The federal government can do something right now to provide relief to Americans facing higher food prices: Repeal the ethanol mandate. The diversion of one-third of the American corn crop into ethanol production is a direct result of the 2005 law that required gasoline makers to buy 7.5 billion gallons of ethanol — a mandate that the 2007 energy bill President Bush signed in December increases to 36 billion gallons by 2022....
But demand for ethanol has also had an impact on food prices. It’s simple economics: Farmers have planted a lot of new corn on acres where they once grew other food crops such as soybeans and wheat, and they are selling all of that new corn — and then some — to ethanol distilleries. That means there are fewer acres devoted to food crops, and there is less corn available for feeding livestock at a time when worldwide demand for meat and milk is rising. Less supply plus greater demand equals higher prices.
There is little the U.S. government can do to make gasoline less expensive and nothing it can do about the weather in Australia. The production of ethanol, on the other hand, is directly related to government policies that subsidize it and require its use in gasoline. Absent government intervention, there would be little demand for ethanol. It has a lower energy content than gasoline, it is not significantly cheaper, and it is more difficult to transport to points of sale.
Friday, April 25, 2008
All of sudden it seems like doomsday scenarios are floating in my head. And then there was an article Instapundit linked yesterday about how to handle high food prices, that made me even more depressed. I really need to take my boyfriend's advice and just avoid these stories all together.