ganeshji

One Tank of Ethanol = Food for One Year

I think this is a very import post. The most important thought here is what do lose or what we will lose in the future. In the last few years food inflation has been very real in fact an investor would have got a better return on wheat or corn then oil.
Here are the return rates
Wheat futures prices have tripled since 2004
Corn prices have almost tripled since 2005
Soybeans have tripled since 2006
Crude oil is up about 60% in the past three years

We might be heading down the wrong road to energy independences. However, this might be America’s cure from eating too much. All joking aside two possible outcomes:

1. US Government keeps passing rules to that helps the ethanol industry. This will work if we become more efficient in crop production. I don’t think we can add that much more land to production without a change in the workforce and the some effects to the environment so I think it would have to be efficient that would stabilize crop prices to make this scenario to work.

2. Rising food cost causes the government to changes the laws on that benefit ethanol. I think the 2nd one is more likely to occur.

I understand this is a very complex issue and my 2 choice are limiting. Looking at real wages vs. inflation I think without a drop energy and food price we could see a changes to how we look at this issue and more important the US Government might change the laws.