To Radioman On Ethanol Tariffs

Reply to radiomanfargo:

It has long been feeling that ethanol is very vulnerable to larger petroleum interests, as well as to its own structural limitations. Almost any big player in the region’s farming picture will immediately opine that ethanol is a bubble that is bound to burst.

The chief structural limitation is its BTU content, and the consumer’s natural tendency to want the most energy for the dollar. This can be overcome by political power, which can force a "standard" or mandate.

The second structural limitation is the availability of corn and competition with livestock needs where the corn is, or the need to move it elsewhere.

The third limitation is the cost of moving corn to the places where the plants, and/or transporting the fuel where it needs to go. Cellulosic ethanol has its problems, too — both with the sheer technology and the cost of moving material to plants.

There are probably others I haven’t mentioned.

That said, I think the whole ethanol program is a fascinating study in the movement of money toward an idea. If we have a problem (dependence on foreign oil) we move to solve it. (There are downsides to sending U.S. troops to the Middle East to die to protect foreign oil, too.)

Not everything that is done with regard to ethanol and other alternatives makes perfect economic sense, but people will get rich in the short run and some will exit the industry or find ways to protect themselves from inevitable down side. Others will not.

The main benefit to ethanol is that it is an alternative fuel to petroleum. It won’t replace all of the petroleum-based gasoline, but it will/could have an effect to reduce the price of petroleum products. It is a "renewable" product, in that it comes from the harvest of sunlight.

Ethanol that comes from outside of the country is "renewable" but it doesn’t meet the political need to make the U.S. more self-sufficient on fuel. I’m not clear on where the power in the Bush administration will come to bear on ethanol. Bush has seemed very supportive of ethanol, but I’m thinking that Cheney will be on the side of pure economics and geopolitics. That might dictate attempting to reduce the tariffs that keep foreign ethanol out, but making that stick will be an interesting problem with the Democrats in control. (Did you see the photo in Agweek of Nancy Pelosi dancing with a Lisbon, N.D., farmer at the National Farmers Union convention?)

To me, this means that the Bush administration could try to eliminate the tariffs "as a final slap," as "radiomanfargo wonders." But I doubt they’ll get that job done. Not yet.

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