Obama's Misguided Ethanol Policy

Barack Obama is helping to ruin your summer BBQ’s. The New York Times ran an article Monday about the Obama campaign and its immense support of ethanol and subsidies.

Senator Obama certainly realizes his views tie in with rising corn and other grain prices: In a May 2008 interview, he said “And so there are a whole host of reasons why we're seeing problems with food supply. There's no doubt that biofuels may be contributing to it.” With oil rising and floods in the mid-west, corn supply has to be stretched- some going to ethanol production and some going to the grocery store- and at a premium.

“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” (Rohter, 6/23/08).

There is no doubt Obama wants lower energy prices and cleaner fuel, but he is clueless about Economics 101 and how to get there. Opposing aspects of NAFTA and insisting on tariffs will not help our case for alternative energy. Brazil’s sugar-cane ethanol, the article points out, is much more efficient and cost effective. In the meantime, with his guarded views on trade, Obama is not helping ease oil tension by opposing more drilling in the United States. Should make for a great debate topic between the two candidates.

Though a separate issue, of course drilling in ANWR and off certain coastlines of the US would take years to affect the supply. Some critics cite fears of another oil spill, which is irrational. Rigs are drilling all over the world, why should the US be exempt if we have the technology to increase supply at some point.

Just last week, Obama commended the override of President Bush’s veto of the Food, Conservation, and Energy Act of 2008 – extending subsidies for corn ethanol. That’d be OK in moderation, but this bill proposed $288 billion in spending, in part for an alternative fuel that is actually harming the American consumer. More spending should be concentrated in Nat Gas, solar and wind power. And did I mention? Drill.

Comments

[longoil]

I think Barack Obama does not see the big picture when it comes to energy policy.

He wants to renegiotate NAFTA. (ironically NAFT is the arabic word for oil). Bad Idea !!!! At least John McCain see this.

What he doesn't realize; there is a clause in the current version of NAFTA that guarantees 60% of oil and gas produced in Canada goes to the USA.

I am sure if he tries to renegiotate NAFTA, this 60% clause will be on the table. There is plenty of takers for Canada's resources besides the USA. Why do you think a pipeline is being built from Alberta to the Pacific coast ?

[Henry L]

I think both of our candidates have a lot to learn about energy and trade. Unfortunately McCain's education would likely come from holdovers from the Bush admin., while Obama's would likely be from the Gore camp. As always, the choice is which will do the least harm.

[Poor CommonBoy]

It seems that this country has to get the idea that our electing of Harvard and Yale lawyers as president isn't cutting it anymore. I don't know what they teach in their law schools because most of their graduates don't know ANYTHING about business and economics. It just seems that lawyers want to screw any business or private entity into bankruptcy. They don't add to our GDP just subtract from the hard work and dedication of working people. This "punish anyone whom has a dollar more than the next guy" attitude is killing our ability as a country to deal with our problems. Just because Obama represents Illinois does it make it right that he supports corn ethanol as a "payback" to farmers whom voted for him? If switchgrass and other cellulosic ethanol can be developed into commercial grade production, then so be it. Why take what we feed cattle and hogs to make ethanol? It just drives up the cost of everything in the food production industry. Socialism DOESN'T work. Just look at Europe. They have so much unemployment and their socialised medicine schemes are a joke. If you want aspirin and or band aids then their medical schemes are okay. However NEVER get anything major wrong with you as the Canadians are proving to us. They come here to U.S. for major surgery because it's almost non-existent up there. Why do we want to have our standard of living lowered to Albanian levels? This is the path that the Harvard and Yale lawyers are taking the U.S. WAKE UP!

[gregorio]

I'm tired of people who don't know what they are talking about slamming the Canadian health care system. I have many Canadian friends and have yet to find one who would trade their system for ours.

[Umm, yeah]

Lol, that's pretty funny that you're trying to say the US Healthcare system is better than Europe & Canada's...

