Energy and Ethanol

One of the major issues confronting the candidates in this Presidential election cycle is energy, and its huge effect on our lives and our economy. There are many policy disputes between candidates and the parties themselves across a wide spectrum of energy related issues. Today lets look at ethanol. The New York Times recently ran a story on the Obama connection to the ethanol industry, and some of the policy differences between the candidates on this issue. Obama is quoted at an ethanol processing plant opening in Iowa as saying:

In the heart of the Corn Belt that August day, Mr. Obama argued that embracing ethanol “ultimately helps our national security, because right now we’re sending billions of dollars to some of the most hostile nations on earth.” America’s oil dependence, he added, “makes it more difficult for us to shape a foreign policy that is intelligent and is creating security for the long term.”

Obama strongly supports the massive subsidy offered to domestic corn ethanol, and has been supportive of the tariff imposed on Brazilian sugar ethanol that serves as outright protection for the domestic ethanol industry. This offers a sharp contrast with McCain, who opposes the domestic government subsidy and opposes the tariff imposed on Brazilian ethanol.

Mr. McCain advocates eliminating the multibillion-dollar annual government subsidies that domestic ethanol has long enjoyed. As a free trade advocate, he also opposes the 54-cent-a-gallon tariff that the United States slaps on imports of ethanol made from sugar cane, which packs more of an energy punch than corn-based ethanol and is cheaper to produce.

“We made a series of mistakes by not adopting a sustainable energy policy, one of which is the subsidies for corn ethanol, which I warned in Iowa were going to destroy the market” and contribute to inflation, Mr. McCain said this month in an interview with a Brazilian newspaper, O Estado de São Paulo. “Besides, it is wrong,” he added, to tax Brazilian-made sugar cane ethanol, “which is much more efficient than corn ethanol.”

The corn ethanol subsidy has been criticized for a number of reasons, including the huge spike in food commodity prices, which is leading to food shortages and hunger in many parts of the world.

Many economists, consumer advocates, environmental experts and tax groups have been critical of corn ethanol programs as a boondoggle that benefits agribusiness conglomerates more than small farmers. Those complaints have intensified recently as corn prices have risen sharply in tandem with oil prices and corn normally used for food stock has been diverted to ethanol production. “If you want to take some of the pressure off this market, the obvious thing to do is lower that tariff and let some Brazilian ethanol come in,” said C. Ford Runge, an economist specializing in commodities and trade policy at the Center for International Food and Agricultural Policy at the University of Minnesota. “But one of the fundamental reasons biofuels policy is so out of whack with markets and reality is that interest group politics have been so dominant in the construction of the subsidies that support it.”

And what of energy efficiency. Brazilian sugar ethanol is far more efficient, which is not in dispute.

Corn ethanol generates less than two units of energy for every unit of energy used to produce it, while the energy ratio for sugar cane is more than 8 to 1. With lower production costs and cheaper land prices in the tropical countries where it is grown, sugar cane is a more efficient source.

Obama has made the tariff on Brazilian ethanol a national security issue, but is it really?

On the campaign trail, Mr. Obama has not explained his opposition to imported sugar cane ethanol. But in remarks last year, made as President Bush was about to sign an ethanol cooperation agreement with his Brazilian counterpart, Mr. Obama argued that “our country’s drive toward energy independence” could suffer if Mr. Bush relaxed restrictions, as Mr. McCain now proposes.

An outgrowth of this debate has been the candidates positions on the recent farm bill passed by Congress. Obama and McCain both missed the vote on that bill, but Obama has been supportive, while McCain has said he would have vetoed the bill. As a Senator from the second largest corn producing state in the Union I understand Obama’s position as a Senator. I am not sure I get his position now. On ethanol and on the willingness to buck the ethanol industry monster that has been created the nod from this dem goes to McCain. Read the New York Times story here.

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5 Responses to Energy and Ethanol

  1. Jules Gordon says:

    OK, who kidnapped the mayor and put a righty in to write this entry?

    Just in case this is you,your honor, you and I are in like mind (are you reconsidering your opinion now).

    Congress has made the situation even worse from ealier and current legaslation.

    My take it is a problem of supply/demand and speculation, dollar devaluation and a host of other things including government interference.

    The government has to remove impediments to expanding supply, look into


  2. Jules Gordon says:

    Sorry, hit submit by mistake.

    To continue, The Attorney general has to look at illegal acts of collusion or anti-trust activity.

    Meanwhile, the $4 plus gas will motivate people to come up with alternative energy. It will take a while.

    Have you selected a day to make good on our bet?



  3. Bill Manzi says:

    I am open Tuesday after 4:30 (tommorow) this week. Let me know if that works for you.


  4. Jules Gordon says:

    Tomorrow at 4:30 is fine. Please confirm.

    It will nice to see you again.



  5. Bill Manzi says:

    Jules old buddy I am in at 4:30 tommorow, and feel free to supersize your order! Just no pastry…..
    See you at Starbucks.


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