Obama’s Common Senseless Ethanol Policy

Diana Furchtgott-Roth of the Manhattan Institute writes on Real Clear Markets:

Since being re-elected, in a triumph of political loyalty over consumer protection, President Obama has refused to waive the federal requirement that 13 billion gallons of corn-based ethanol be blended in 2013 with gasoline.

In making that decision on November 16, Mr. Obama brushed aside evidence that dedicating corn to ethanol, rather than to animal feed and other food uses, has contributed to a rise in prices. Corn prices are up nearly 40 percent over the past year, and wheat prices are up by 20 percent.

One apparent consequence: prices for corn-fed meat are on the rise. U.S. beef is now $4,900 per ton, up from $3,900 in 2009.

And while he purports to be committed to environmental protection, the president also ignored the findings of some analysts that the production of ethanol–which is an expanding industry–makes air pollution worse.

In the mid-2000s, when Congress imposed renewable fuel mandates, adding ethanol to gasoline was seen as a way to diminish gasoline consumption, reduce oil imports and even curtail tailpipe emissions.

In 2012, the subsidy of 45 cents a gallon expired, along with the 54 cent tariff for imported ethanol. What keeps the ethanol industry afloat is the mandate for the American economy to consume ethanol.

Now, with U.S. crude oil and gas production rising and imports falling, and with a nascent trend under way towards powering motor vehicles with abundant natural gas, the case for ethanol is weak.

But an ethanol lobby has put down tenacious roots, including corn farmers, whose price per bushel has risen from under $4.00 in 2010 to over $7.00 in 2012, and investors who placed capital into ethanol-producing plants.

Of 97 million acres of corn in America, about 40 percent is dedicated to ethanol, shrinking supplies that go into food.

The rest here.

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