How the US government is screwing up energy policy…again
As a warmer than average winter on the populated east coast has oil prices dropping, the US is about to supplement its supply of cheap oil with expensive corn alcohol. This will be domestic ethanol as high tariffs keep cheap foreign ethanol from being used. To the delight of Archer Daniels Midland, this has caused the price of corn and therefore anything that requires corn, like say food, to go up. Once again, the government tries to solve one problem and produces two.
I guess it should not be much of a surprise that a bunch of lawyers whose sum total of economic experience is raiding the public coffers to bestow favors on the cretins that ensure their reelection would miss the down side to energy self sufficiency. For crying out loud, is it too much to expect of our elected representatives to take an afternoon off of playing truth or dare with congressional pages and have a staff member dig up historical natural gas prices. Then maybe they could have taken a later flight to whatever lobbyist sponsored junket was on their itinerary and found some community college economics professor to explain the effects of inelastic demand and constrained supply. This would explain why natural gas prices have more fluctuation than oil prices because it is difficult to transport and thus difficult to import. This also opens up discussion on the desirability of policies that strive for energy independence.
So back to our current troubles, the government decided it would be good to augment our gasoline supply by cutting it with ethanol. Never mind that ethanol can’t be transported in pipelines and has lower energy content than gasoline. Never satisfied to mandate stupidity on a single level, the G also placed high tariffs on imported ethanol so that this dim witted idea could be sold as a basis for energy independence. Now our energy supply is not only constrained by poorly run foreign run oil companies but also the futures price of American corn.
This is already having an effect. Corn consumers of all types are starting to feel upward pressure on prices. So this winter as prices rise for everything from gasoline to hamburgers to soft drinks, thank your government.