Ethanol isn't even an economic reality yet, and it's already a disaster. Seldom is the Law of Unintended Consequences more glaringly obvious. In this case, speculation on ethanol is doing insane things to the price of corn futures.
Paul Saffo has written an excellent essay entitled Food, fuel, ethics and the "tortilla tax" that highlights the problems with ethanol.
America is falling in love with ethanol, and it is causing riots in Mexico. The problem is that the favored source for American ethanol is corn and the resulting demand by ethanol plants is driving the price of corn up globally, causing the price of tortillas in Mexico to jump 25 percent one week earlier this month.. Under pressure from angry citizens, the Mexican government announced that it would end the “tortilla tax” – the various charges and subsidies on corn—and will boost corn imports to hold prices down.
This effort will fail. The US already produces nearly half of the world’s corn and there are ethanol plants under construction across the Midwest. Some project that nearly half of the 2008 US corn harvest could be diverted to ethanol production, making the US not just the world’s largest corn producer, but also the world’s largest corn importer in the near future.
Did nobody see this coming? When did people start believing that you can get something for nothing, not to mention ignoring the concept of supply and demand? At this point, ethanol is a net loss, because it takes more energy to make a barrel of ethanol than it can generate. Even when the refining process becomes more efficient, it will still put obscene pressure on the price of corn. Can somebody honestly tell me what the point of alternative fuels are if they end up over sixty dollars a barrel themselves?
Tuesday, March 06, 2007
Enviornmentalists pro-ethanol, anti-peasants
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