Ethonomic Indicator of the Day: 36 billion gallons--the amount of ethanol fuel the government has mandated the U.S. produces by 2022.
Ethanol is in nearly every gallon of gas pumped in the United States. It's a clean alternative to oil that's grown from the earth. What's not to like about that? Just one thing: when we use more ethanol food prices go up.
Here's a chart from the Department of Agriculture which shows what our increasing demand for ethanol has done to the price of corn. It's made it go up 38%.
It's pretty clear (and simple economics, to boot): As demand for ethanol goes up, so go corn prices While its great that we're using more clean fuel, it's just playing into the main criticism of ethanol. That growing acres and acres of food and then burning it up--while people are starving around the world--isn't really a good moral use of our acreage.
Because corn is in basically everything, an increase in the price of corn can have wide-ranging repercussions. If corn syrup costs go up, the entire supermarket is going to have to raise prices. It makes feeding livestock more expensive, which means meat is more expensive. None of these things are intrinsically bad: meat and corn-syrup infused products are artificially cheap. But they do prove a problem to a country in a recession. How do you balance taking care of citizens and also producing alternative fuel? Which issue do you pick?
Because of Iowa's position in the American political process and its
huge corn industry, it's unrealistic to think that we're going to stop producing and subsidizing ethanol anytime soon. Maybe the solution isn't to abandon ethanol, but to abandon corn as such a prolific additive. All that food shouldn't need to have corn syrup in it, and that would free up our corn to cleanly power more of our cars. Surely, the sugar industry would be happy to pick up the slack.
Image from Flickr user Flibblesan