The question answers itself. Of course not. But that is the effect of the Renewable Fuel Standard (RFS), more commonly known as the ethanol mandate.
Under the RFS (Energy Independence and Security Act, p. 31), refiners must sell specified amounts of biofuel each year. The “volumetric targets” increase from 4.0 billion gallons in 2006 to 36 billion gallons in 2022. The amount of corn ethanol qualifying as “renewable” maxes out at 15 billion gallons in 2015. Already, ethanol production consumes about 40% of the annual U.S. corn crop.
By 2022, 21 billion gallons are to be “advanced” (low-carbon) biofuels, of which 16 billion gallons are to be made from plant cellulose. But with cellulosic ethanol proving to be a complete dud, corn growners and ethanol producers are lobbying to redefine corn ethanol as ”advanced.” If they succeed, mandatory sales of corn ethanol could significantly exceed 15 billion gallons annually.
In any event, the RFS sets aside a large and increasing quantity of the U.S. corn crop each year for ethanol production regardless of market demand for competing uses — and heedless of the potential impacts on food prices and world hunger. No matter how much of the U.S. corn crop is ruined by drought, no matter how high corn prices get, no matter how many people in developing countries are imperiled, the RFS requires that billions of bushels of corn be used to fuel cars rather than feed livestock and people. This is crazy. [click to continue…]
Today, FarmEcon LLC released RFS, Fuel and Food Prices, and the Need for Statutory Flexibility, a study of ethanol’s impact on food and fuel prices. FarmEcon prepared the study for the American Meat Institute, California Dairies Inc., Milk Producers Council, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council, and National Turkey Federation.
The study argues that the Renewable Fuel Standard (RFS), commonly known as the ethanol mandate, is detrimental to both non-ethanol industry corn users and food and fuel consumers. The program should therefore be reformed. The RFS has “destabilized corn and ethanol prices by offering an almost risk-free demand volume guaranty to the corn-based ethanol industry.” Consequently, food producers who use corn as a feedstock “have been forced to bear a disproportionate share of market and price risk” when corn yields fall and prices rise. This has become painfully obvious in recent weeks as drought conditions in the Midwest depress yields and push corn prices to record highs.
Appropriate reform* would assure food producers ”automatic market access” to corn stocks “in the event of a natural disaster and a sharp reduction in corn production.” Ethanol producers should “bear the burden of market adjustments, along with domestic food producers and corn export customers.” The study also recommends that the RFS schedule ”be revised to reflect the ethanol industry’s inability to produce commercially viable cellulosic fuels.”
Pretty tame stuff. An argument for flexibility to avoid the RFS’s worst market distortions and the cellulosic farce rather than an abolitionist manifesto. Nonetheless, the study paints a fairly damning picture of the RFS as a whole:
- Increases in ethanol production since 2007 have made little, or no, contribution to U.S. energy supplies, or dependence on foreign crude oil. Rather, those increases have pushed gasoline suplies into the export market.
- Current ethanol policy has increased and destabilized corn and related commodity prices to the detriment of both food and fuel producers. Corn price volatility has more than doubled since 2007.
- Following the late 2007 increase in the RFS, food price inflation relative to all other goods and services accelerated sharply to twice its 2005-2007 rate.
- Post-2007 higher rates of food price inflation are associated with sharp increases in corn, soybean and wheat prices.
- On an energy basis, ethanol has never been priced competitively with gasoline.
- Ethanol production costs and prices have ruled out U.S. ethanol use at levels higher than E10. As a result, we exported 1.2 billion gallons of ethanol in 2011.
- Due to its higher energy cost and negative effect on fuel mileage, ethanol adds to the overall cost of motor fuels. In 2011 the higher cost of ethanol energy compared to gasoline added approximately $14.5 billion, or about 10 cents per gallon, to the cost of U.S. gasoline consumption. Ethanol tax credits (since discontinued) added another 4 cents per gallon. [click to continue…]
From the Sunday talk show circuit, summary courtesy of Politico:
High energy costs, not the drought gripping more than half the country, may take a bite out of Americans’ grocery bills, Agriculture Secretary Tom Vilsack said Sunday.
With 26 states in drought conditions, CNN’s Candy Crowley repeatedly pressed Vilsack on “State of the Union: over a connection to jumps in the prices of some food items, but Vilsack resisted the connection.
“If [people] are using this drought to inappropriately raise prices, shame on them,” Vilsack said.
Typically, when it is discovered that in the future there will be much less of a certain commodity than previously expected, the price rises. While some energy prices have risen, they haven’t changed enough to warrant such a dramatic rise in the price of corn. The primary cause is lowered yields resulting from drought:
U.S. feed grain supplies for 2012/13 are projected sharply lower this month with lower production for corn on lower yields. Extremely hot weather and drought result in a 20- bushel-per-acre decline in the projected corn yield to 146 bushels per acre reducing projected production to 13.0 billion bushels, compared with 14.8 billion bushels last month. The June Acreage report increased planted acreage relative to March intentions but harvested acreage was reduced 249,000 acres. Corn supplies for 2012/13 are projected1.8 billion bushels lower. Forecast 2012/13 prices are increased for corn, sorghum, and barley and oats. With tighter supplies and higher price prospects, domestic corn use is projected down 755 million bushels as feed and residual and ethanol use prospects are lowered. [click to continue…]
The wind energy industry has been having a hard time. The taxpayer funding that has kept it alive for the last twenty years is coming to an end, and those promoting the industry are panicking.
