Click here to listen to the broadcast of You Tell Me on Newstalk 600 KTBB, Friday, May 5, 2008.
It’s costing a fortune to fill up my car. I hate it. I’m sure you hate it. I also hate that we remain, 35 years after the Arab oil embargo, more dependent on oil from foreign sources than we were when we first experienced gasoline lines.
I appreciate the urge on the part of the government to “do something.” How can today’s politicians not have that urge? We are a nation of people who expect government to “do something” whenever there is a problem, no matter how personal the problem (like borrowing too much money for a house) and no matter how frequently we see that the “something” that is done is usually much worse than the problem itself.
Oil prices were on the rise in 2005. The Bush administration’s efforts to increase American production of oil by drilling in the Alaska National Wildlife Refuge (AKA: ANWR) and the Outer Continental Shelf died in Congress.
What didn’t die was the Energy Policy Act of 2005. The original bill contained a provision permitting the drilling of ANWR. By the time the bill became law, that provision was gone. What survived was the provision mandating that ethanol be mixed with gasoline such that an ever-increasing percentage of total gasoline sold in America contains ethanol.
George Bush, I love you. I’ve defended you in the midst of withering criticism. But you continue to stand behind the ethanol farce and that is indefensible. It’s bad policy and it’s causing bad problems.
Whenever you pass laws that serve to intervene in free markets, you almost always confront an additional law: the law of unintended consequences.
Ethanol is so costly that it can’t make it in the free market. That’s why it was necessary to pass a law mandating its use. That’s why it has been necessary to subsidize its production by paying farmers (with your tax money) to grow corn instead of other commodity crops.
It takes 400 pounds of corn, the average direct and indirect corn consumption of an adult for an entire year, to produce enough fuel to fill up your tank once.
Corn has to be grown, fertilized, harvested and trucked to processing plants. All of that burns fuel. It takes more than a gallon of fossil fuel to produce a gallon of ethanol. You heard that right. Ethanol uses more energy than it yields.
And it takes an astonishing 1,700 gallons of water to produce a single gallon of ethanol.
Ethanol is a bad deal. Ethanol is doing nothing to reduce our oil dependence. And that would be bad enough. But it doesn’t stop there. The ill-advised government ethanol mandate is causing serious problems elsewhere.
Have you looked at your grocery bill? How could you not? Yes, there are lots of factors contributing to rising food prices. But one of the biggest is ethanol production.
The Energy Policy Act of 2005 mandates 7.5 billion gallons of ethanol production this year. This has required the diversion of over a third of the American corn harvest out of food production and into producing fuel.
Everything down the line that relies on corn has been clobbered. This includes the obvious like breakfast cereal but also the less obvious, like animal feed and corn sweetener for a whole list of packaged foods. The sudden demand for corn affected all other grain crops, as fields that once produced wheat and soybeans were diverted to growing corn. All at once, the price for bread, meat, eggs, milk – pretty much everything in your fridge – jumped way up.
Domestic food prices have risen by over 46 percent this year. Around the world, there have been food riots in Egypt, Cameroon, Indonesia, Asia and as close to home as Mexico. People who can’t afford to buy food can get pretty nasty. I wonder how that fence on the Mexican border is coming.
Fuel prices are a problem. The mortgage meltdown is a problem. Tight credit is a problem. The very real chance of recession is a problem.
We have enough problems. So we shouldn’t voluntarily make more problems. It’s time to admit that the ethanol mandates were a bad idea and stop this lunacy before things get much worse.