Ethanol backfires

Good goal, bad policy.

In fact, ethanol will do little to reduce the large percentage of our fuel that is imported (more than 60%), and the ethanol policy will have widespread and profound ripple effects on other markets.

Corn farmers and ethanol refiners are ecstatic about the ethanol boom and are enjoying the windfall of artificially enhanced demand. [see tongue-in-cheek Corn Cartel post]

But it will be an expensive and dangerous experiment for the rest of us.

…it is no surprise that the price of corn has doubled in the last year — from $2 to $4 a bushel. We are already seeing upward pressure on food prices as the demand for ethanol boosts the demand for corn. Until the recent ethanol boom, more than 60% of the annual U.S. corn harvest was fed domestically to cattle, hogs and chickens or used in food or beverages. Thousands of food items contain corn or corn byproducts.

…any sort of shock to corn yields, such as drought, unseasonably hot weather, pests or disease could send food prices into the stratosphere.

…adding ethanol raises the price of fuel because it is more expensive to transport and handle.

Our politicians may be drunk with the prospect of corn-derived ethanol, but if we don’t adopt policies based on science and sound economics, it is consumers around the world who will suffer the hangover. [LA Times]