The Oil and the Glory

How good intentions ended with expensive and dirty corn

In the United States, corn is now officially a fuel crop — the federal government forecasts that this year, ethanol-makers will for the first time use more corn than poultry and livestock farmers. What’s the outcome of this government-subsidized gluttony by fuelmakers? One is that folks like myself who think corn is the most delicious ...

Peter Parks  AFP/Getty Images
Peter Parks AFP/Getty Images

In the United States, corn is now officially a fuel crop — the federal government forecasts that this year, ethanol-makers will for the first time use more corn than poultry and livestock farmers. What’s the outcome of this government-subsidized gluttony by fuelmakers?

One is that folks like myself who think corn is the most delicious vegetable out there are paying 90 percent more per ear than we were last year. That includes the Chinese, who are importing much more U.S. corn (picture above). Another is that the U.S. taxpayer is effectively subsidizing exports to Brazil, Europe and elsewhere, which will buy around 1 billion gallons of the fuel. This has also been a windfall for big agricompanies like Archer Daniels Midland, which over the years has been among the most politically influential companies in Washington lobbying.

Interestingly, smart minds think almost none of this will change when, as expected, U.S. congressmen vote to kill both $6 billion in subsidies to fuel-makers and tariffs on ethanol imports. The dual end to the 45-cent a gallon subsidy and the 54-cent a gallon tariff seems likely to be a part of any budget-cutting deal in Washington.

Since ethanol is a mandated component of gasoline, ADM and the rest of the industry have captive demand, and the poultry industry thinks these fuel-makers will continue to drive up the price, which is triple what it was when Congress first approved the mandates in 2005. Plus, with oil prices seeming set to average $100 a barrel, ethanol is competitive on its own, Clifford Krauss writes in the New York Times. Currently oil companies are mandated to use 12 billion gallons of ethanol a year, a figure that will rise to 15 billion gallons in 2015, and then more than double to 36 billion gallons in 2022.

A final outcome has been a triggering of the law of unintended consequences: When initiated, the objective was to reduce U.S. imports of foreign oil. It also was to kick-start a renewable fuel industry. Now, though, U.S. gasoline demand is falling because of high prices. As for renewable fuels, corn ethanol was never route to cleaner air.We are waiting for a widely available renewable fuel that meets the original intentions.

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