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Brooks Wilson's Economics Blog: Ethanol and Catch-22

Tuesday, October 19, 2010

Ethanol and Catch-22

Farmers, ethanol producers and workers remind me of a character in Joseph Heller’s “Catch-22.”
Major Major's father was a sober God-fearing man whose idea of a good joke was to lie about his age. He was a long-limbed farmer, a God-fearing, freedom-loving, law-abiding rugged individualist who held that federal aid to anyone but farmers was creeping socialism.
Those involved in ethanol production are generally conservative and religious, qualities that are not offensive, but they should keep their hands off taxpayers’ wallets.  The government through the EPA is bailing out ethanol producers by mandating that gasoline consuers buy more of the blend that a Wall Street Journal writer observes “is more expensive than gas, gets worse mileage than gas, increases carbon emissions more than gas does, and that few consumers would willingly buy unless required by law. (“The Ethanol Bailout:EPA does the industry another big favor.”).  The write sagaciously observes
Scenes from a bailout: Last week, the Environmental Protection Agency decided to make the ethanol lobby's guaranteed "market" even larger. Shares in Archer Daniels Midland, the second largest U.S. ethanol maker, rose to a near 28-month high. Midwest Democrats in tight races got a political bump. Maybe for the first time in history, Exxon and the Natural Resources Defense Council shook out on the same side of an issue—in opposition.

Such wonders were possible because the EPA lifted the cap on how much ethanol is allowed to be mixed into gasoline to meet the annual consumption mandates in the 2007 energy bill, which will rise to 36 billion gallons by 2022. Until last week, this per-gallon "blend wall" stood at 10%, because ethanol is highly corrosive and can damage engines and exhaust systems and impair other features. The practical problem with this industrial planning is that Americans don't use enough gas to meet the mandates.

So the EPA decided that more ethanol should be mixed with less gas, lifting the cap to 15% for model years 2007 and later, or about one out of seven cars and light trucks currently on the road. The decision came in the nick of time for the ethanol industry, which is at market saturation and producing a glut that the government is not requiring anyone to buy. "We have lots of gallons of ethanol chasing too few gallons of gasoline," Renewable Fuels Association president Bob Dinneen told the New York Times in May.
The added emphasis is mine. 


  1. Danielle Zimmerman1/11/10 6:07 PM

    I disagree in using our food for fuel. Bad idea.

  2. Alejandra Olivas5/11/10 9:54 PM

    I really do not think that the gasoline should have a greater amount of ethanol. Not only because it may damage the engine as mentioned in the blog but will increase the usage of gasoline for a drug or alcohol. Mainly because there will be a higher percentage of alcohol in the gasoline, therefore the demand may go down for the product.

  3. Ilse Rojano6/11/10 2:31 PM

    I believe that using ethanol in gasoline is a bad idea because it can not only damage the engines, it can also have a negative impact on the U.S. economy. It is more expensive than gasoline, gets less mileage, and can be hazardous to our envirnoment.

  4. I have to agree with both, and its crazy to say but just as much as some people like the smell of gasoline, eventually if they put more ethanol in the gasoline, people will find ways of using it for other things such as, mentioned in the other post, drug or alcohol. Also it makes the economy worse.