New twists on the old controversy

The relentless attacks on renewable fuels and the political dynamics of the post 2016 era have helped to create something new: a safe space for a particular brand of pro-petroleum polemics which would not have been possible in a more rational time.

Case in point: An April 13, 2017 Investors Business Daily article on ethanol by William F. Shughart that claims “the long war on fossil fuels is destroying the famed American prairie.”

To begin with, it’s not rational to blame ethanol alone for all the environmental impacts of US agriculture. Secondly,  to do that without any comparison to the environmental impacts of fossil fuels is ridiculous.  So, let’s back up.

There is no argument that American agriculture in general has environmental impacts, from water use to air pollution, water pollution and use of chemicals.  How much of that can be ascribed to corn, and how much can or should be ascribed to ethanol?

In a study of corn and ethanol in Missouri, the state extension agency found that overall corn GDP in the state, in 2014, was  $1.106 billion while the value added by ethanol production from corn was $163.1 million. OK, then, roughly 15 percent of the economics.

Let’s also  consider also that ethanol replaces oil that has its own enormous environment impacts. Take a look at some of these photos of coastal Nigeria from a respected German magazine.  Clearly, oil has  destroyed coastal Nigeria and many other places in the world.  

Consider how many hundreds of millions of people in the Middle East have been killed, injured, displaced or harmed in some way during the past three decades of war over oil.  These oil wars were (we now realize) completely unnecessary, and were only fought because one region’s oil was more profitable and convenient than  alternative sources of oil and other forms of energy.

In the past, the petroleum industry and its apologists have been more or less defensive,  as well they should have been, considering the damage they have done.  

But in recent years we’ve seen the emergence of aggressively pro – petroleum polemics. Shughart , for example, cleverly notes that the “war against” fossil fuels is destroying the prairie, without any serious attempt at logical connections between the war against petroleum and the environmental problems with corn agriculture that are all the fault of ethanol.   

Similarly, the economic impacts and benefits of ethanol are not seriously discussed here.   It’s pretty clear that Shughart is not trying to help us understand the economics of a very complex policy issue when he says:  “Nationally, corn growers received some $94.3 billion in subsidies from federal commodity, crop insurance, disaster relief and conservation programs between 1995 and 2014…”

A more relevant statistic would be the USDA’s ARC / PLC payments covered by commodity in 2015, which would be $4.1 billion for corn.  This is higher than previous years, as ARC economists have been pointing out.  But it would be higher without ethanol markets that contribute to the corn economy, as corn prices have fallen from a peak of $8 per bushel in 2012 to about $3.40  in the past year or so. But ethanol production and costs have held steady throughout that period.  

In fact, the real problem for the oil industry is that ethanol is now much cheaper to produce than gasoline.  Ethanol producers can go as low as $1.10 per gallon — possibly lower — which is impossible for the oil industry. It must be a bitter pill for an industry that used to simply argue that the market should decide.

Farm policies have always been controversial.  In the 1960 Nixon – Kennedy presidential debates, for example, John F. Kennedy noted that we needed crop insurance because the last bushel tended to set the price, to the detriment of farmers. In other words, if the immediate demand was for 100 bushels, and the market had 101 bushels available, the cost would temporarily drop and force farmers out of business.  

Farm price insurance and crop supports have also been very important in stabilizing food prices for American consumers, and (many would argue) worth every penny considering the social damage that out of control food prices might cause.   But that has nothing to do with ethanol, which is simply a side-stream and a way to add local value to the enormous rivers of grain that flow out of the Midwest.        

So I would hope that academics like Prof. Shughart would resist the tendency to lump these problems together, and would try to help people separate the issues, to clarify rather than confuse probable causes and effects.

In the end, what we all want is energy security and a clean environment.  Ethanol isn’t the only way to get there, nor is it perfect by any means.  But given a direct comparison to oil, it is by far the preferable choice.    

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