Belatedly, the mainstream press is discovering how the environmentalists who shoved Congress into subsidizing ethanol production as an alternative to imported oil, wrecking the U.S. food system and driving up prices.
No small part of the current U.S. economic crisis is the run-up in food prices, which can almost entirely be traced to ethanol production competing with food production for the U.S. corn crop. While corn prices have backed off now, they hit nearly $7 a bushel last spring, far above the usual $2-$3 price that undergirded the ability of soft drink manufacturers, baked goods producers and livestock producers to provide inexpensive food for U.S. consumers.
The disaster is about to get much worse, as ethanol producers have already started going broke in droves. As oil has dropped to $60 a barrel from its $150 summer high, and gas has plummeted well below $3 a gallon (It's $2.31 in my neighborhood tonight, with E-85 fuel from ethanol at $2.09), ethanol has become increasingly uneconomic.
E-85 gets about about 25% worse miles-per-gallon than gasoline does, so with only a 22-cent a gallon difference, gas is actually cheaper. Gasoline also burns hotter and gives better acceleration, so why would you buy ethanol at this little price difference?
Ethanol is subsidized by taxpayers to the tune of 58 cents a gallon, or it would cost at least $2.65 a gallon--way more than the present price of gas--for an inferior product. This is all coming unraveled, several ethanol companies have filed for bankruptcy already.
Food prices haven't dropped, as the mass media is finally pointing out, as manufacturers just take the cheaper corn price savings and put them in their pockets.
As they say--it's just starting to hit the fan.
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