Perhaps this current wave started when one of wind energy’s most noted supporters, T. Boone Pickens, “Mr. Wind,” in an April 12 interview on MSNBC said, “I’m in the wind business…I lost my ass in the business.”
The industry’s fortunes didn’t get any better when on May 4, the Wall Street Journal (WSJ) wrote an editorial titled, “Gouged by the wind,” in which they stated: “With natural gases not far from $2 per million BTU, the competitiveness of wind power is highly suspect.” Citing a study on renewable energy mandates, the WSJ says: “The states with mandates paid 31.9% more for electricity than states without them.”
Then, last week the Financial Times did a comprehensive story: “US Renewables boom could turn into a bust” in which they predict the “enthusiasm for renewables” … “could fizzle out.” The article says: “US industry is stalling and may be about to go into reverse. …Governments all over the world have been curbing support for renewable energy.”
Michael Liebreich of the research firm Bloomberg New Energy Finance says: “With a financially stressed electorate, it’s really hard to go to them and say: ‘Gas is cheap, but we’ve decided to build wind farms for no good reason that we can articulate.’” Christopher Blansett, who is a top analyst in the alternative-energy sector in the Best on the Street survey, says, “People want cheap energy. They don’t necessarily want clean energy.”
It all boils down to a production tax credit (PTC) that is set to expire at the end 2012. Four attempts to get it extended have already been beaten back so far this year—and we are only in the fifth month. The Financial Times reports: “Time-limited subsidy programmes…face an uphill battle. The biggest to expire this year is the production tax credit for onshore wind power, the most important factor behind the fourfold expansion of US wind generation since 2006. Recent attempts in Congress to extend it have failed.”
[click to continue…]
[* This column is a lightly edited version of my post earlier this week on National Journal's Energy Experts Blog.]
You know we’re deep into the silly season when ‘progressives’ champion reverse protectionism – banning exports – as a solution to America’s economic woes. Congress should reject proposals to ban exports of petroleum products and natural gas for at least six reasons.
(1) Export bans are confiscatory, a form of legal plunder.
As economist Richard Stroup has often pointed out, property rights achieve their full value only when they are “3-D”: defined, defendable, and divestible (transferable). A total ban on the sale (transfer) of property rights in petroleum products or natural gas would reduce the asset’s value to zero (assuming no black market and no prospect of the ban’s repeal). To the owner, the injury would be the same as outright confiscation. A ban on sales to foreign customers would be similarly injurious, albeit to a lesser degree.
The foregoing is so obvious one is entitled to assume that harming oil and gas companies is the point. I would simply remind ‘progressives’ that the politics of plunder endangers the social compact on which civil government depends. Why should others respect your rights when you seek to deprive them of theirs? Every act of legal pillage is precedent for further abuses of power. Do you really think your team will always hold the reins of power in Washington, DC? [click to continue…]
Carl Sagan
Common sense teaches that the world would be a better place if people were more informed about it. Scientists with the fervor of corner preachers exhort anyone who will listen to take an interest in scientific matters. Astrophysicist Carl Sagan writes, for example, that:
the consequences of scientific illiteracy are far more dangerous in our time than in any that has come before. It’s perilous and foolhardy for the average citizen to remain ignorant about global warming, say, or ozone depletion, air pollution, toxic and radioactive wastes, acid rain, topsoil erosion, tropical deforestation, exponential growth….How can we affect national policy… if we don’t understand the underlying issues?
Certainly everyone wants to overcome ignorance in the world, but notice that Sagan does not just complain about ignorance. Rather, he says that it is “dangerous,” “perilous,” and “foolhardy” to be ignorant of environmental issues. Passages like these rarely create “average citizens” who become experts on environmental policy, particularly when these issues barely warrant a mention in the rest of the book. Instead they create average citizens who become experts on caring about environmental policy. They tell the reader that it’s “perilous and foolhardy” to ignore these issues. After all, they’re scientific.
The Experts on Caring then go out and flood politicians and bureaucrats with questions about the environment. What will you do about this or that new catastrophe? Those who ignore such calls are labeled as “anti-science.” Anyone who disagrees just doesn’t understand science.
This weekend, one such Caring Expert told me that “all our wealth has a downside. Think about global warming. We are responsible for that. Hurricanes and floods kill people.” Statements like these encapsulate the major problem with Experts on Caring: Even if they’re right about a problem, their sense of proportion has been totally distorted by the Carl Sagans of the world who tell them it’s “dangerous” not to care.
