In Brief: Ethanol and Inflation
In the interest of lowering prices and protecting the environment, biofuel mandates should be eliminated.
For years, we have decried the ethanol boondoggle. We’re not alone. Jerry Jung, founder of ReThink Ethanol, explains how ethanol plays a huge role in current inflation.
Let’s overlook the devastating impact that biofuel production has on our surface and groundwater. Let’s forget about the loss of tens of millions of acres of natural habitat and its calamitous impact on local and migrating biodiversity. Let’s instead focus on the economics of biofuel subsidies and how it contributes to rising food and fuel prices.
The most significant biofuel mandate applies to corn-based ethanol. The EPA, no longer constrained by legislation providing guidelines, has continued to increase the number of gallons of ethanol that must be blended into our gasoline supplies. This year the EPA has mandated the production of 20,770,000,000 gallons of ethanol. A bushel of corn will make 2.75 gallons of ethanol and the average yield for corn is 177 bushels per acre. Basic arithmetic then substantiates that 41,900,000 million acres of prime farmland in this country are diverted from food production to fuel production.
The USDA estimates that farmers will plant 89,500,000 acres of corn this year. Therefore, a staggering 46.8% of the corn crop is used to make fuel — close to the amount utilized for beef, poultry, corn syrup and dairy!
You don’t have to be an economist to realize that scarcity drives up prices.
So what did Joe Biden do? He mandated more ethanol in our fuel over the summer.
Jung further explains:
The consensus is that it takes as much energy to produce ethanol as it yields when you factor in the diesel fuel consumed by agricultural tractors and highway trucks as well as the natural gas consumed in the production of fertilizers and processing the corn. The 1:1 ratio of energy inputs to energy outputs is euphemistically referred to as “energy neutrality.” But wait! Energy is consumed once to make energy and then again when it is consumed in our cars. Energy consumption is doubled! The creation of this artificial demand translates into reduced supply and higher prices for other uses.
After talking about the “convoluted system” surrounding mandates and credits and so forth, he concludes:
Biofuel mandates should be eliminated. Let free markets determine the value of corn ethanol. Mandates hurt those most in need by driving up the price of energy and food, two price inelastic necessities comprising a lion’s share of working-class budgets.
