The Ethanol Bubble Pops in Iowa: More evidence the fuel makes little economic sense.

The Wall Street Journal ^ | April 18, 2009 | Max Schulz

[Designer]

"If the purpose of making ethanol a motor fuel additive is to reduce oil consumption.."

It is NOT REALLY.

"..how does a 10% ethanol blend that gives 10% less miles per gallon save anything?"

The real push behind all the ethanol was started by the producers of corn (farmers and farmer co-ops) to enhance the price they received for corn.

They essentially went out and invented a market for corn that didn't exist, which increased their profits.

Now that there is a market, we find that the inevitable has occurred; other countries have stepped in to sell corn as well.

The "lawgivers" of midwestern states have attempted to mandate the use of ethanol as a pay-back to their constituents who helped get them elected.

[thackney]

Here is the USDA history and projections:

Agricultural Baseline Projections: U.S. Crops, 2009-2018
http://www.ers.usda.gov/Briefing/Baseline/crops.htm

[Toddsterpatriot]

Thanks. I wonder if our farmer will come back with proof that the ethanol tax credits give a 20 or 30 to one benefit in lower prices?

What do you think, ignoring the cost of the tax credit and the market dislocations, do you think ethanol has given us a lower price at the pump?

[allmendream]

I donut think all biofuels are a pipe dream.

It is quite possible to create an organism that could be fed nearly anything and produce a high quality fuel.

But what it should be fed is corn stalks and other waste products, not corn or other foodstuff.

And people should just accept that we are going to pump out every single drop of economically available petroleum and burn it all up over the next few hundred years. Our entire economy is based upon petroleum and almost everything is made out of it.

[thackney]

ignoring the cost of the tax credit

I don't know how to do that or the mandates of consumption. They so greatly distorted the market for the product and pricing. The tax credit discounts 1/3 the current price and the mandate effectively triples(??) the demand.

[newgeezer]

I think I heard that ethanol production for fuel last year used 15% of the corn crop. You think that might distort the market?

The corn market? Sure, and the competition for land can and did affect other grain markets. But, I'm still waiting for any facts to prove whether and how much government-mandated ethanol "distorts food markets" (other than the niche "corn on the cob" market). How much do fluctuations in grain prices affect the price of food?

Someone previously stated his opinions and feelings about markets, and you raked him over the coals, demanding evidence. Now, when you hope to make a point, your idea of supporting evidence is to present what you think you paid for corn on the cob last year? ;O)

[Toddsterpatriot]

I don't know how to do that or the mandates of consumption.

Yeah, I know what you mean. I think that whatever the government does with mandates, the true costs are at least 2 to 3 times the visible outlay.

As far as the other claim, a benefit 20 to 30 times the visible outlay, I'm gonna chuckle about that one for quite some time.

[Toddsterpatriot]

You think that might distort the market?

The corn market? Sure,

Excellent! I'm glad we agree.

and the competition for land can and did affect other grain markets.

Bravo, 2 for 2.

But, I'm still waiting for any facts to prove whether and how much government-mandated ethanol "distorts food markets

I think the whether is obvious. As to how much, that's open to interpretation.

Someone previously stated his opinions and feelings about markets, and you raked him over the coals, demanding evidence.

Yeah, the other opinion was we save $100 billion to $150 billion per year in fuel costs due to the addition of ethanol.

You think that's a bit more specific, and more easily refuted, than the idea that the government mandating billions of gallons of ethanol usage will distort food markets?

Now, when you hope to make a point, your idea of supporting evidence is to present what you think you paid for corn on the cob last year? ;O)

I'm open to any evidence you provide that shows no distortion occurred. :^)

[GOPJ]

Yeah - like Mayday celebrations...

[GOPJ]

The person who came up with the "earth day" idea is a convicted killer:

http://www.freerepublic.com/focus/f-news/2235016/posts

[Iron Munro]

"I donut think all biofuels are a pipe dream."

One of the major drawbacks to any political involvement in addressing a need or solving a problem is the fact that politicians almost always have another agenda and end up using the problem as cover to accomplish other goals.

In the case of biofuel from corn, politicians weren't satisfied with supporting/encouraging programs to develop biofuel in the most efficient and cost effective way. They used the fuel crisis as a way to create an artificial demand for corn as a way to drive up corn prices for their agri-business lobbyist pals and financial supporters.

The fact that it was an expensive, ineffient process and that it resulted in very big price increases to consumers (voters) for food and other products affected by corn prices seems to be of little concern to them.

Remember, both republicans and democrats from President Bush to the Senate and beyond are responsible for this flawed biofuel policy. And politicians of both parties are responsible for thousands of other market altering actions and subsidies (such as home mortgages to unqualified buyers).

This is another good reason why politicians of all stripes should not be trusted to interact with businesses in any way that can affect markets.