Discussion: (21 comments)
Comments are closed.
The public policy blog of the American Enterprise Institute
View related content: Carpe Diem
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.
Comments are closed.
1150 17th Street, N.W. Washington, D.C. 20036
© 2014 American Enterprise Institute for Public Policy Research