[click to continue…]
Anthony Watts’s indispensable Web site, Watts Up with That?, has a trove of hard-hitting commentaries on climate scientist Peter Gleick’s theft and publication of the Heartland Institute’s fund-raising documents and apparent forgery of a “confidential” climate strategy memo. Gleick earlier this week confessed to stealing the documents, but not to fabricating the strategy memo, although textual and other evidence point to him as the culprit.
Gleick, who described his conduct as a “serious lapse of my own and professional judgment and ethics,” has resigned from his post as Chair of the American Geophysical Union (AGU) Task Force on Scientific Integrity. He nonetheless tried to blame the victim, claiming “My judgment was blinded by my frustration with the ongoing efforts — often anonymous, well-funded, and coordinated — to attack climate science and scientists and prevent this debate, and by the lack of transparency of the organizations involved.”
Yep, it’s the small underfunded band of free market think tanks who are stifling the U.N. Intergovernmental Panel on Climate Change, the U.S. Global Change Research Program, the National Academy of Sciences and their numerous brethren overseas, the European Environment Agency, the U.S. Climate Action Partnership, the EPA, NRDC, Greenpeace, etc. etc. Heartland invited Gleick to attend a public event and debate climate change just days before he stole the documents. Gleick turned down the invitation. Yet Gleick has the chutzpah to plead ”frustration” at those trying to “prevent this debate.”
Among the key posts on Anthony’s site to check out: Joe Bast’s Skype interview with the Wall Street Journal; Dr. Willis Eschenbach’s Open Letter to Dr. Linda Gunderson, who succeeds Gleick as Chair of the AGU Scientific Integrity Task Force; and Megan McCardle’s column in The Atlantic reviewing among other things evidence fingering Gleick as the author of the fake strategy memo. [click to continue…]
House Ratchets Up Probe of White House Involvement in Solyndra Scandal
Fourteen Republican members of the House Energy and Commerce Committee, led by Chairman Fred Upton (R-Mich.) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-Fla.) sent a strongly-worded, five-page letter to the White House on 9th February setting a 21st February deadline for turning over documents related to the White House’s involvement in the Solyndra scandal. The letter also demands that five officials be made available for interviews by 17th February.
The letter notes that the Committee requested the relevant documents five months ago and has made every effort to accommodate the White House’s concerns. As to the reasons why the White House has refused to comply with the committee’s subpoena last fall, the letter notes that the White House has not claimed executive privilege for the withheld documents and demands that if executive privilege is going to be claimed the White House must let the committee know by 21st February.
The Department of Energy made the first renewable energy loan under the 2009 stimulus bill to solar panel maker Solyndra, which is based in Fremont, California. The entire $527 million of taxpayer money was lost in August when Solyndra declared bankruptcy. The largest private investor in Solyndra, George Kaiser, is a major Obama and Democratic Party donor and fundraiser and has been a frequent visitor to the White House during the Obama presidency.
So much for consensus.
For years, climate change cultists have attempted to shut down public discourse over global warming by assuring us that “the debate is over,” that scientists are in lockstep agreement that Man is steam-frying his own planet.
That was always bunk, of course. For one, if the scientific debate was really over, no one would have to say it. There just wouldn’t be any debate. No one these days goes around saying “the debate is over” about heliocentrism. That’s because no one questions the fact that the Earth revolves around the Sun – there is literally no debate.
Second, the fact that it was so often politicians and/or celebrities (or a bizarre hybrid of the two like Al Gore) intoning the “debate is over” canard, instead of actual scientists, was a major clue that something was amiss with the “consensus” claim.
(The Washington Post famously reported on Gore’s scientific acumen: “For all of Gore’s later fascination with science and technology, he often struggled academically in those subjects. The political champion of the natural world received that sophomore D in Natural Sciences 6…and then got a C-plus in Natural Sciences 118 his senior year.”)
Sadly for Gore et al, a growing number of scientists are publically expressing skepticism about anthropogenic global warming, emboldened by a flood of new data that casts doubt on the whole “climate change” paradigm (I address some of this new data in my latest piece for the Washington Examiner).
[click to continue…]
Dear Mitt,
Congratulations on winning the Iowa Caucus! I know you have worked long and hard for the Republican Presidential Nomination.
On the night of the caucuses, the Democratic National Committee (DNC) Chair, Rep. Debbie Wasserman Schultz (DWS), was heard saying: “Republicans, in general, aren’t enthusiastic about any of their choices.” This is clear as evidenced by the search for the “not Romney” candidate.
While DWS was correct, one thing all Republicans are enthusiastic about is beating President Obama. They will unite behind that cause. If you are to be the candidate who unites the Republican Party, you are going to have to differentiate yourself from President Obama to win support beyond Iowa. You’ve got several problems there.
One problem is your view on manmade climate change. The American public doesn’t view global warming as an important issue—this is especially true for Republicans. Yet President Obama continues to tout green jobs. In the name of saving the planet, his administration’s policies are making it difficult for people to feed their families and heat their homes.
[click to continue…]
RSS Updates 
RSS E-Mail Updates 
CEI.org 
OpenMarket.org 
WorkPlaceChoice.org 
DriveInnovation.org 
CEI On Demand Video 
Liberty Week Podcast 
