SubsidyEye

Ethanol: A Few Myths Debunked

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Well, we've certainly see that Khosla's prediction that ethanol policy would not affect food prices was inaccurate! Oh, yes, there is a lot of cropland around -- especially if you are willing to plant monocultures on fragile, erodible CRP (Conservation Reserve Program) land, plow up prairie grass, and ignore the environmental consequences of less-frequent crop rotations. And, of course, we'll assume there is no risk at all of large-scale drought or a pest-related crop failure. Those only existed in Biblical times, right?

The differences between the USA's situation and Brazil with respect to ethanol are much greater than the similarities. Brazil has fewer people, fewer and smaller cars, which are driven less. As a result, their consumption of gasoline plus ethanol is less than 6% of U.S. consumption of these fuels.

As investors, readers of this blog should worry about the dependency of the U.S. biofuels industry on low crop prices and high oil prices, but especially the continued maintenance of <a href="www.newsday.com/news/o...
">slogan-determined mandates, the $0.54/gallon import tariff, the $0.51/gallon volumetric ethanol excise tax credit, and a whole raft of other federal-and state-level subsidies and tax breaks. -- Ron Steenblik, Global Subsidies Initiative