Corn-ethanol for cars?

Here is another example of how Government meddling with the economy reduces the standard of living.

If two products or processes accomplish a job and one is cheaper, then replacing the cheaper one with the more expensive one reduces the standard of living.

According to the Wall Street Journal and others, Government’s subsidizing and/or forcing corn-ethanol use in cars increases the cost per mile of driving. It also increases oil demand, since it requires more than a gallon of oil to produce a gallon of corn-ethanol and the latter has less energy per gallon.

By increasing oil demand, it increases the price of oil and the price of all products that use oil in the production or delivery process.

Why is it so easy for Government to mess up the economy like this? Because too many voters either vote their own immediate interests (e.g., farmers) or fail to understand the issues.

The problem is not Government. The problem is us.

The Wall Street Journal’s editorial can be found here “An Energy Field of Dreams”.

Here are some excerpts.

“We'd say the world had gone mad, except that this is a fairly typical case study in how political meddling distorts energy markets. Weary of high gas prices, drivers can be forgiven for desiring a "miracle" fuel that is allegedly cheap and clean. But the corn farmers, ethanol producers, politicians and environmentalists who have promoted the new ethanol mania have no excuse for peddling misinformation.”

“We have nothing against corn-based ethanol per se, assuming it competes in the market on the same basis as other fuels. Ethanol's problem is that it is expensive to make and provides far fewer miles per gallon than gasoline. So its supporters have worked the political system to subsidize ethanol, and more recently to force Americans to buy it.”

“U.S. taxpayers today pay twice for ethanol: once in crop subsidies to corn farmers and again in a 51-cent subsidy for every gallon of ethanol. Without such a subsidy, ethanol simply wouldn't be cost competitive with gasoline. Then last year, Congress went further and passed a new ethanol mandate, requiring drivers to use at least 7.5 billion gallons annually by 2012.”

“Sorry. The most widely cited research on this subject comes from Cornell's David Pimental and Berkeley's Ted Patzek. They've found that it takes more than a gallon of fossil fuel to make one gallon of ethanol--29% more. That's because it takes enormous amounts of fossil-fuel energy to grow corn (using fertilizer and irrigation), to transport the crops and then to turn that corn into ethanol. The Saudis ought to love the stuff.”