How Much Does Ethanol Cost Us

Lately there’s been some discussion in the comments regarding just how much the corn diverted to ethanol production has affected the world wide food shortage. Aside from ethanol we’ve seen rising demand as well as crop failures in various parts of the world because of drought and global warming cooling. Also rising populations and rising affluence in the poorer countries is leading to a very significant rise in demand. (And that’s a good thing in my opinion.)
Our discussions have always been unsatisfactory because nobody’s come up with any hard data one the relative effect of these various factors. I stumbled upon some data from The Economist this morning.

his year the overall decline in stockpiles of all cereals will be about 53m tonnes—a very rough indication of by how much demand is outstripping supply. The increase in the amount of American maize going just to ethanol is about 30m tonnes. In other words, the demands of America’s ethanol programme alone account for over half the world’s unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been. According to the World Bank, the grain needed to fill up an SUV would feed a person for a year.
America’s ethanol programme is a product of government subsidies. There are more than 200 different kinds, as well as a 54 cents-a-gallon tariff on imported ethanol. That keeps out greener Brazilian ethanol, which is made from sugar rather than maize. Federal subsidies alone cost $7 billion a year (equal to around $1.90 a gallon).

So America’s ethanol program is directly responsible for the lost of 60% of the worlds stockpiles. Add to that the ethanol programs in Europe and I think you could say that ethanol was the driving force in the shortage of food that we’ve recently seen.
Now of course the other side could say that droughts and other crop failures reduced production by an amount equal or greater than the 30m tonnes that the US ethanol program consumed. And that’s a fair point, but I think you have to consider that you’ll never have a perfect growing season world wide.
The other think that’s remarkable in this article is just how much the ethanol subisdy is costing us. When we fill up with a gallon of ethanol it’s costing the taxpayer (you and me) $1.90 in addition to the $3.40 we’re paying the friendly guy inside the pump. Plus we’re paying in higher food prices as well.
I think we gotta apply the brakes to this ethanol thing until the world’s farmers can catch up with increased production. I’m not saying to quit producing it, but let’s cut down on the mandates.

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