Corn and Sugar Cane for Ethanol?

Does the conventional wisdom about ethanol for fuel make economic sense? In general the answer is clearly "No!" If you are a corn or sugar cane producer, the answer is certainly "Yes!" With all economic analysis, measures of success vary among parties.

If one is just a consumer of gasoline in the US, which is mandated by law to have at least 10% ethanol, the answer is no. Ethanol, when blended with gasoline, is less fuel efficient and creates more emissions through incomplete combustion.

Although ethanol had been envisioned to reduce dependence on foreign oil, the opposite has occurred. It takes more fuel to plant, tend, and harvest corn and sugar cane, and then to process it, than the resulting ethanol saves. Additionally, ethanol blended gasoline is more expensive to purchase, and since it is less fuel efficient, it is less efficient to use.

Further, when existing crops such as corn and sugar cane are taken off of the food market to ethanol, the price of those crops goes up, as does the price of food. Higher food prices lead to both local and global insecurity. Is getting less mileage, creating more pollution, and spending more at the grocery store worth it?

From a farmer's point of view, using crops which are often subsidized, even sometimes subsidized to destroy, in a useful manner is good. Arguably, higher prices lead to higher output and that is better for the agriculture sector in general. A strong agricultural sector leads to greater food security.

So who is right? From an economic efficiency point of view, the consumer is right and the farmer wrong. The costs to the consumers far outweigh any potential and specific gains to farmers and the agricultural sector. Additionally, the detrimental impact of increased air pollution also tilts the scale in favor of the consumer.

Clearly, using corn or sugar cane to make ethanol for fuel doesn't make overall economic sense.

Here is some video discussing the issue further:

Hybrids, the Real Deal or Flavor of the Month?

Gas is about $4.00 a gallon where I live, almost twice what it was a year ago. So what? If you are considering a hybrid, it is a pretty big so what. When I was considering the costs and benefits of hybrids a year ago, I came to the reasoned conclusion that there was little economic benefit to be had. The clear reason was that cost savings from using less fuel didn't cover the acquisition cost. Most hybrids tend to several thousand dollars more than their non-hybrid siblings.

The US government, as well as many state governments, decided they should lavish hybrid owners and manufacturers with tax payer money (a.k.a. subsidies), as well as certain privileges, such as driving in HOV lanes without other passengers. They did this to encourage the technology, ostensibly to reduce emissions as well as dependence on foreign oil. Arguably, those may be noble goals, but the number of potential vehicles wouldn't make a dent in either of the issues. ULEV (Ultra-low Emission Vehicles) are able to reduce vehicle emissions without having to worry about recycling or producing expensive battery packs needed for hybrids. Additionally, there are several models of inexpensive gasoline-powered cars that get similar mileage for less money, not to mention diesel-powered vehicles.

Back to the question at hand, will a hybrid save its owner enough money to justify the premium price? The answer is found by using a simple formula. Take the fuel economy of a non-hybrid and multiply by the average number of miles per tank to get price per mile. Do the same thing with the hybrid. Subtract the two results. Take the difference and multiply by tanks per year. So, if one saves $500 a year, and its a 5 year loan, the owner saves $2500 over the life of the car. Is that amount greater than or less than the premium to by the hybrid? That answer will determine generally whether owning a hybrid makes sense from an economic point of view. $4.00 gasoline has really changed the outcome of that equation, making them more attractive. I tell you what I am waiting for though, hydraulic diesel hybrids, as they don't require batteries to store power. UPS is running a pilot now. Details can be found here.

Don't forget to use the MPG calculator at http://www.fueleconomy.gov/feg/savemoney.shtml