Tuesday, July 19, 2005

A Major Boon to Agriculture

Be it known:

A long-standing debate over ethanol's economic efficiency and energy attributes is evaporating under the pressure of fast-rising oil and gasoline prices.
In other words, irrationality, shortsightedness, and willful ignorance are setting the market value of a commodity. The system works!

This article helpfully goes on to explain (for those who came in late) that the demand for ethanol is increasing, but that there's some debate over its energy efficiency.
Proponents claim that ethanol - made mostly from corn - is a cost-effective, cleaner-burning fuel that lessens the need to import petroleum.

Opponents say ethanol takes more energy to produce than it yields, lessens automotive fuel mileage and wouldn't be economically efficient without a federal tax credit of 51 cents per gallon.
That's a fair assessment of both positions. What's missing is the fact that only one of these positions - the latter one - is correct. The idea that there is a fact of the matter, and that it's accessible to human percipience, remains an alien conception among American journalists.

Of course, it's also important to remember that gasoline wouldn't be economically efficient without tax credits and subsidies either. Even before externalities are factored in, the price of gasoline is artificially low.

The latest attack on ethanol's efficiency comes from professors David Pimentel of Cornell and Tad Patzek of UC-Berkeley.
"The government spends more than $3 billion a year to subsidize ethanol production when it does not provide a net energy balance or gain, is not a renewable energy source or an economical fuel,” Pimentel said. “Further, its production and use contribute to air, water and soil pollution and global warming.”
Sounds like a bargain, especially when you learn that Pimentel and Patzek didn't take certain costs into account:
Although additional costs are incurred, such as federal and state subsidies that are passed on to consumers and the costs associated with environmental pollution or degradation, those figures were not included in the analysis.
As important as these factors are, the amount of water used to produce ethanol crops is arguably just as important, especially in states like Nebraska.

But what the heck...let's just ignore all of these issues, and soothe our sprained intellects with the balm of commodity fetishism:
Even though Colorado's average retail gasoline price last week reached a record high of $2.30, energy analysts say ethanol's cheaper price is helping to keep a lid on gasoline costs.
You're not having any problem following this, are you? The price of one commodity for which there's no accurate assessment of cost is holding down the price of another commodity for which there's no accurate assessment of cost. The music swells, and the blind lead the blind into a radiant sunset.

One ethanol proponent, at least, is refreshingly candid:
"We see it as a major boon to agriculture with benefits to consumers as well," said Jim Geist, a spokesman for the proposed Great Western Ethanol plant.


G in INdiana said...

As an old farmer in my 'hood commented, "get rid of the damned farm subsidies, pay us for what we produce, and use it to power shit up." The guys a hoot and very sharp, plus he grows some awesome corn and soy beans.

WHT said...

Spot on. Good post as always.