[ValueHunter]

I'm actually not finding too much joy in Republican stupidity. By repeating the same tired lies of the last 20 years they are going to give the Dems the same supermajority that they enjoyed recently and we've seen what too much of a good thing has done for them.

[jrp]

If Canadian and European health care is so superior then why are the waiting rooms at the Mayo clinic so jammed with Canadians and Europeans?

[longoil]

jimgrell44,
The Green Faucet article is pretty interesting.

There is a long "cause and effect" chain associated with corn ethanol.

It obviously drives up food prices when you convert food to fuel.
In Canada they even make ethanol with wheat.

By making corn more expensive, the basic food of many Mexicans, the ethanol advocates have also inadvertently increased illegal immigration into the US.

Expensive corn means expensive tortilla bread and has caused many poor Mexicans to go North to seek a better life.

This is another problem with dismantling NAFTA (like Obama wants to do). NAFTA currently provides jobs for many Mexicans. Changing it would put more Mexican folks out of work and aggravate the current illegal immigration problem in the USA.

[JAAG]

Longoil that problem is that you dont get it either!!! It is pathetic that the US still using oil as the main source of energy. Brazil is leading the world on ethanol production that tells me that the US could have developed ethanol or solar technologies 20 years ago!!! But this country is directed by big business (oil, pharmaceuticals, etc..) and wall street, this is the wrong way, period. Obviously, corn is not the best solution but is better than depending on the middle east. I suggest we follow Brazil and develop sugar cane either by growing it here or requesting it from Latin America they would supply sugar cane all day long; then, we can have GM build those cars they built in Brazil that run on ethanol and/or oil. Furthermore, we should harness solar power afterall it is free !!! and will not be depleted like oil will eventually. Only idiots think that drilling for more oil is the solution, no matter what it will be depleted !!! Lets find a long term solution trust me the sun is not going anywhere; if we lead with solar technology, we will not need to fight wars in the middle east not to mention that terrorism will lose most of its funding that comes mostly from oil. Do you see the irony? our national security has been sold out to the oil companies; if we had solar or ethanol technologies we would not be in Irak (sorry mr cheney, Haliburton would not quintuple its stock value, by the way how much stock do you own? how much money have you made? ) The notion that India and China are increasing oil prices is just ridiculous, as though these two countries just came into the picture yesterday... newsflash they have been growing at an tremendous pace in the last 20 years but in 2008 they drive the prices of oil to $140? wow fascinating!!!

[BudH]

Ethanol is only being used because the farm state senators have pushed for it and they are important votes. Obama is from Illinois, which has a bunch of farmers. Ethanol is false hope, as it takes as much energy to produce as it yields. And food prices rise as acreage is devoted to its' production. Our energy policy is whatever sounds good on TV and might get votes for the proponents.

[Bo864]

"greenfaucet"... article was right on, but when do politicians do the right thing when it comes to taxpayer dollars. They vote to keep themselves in office. Maybe we should revisit term limits for our senators and representatives.

[longoil]

JAAG,

I agree with you that we should get off of oil, but to convert to an oil-free society will take 30 yrs at least. Ethanol and hydrogen are not the solution as they both have a negative EROI (it takes more energy to produce them than is returned). The US has over 200 million cars, so we are stuck with a gasoline/diesel economy and with desperate measure such deep sea drilling, oil sands and oil shale. T. Boone Pickens has the right idea. Use solar and wind to generate electricity. The natural gas saved can be used for Gas-to-Liquids plants to make gasoline and diesel. No a complete solution, but a step in the right direction. Pickens is currently investing about 15 billion in wind farms in Texas.

I also agree with you that oil revenue is diverted to terror groups by some oil producing countries. (For example, 18 of 19 of the 9/11 suicide bombers were from Saudi Arabia).

The USA spends 1.2 trillion a year on oil (assuming $130/bl).
$900 billion of that amount is used for imported oil. That is a very scary number when you consider that the US GDP was only 13 trillion dollars in 2007.

