Moral Hazards Amok

Does Ethanol Deserve the Blame for Rising Food Prices?

So are fuel costs really kept 15% lower as this article claims? Not all! We the taxpayers are being forced to heavily subsidize it.

David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains.

According to their calculations, ethanol contains about 76,000 BTUs per gallon, but producing that ethanol from corn takes about 98,000 BTUs.

Just as bad, corn ethanol subsidies totaled $7.0 billion in 2006 for 4.9 billion gallons of ethanol. That's $1.45 per gallon of ethanol (and $2.21 per gal of gas replaced).
Even with high gas prices in 2006, producing a gallon of ethanol cost 38¢ more than making gasoline with the same energy, so ethanol did need part of that subsidy. But what about the other $1.12. Not needed! So all of that became, $5.4 billion windfall of profits paid to real farmers, corporate farmers, and ethanol makers like multinational ADM.

Where did those subsidies come from:
1. 51¢ per gallon federal blenders credit for $2.5 billion = your tax dollars.
2. $0.9 billion in corn subsidies for ethanol corn = your tax dollars.
3. $3.6 billion extra paid at the pump.

These figures are from 2006. Today’s fleecing of the taxpayers is much worse.

It really is very DUMB idea putting corn and grass into our gas tanks and the market would never buy a drop of it if they weren’t required to do so, or only because it’s so heavily subsidized. It’s a transfer of wealth from ordinary consumers to big Agra, INCREASES our dependence on foreign oil, and oh yea, it causes more pollution than it prevents.