestock, such as beef, chicken and dairy products, and products made from corn, such as cereals. As a result of higher demand for corn, other grain prices, such as soybean and wheat, have risen dramatically. The fact that the U.S. is the world's largest grain producer and exporter means that the ethanol-induced higher grain prices will have a worldwide impact on food prices.

"It's easy to understand how the public, looking for cheaper gasoline, can be taken in by the call for increased ethanol usage. But politicians, corn farmers and ethanol producers know they are running a cruel hoax on the American consumer. They are in it for the money. The top leader in the ethanol hoax is Archer Daniels Midland (ADM), the country's largest producer of ethanol. Ethanol producers and the farm lobby have pressured farm state congressmen into believing that it would be political suicide if they didn't support subsidized ethanol production. That's the stick. Campaign contributions play the role of the carrot...(Read the complete article here)

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