[Subsidy Eye]

Good to see that blog writers for Seeking Alpha are finally seeing the light on ethanol. Only two years ago, the advice from these pages was BUY, BUY, BUY. Warnings from people from outside the investor community that the whole government-directed biofuels boom was an expensive, over-hyped scam were treated with derision.

There's nothing particularly wrong with biofuels per se. But there is a whole lot of wrong with the subsidies, import tariffs and consumption mandates that are distorting not only the energy market but agricultural markets as well.

[truthseeker]

Unfortunately, most city people have no idea about corn and ethanol.
It's the big food companies, such as Coca Cola, Gen. Mills, etc. which have lobbied and convinced people that ethanol is the reason for high corn prices. It may be partly true, but the gluttonous appetites of Americans for corn syryp soda, etc. is the reason also. Much of corn is used for corn syrup--we don't need soft drinks--there would be no shortage of corn if Americans didn't crave corn syrup, but corn was used mostly for corn meal and other corn foods.
Of course the conglomerate food companies are worried--but their higher costs are largely due to increasing fuel prices.
Are increasing costs of oil due to Ethanol?
No--they are largely due to rampant speculation by index and other funds driving up the spot price of oil
Unfortunately, nobody speaks for the farmer--check out some info from Midwest farmers and scientists.
Of course, they're not equal in astuteness to the New York Times, who "knows everything".

[truthseeker]

Here are a couple of websites to check out:
http:theindependent.com/new...

http:farmingforyou.org...

[truthseeker]

Sorry, the first web address I gave above doesn't work
Just put in
theindependent.com and type in Ethanol on the search for the site--several articles come up

[Philip38]

Poor Boy Common:
1. You are right about Obama being influenced by Illinois corn farmers who helped get him this far. He is beholden to them, yet corn ethanol produces less than 2 units of energy for every 1 unit it takes to produce it. Switchgrass produces a much higher rate, something along the lines of Brazilian sugar cane, which produces more than 8 units of energy for every 1 unit needed to produce it. Obama supports the tariff on Brazilian ethanol and supports billions of subsidies for Illinois corn ethanol. The Brazilian vote won't get him elected; the Illinois-Iowa-Kansas vote will help him in the Fall. So, he is a politician on the politically expedient but sensibly wrong side of an issue. John McCain has him here.
2. On Healthcare, I disagree with you. Others have it much better. We are subsidizing the rest of the world for drugs because pharmaceutical companies charge us much more than they do other countries for the same thing. There are more MRI machines in the Greater Atlanta area, e.g., than in all of Canada. The Japanese had a solution: a cheaper MRI machine that Toshiba made, and innovations like this make Japanese healthcare cheaper. Take a look at Reid's Frontline investigation on world health care systems. It is a convincing look at how five other industrial nations do it. Our Medicare and our Veterans Admin were templates for a couple of these "foreign" systems.
www.pbs.org/wgbh/pages.../

[bm1087]

TruthSeeker you hit the nail on the head. When the Ethanol industry is allowed to progress they will be able to use every piece of corn: The husk and the kernel with by-products such as fuel, feed, corn oil, and corn derivatives. Nothing will go to waste. Now my only problem with the industry is why they use Nat Gas in the processing when all of their plants are in the middle of nowhere? Can't they use the power of wind and/or solar for processing? Wouldn't that be a net sum game negating the argument of more to produce?

What others on this blog fail to factor into the current oil equation is we absolutely didn't learn anything from the 70's. Our wars alone have cost trillion(s) not to mention blood. Today we buy oil from our enemies around the world. I'd rather pay more for chicken if it meant my dollar stayed in the pocket of an American farmer. If I can't serve overseas, I'd gladly support our troops from home.

[AmesTiedeman]

It is not just Obama. Ethanol is not the answer. Too many people think it is. They are wrong.