http://spectator.org/archives/2012/08/06/renewable-fools-standard
The drought should mean an end to the ethanol subsidy — the last thing the EPA and Obama will ever surrender.
Your car will get better mileage if the price of your Thanksgiving turkey goes down, and my chain saw will start more easily. It all comes down to the price of corn, and how much ethanol the federal “Renewable Fuel Standard” mandates to be blended in gasoline.
The price of corn is going to go up sharply in the coming months because the worst drought in fifty years has brought disaster to corn farmers. According to the EPA, which has control of the Renewable Fuels Standard created by the 2005 Energy Policy Act, America grew about ten billion bushels of corn in 2000, almost half of the world’s production of 23 billion bushels. Corn was plentiful and cheap, so congressional “experts” mandated that a minimum of 7.5 billion barrels of ethanol be included in gasoline sold in 2012. (It takes about one bushel of corn to produce a gallon of ethanol.)
The actual production of ethanol in 2011 topped 11 billion gallons, more or less all of which was included in gasoline, according to an April 2012 Congressional Research Service report. Last week, the Agriculture Department lowered its projection of the 2012 corn crop by 12%.
Since 2005, the ethanol mandate has driven the average price of corn from about $2 per bushel to almost $8 per bushel, according to a January 23, 2012 CRS report. But all of the supposed benefits of the mandate have not appeared. According to that same report, our dependence on foreign oil hasn’t been reduced at all, and there is no evidence that the ethanol mandate has driven energy prices down.
If those benefits were going to happen, they would have in times when the corn crop was plentiful. But now because of the drought, only about 40 percent of the 2012 corn crop is being rated “good to excellent,” i.e., worth harvesting. The rest may have to be abandoned. Corn futures prices are rising, which means the cost of the most-used feed for chicken, cattle, and other livestock will rise as much or more than the price of feed corn.
The arithmetic is simple: the more feed corn is used to produce ethanol, the less is available to feed those chickens, cattle, and turkeys. About 40 percent of our corn crop is used for ethanol, not for feeding livestock or people. Simply put, the ethanol mandate is forcing the prices of protein foods to rise and will continue to do so as long as it exists. And the mandate costs the federal government billions because gasoline blenders are given a reported 45 cents per gallon tax credit for using ethanol in their gasoline.
Last week, a broad coalition of meat and poultry producers petitioned EPA administrator Lisa Jackson to waive the ethanol mandate, saying the Renewable Fuel Standard “directly affected the supply and cost of feed in major agricultural sectors of this country, causing the type of economic harm that justifies issuance of an RFS waiver.”
If only facts mattered, the EPA would waive the ethanol mandate for this year and Congress would kill it for the years that follow. There is no good reason for it: the price of corn will drop slightly, but every American who buys corn for food or to feed his livestock will benefit. And all of us who have to use gasoline containing ethanol will find that our machinery works better and more efficiently.
Ethanol is corrosive and has a lot of water in it, so you can’t leave your gas-powered mower or generator filled over the winter unless you want the inevitable ethanol sludge to destroy its carburetor. Ethanol cannot be shipped by pipeline as pure petroleum-based fuels can, making it still more expensive.