Family Security Matters
Biofuels, Energy, Ethanol, and Hunger
May 2, 2008
Jonathan D. Strong
Since the release of Al Gore’s movie An Inconvenient Truth, scientists, the United Nations, governments, lobbyists, and activists have been telling us that the Earth/climate is in “crisis,” that we “must act now to save the planet,” and that we are on the verge of “catastrophe.” Never mind that inconvenient fact that the Earth has cooled over the past few years, governments in the United States, Canada, and Europe have now set targets to mandate a certain level of ethanol or other biofuels to replace traditional fuels. This has been a result of powerful lobbying groups like Greenpeace, the Sierra Club, and other environmental groups who have pushed hard for reducing our dependence on brown energy.
While I am no fan of Al Gore, I do agree that we should do a better job of taking care of the planet. I believe this, not out of a worship or reverence for the Earth, but because I believe that God gave humanity, created in His image, an obligation to care for the planet and creatures He created. But I also believe in fairness and equality, and thus, I adamantly oppose the Kyoto Protocol for its obvious unfairness and punishment of economically prosperous nations for the benefit of developing nations.
Al Gore and company may have had good intentions in their push for ethanol and biofuels, but the result is leading to starvation, market distortion, and possibly violence in the future. The Economist reports that since January of this year, rice has increased by 141%. In 2007, wheat prices increased 77%. Egypt has recently ordered the army to start baking bread because of food shortages and the Philippines has made hoarding rice a crime punishable by life imprisonment! Protests have also broken out in Haiti and riots have erupted in Cameroon. The results of the global warming activist/extremists are certainly being felt, although obviously not how they intended.
Hunger and starvation are now a serious threat to many poor countries. Those of meager means are about to find themselves in even worse economic straights. But the “greens” could not manage such an incredible feat of causing a global food crisis on their own. They needed the ever expanding bureaucracy of government to enable their success. President Bush, once criticized as a puppet of oil barons, has become ethanol’s biggest promoter:
“There were 110 ethanol refineries in operation in the United States at the end of 2006, according to the Renewable Fuels Association. Many were being expanded, and another 73 were under construction. When these projects are completed, by the end of 2008, the United States' ethanol production capacity will reach an estimated 11.4 billion gallons per year. In his latest State of the Union address, President George W. Bush called on the country to produce 35 billion gallons of renewable fuel a year by 2017, nearly five times the level currently mandated.(Foreign Affairs)Some estimates, according to Foreign Affairs, state that half of U.S. corn production will soon go towards ethanol rather than food consumption. Farmers aren’t stupid; those that used to grow wheat, barley and other grains have begun switching to corn because of the bonanza of government subsidies and rising prices that result, corn “futures rose to over $4.38 a bushel, the highest level in ten years.” Direct corn subsidies are almost $10 billion a year in the US alone.(Ibid)
But of course the U.S. is not alone. The EU produces almost 80% of the world’s biofuels. The Common Agricultural Policy (CAP) of the EU has distorted world food prices (almost always upward) for decades making produce from poorer areas of the world unable to compete with subsidized European farmers.
So what is the net result for the world’s poor?
Realistically, however, resorting to biofuels is likely to exacerbate world hunger. Several studies by economists at the World Bank and elsewhere suggest that caloric consumption among the world's poor declines by about half of one percent whenever the average prices of all major food staples increase by one percent. When one staple becomes more expensive, people try to replace it with a cheaper one, but if the prices of nearly all staples go up, they are left with no alternative.(source)
All of this bad news comes with the fact that ethanol is a net energy loser, meaning it takes more energy to produce ethanol than the energy that actually results from it in final form. Leave it to the government and Left-wing environmental extremists to bring us such a solution to our energy problems.
But things will not get better if the current ethanol policies don’t change, energy prices will rise as India and China continue their economic expansion and demand greater quantities of oil, natural gas, and electricity to feed their growing populations, industries, and market share.
However, all is not lost. As a conservative, I am also compelled to be an optimist. There are solutions and plenty of them. Oil is not running out, and in North America there are mass quantities of supplies that have yet to be exploited. So why aren’t they? Well, again mostly because of the environmental lobby who have prevented drilling in ANWR, the Gulf of Mexico, and elsewhere.
My native country, Canada, sits atop the second largest quantity of proven oil reserves in the world next to Saudi Arabia thanks to the oil sands of Alberta and Saskatchewan. Fortunately, unlike ANWR, the oil sands are being mined aggressively for energy.
Economics is not a difficult subject to understand. If you increase supply, prices fall so long as demand remains constant. But with increasing demand from India and China, and a stable or decreasing supply of oil because production remains stagnant, you have a rapidly increasing cost of oil as we’re currently experiencing.
So what should we do? First, ethanol subsidies should be ended immediately. Immediately is not a word most governments understand, but it is immoral to fund an industry that is directly contributing to the starvation of the poor in developing nations. Secondly, we (in the West) should re-double our efforts to find new supplies of energy while investing in ways to use it more efficiently. We should do this with carrots, not sticks and encourage creativity in academic institutions, private industry, and amongst entrepreneurs. Third, new nuclear power plants should replace all oil powered plants by 2010. There is absolutely no need to continue using heavy oil to produce electricity. This is plainly stupid. Finally, taxes on fuel should be eliminated. The government should not profit from rising energy costs which cut into the disposable income and well being of citizens. What incentive does government have to increasing fuel efficiency and lowering costs if the government receives greater revenue/profits from higher prices?
As Ronald Reagan famously said, “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” The subsidization of ethanol is a classic example of why the government should stay out of the free market to the greatest extent as possible. The rise of China and India is not a result of brilliant government policy, but a result of the introduction (or permission) of capitalism and free markets to flourish on their own, free of government interference.
The same factor that has resulted in an increase in the demand for energy will also be the solution to solve our energy problems. Entrepreneurs in the U.S., India, China, and around the world will see the need for new forms of energy and will figure out how to make a buck off this need. The hand of government needs to give way to the invisible hand of free markets, otherwise children in poor countries may starve and prosperous in the West will be less so.
FamilySecurityMatters.org Contributing Editor Jonathan D. Strong, Esq., is a member of the Florida bar and blogs at The Strong Conservative (http://strongconservative.blogspot.com).