The issue to me when it comes to flex fuels is one of realism. Let’s start off with the supposed threat. First of all, the “oil weapon” is an illusion. We’re about to see just how with Hugo Chavez’s typically quixotic threat to stop selling crude oil to ExxonMobil. Instead, he’s going to sell it to others who will then sell it to ExxonMobil. The question of the link between oil prices and terrorism has been settled by Jerry Taylor and Peter Van Doren and until I see some genuine data that contradicts their analysis, I’m not going to worry about that. Threats to close the Persian Gulf are as unrealistic as they were when Iran actually tried it. As for the worries about petrodollar-fuelled Arab takeovers, when the Arab world starts to own more American interests than Belgium, let me know.
Furthermore, as we on the “OPEC-loving libertarian”* side have said repeatedly, most of our oil comes from the USA, Canada and Mexico. Only about 15 percent of the world’s oil comes from the Middle East. OPEC holds the seeds of its own destruction. Action against oil in general as opposed to the terrorist states cuts off our nose to spite our face.
As for Cliff’s most recent point about the military, we “OPEC-loving libertarians” see no reason for a massive taxpayer-funded subsidy to the Middle East states. They should pay their own way.
Meanwhile, we have seen food riots this year in Indonesia, the world’s largest Islamic state. The cause? Rising soybean prices as a result of pro-biodiesel policies.
Now let’s turn to the physical and political realities. The points about the transportation of biofuels haven’t been emphasized enough. Ethanol and its ilk cannot be transported by pipeline. The infrastructure required is therefore quite different and incredibly transportation-intensive. In this regard, the 70-percent issue doesn’t quite sum up how much less efficient for the economy ethanol is. Brazilians don’t think the Brazil model will work in the U.S. — see Marcus Renato Xavier’s paper on the subject last year for CEI.
Importing Brazilian (or Caribbean) sugar ethanol are fine by me. We should get rid of the entry barriers. The chances of this happening are, however, extremely remote. The sugar lobby is among the most powerful in the country. If we could break the sugar lobby’s power, then the price of sugar would tumble, we wouldn’t have to use corn syrup to sweeten things and the price of a lot of food would fall. So, why don’t free-marketeers and our national-security friends work together to help break that lobby? Then we can talk about using imported sugar ethanol for fuel. Before that event, it is premature.
As for coal-to-methanol, the environmental lobby detest it. In a country where it is getting increasingly difficult to build a new, state-of-the-art, coal-fired power plant, it will be even more difficult to get coal-to-liquids plants approved. All the global warming bills currently before Congress will completely destroy the coal-to-liquids market. So why don’t free marketers and our national-security friends work together to defeat the global-warming legislation and make it easier to build coal-related energy facilities? Then we can talk about using coal-to-methanol. Before that event, it is premature.
So let’s have a degree of realism in this discussion. As we free-marketeers know, everything involves trade-offs. It is unrealistic to ignore those trade-offs which is what, I fear, is happening on one side of this debate.
* This is a bit like saying “Obama-loving Clintonite.”