Ethanol Doesn’t Make Sense Economically or Environmentally, Only Politically

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The dollar is scarcely worth more than a Swiss franc, which makes a visit to Switzerland extremely expensive. Our hotel – Hotel d’Angleterre – overlooks the lake…a beautiful place, clean, well-decorated and efficiently run place – as you’d expect. The price, with discount, was about $600 a night.

“Couldn’t you find anything cheaper?” was asked Elizabeth.

“Well, of course…but I didn’t have time to pay much attention…and besides how often will we come here…how often do we go anywhere?”

We could tell from the tone of her voice that this issue was not worth pursuing. Besides, we are used to being shocked by prices in Europe. We’re shocked so often, in fact, that we’d be shocked if we weren’t shocked. Still, occasionally, we got a major shock in the restaurant. The breakfast buffet was $49; we almost decided we could wait to eat until we got home.

At the table next to us was a group of Americans, a hearty, trim man in his 60’s, with one nice-looking woman in her 40’s…and two young women, obviously his daughters, in their 20’s. They all looked so wholesome, dressed in jeans and sweaters…the girls with blond hair, blue eyes and straight, sharp noses.

In foreign countries, we often imagine that the people near us cannot understand English and speak more freely than we might at home. Usually, this is a mistake. There is always someone nearby who speaks English – practically everywhere, and especially in Geneva. In this case, we understood every word they said.

We wondered what brought them here. This was not a tourist hotel…Geneva is not really a tourist town. And these people were purely American, Midwesterners, probably…not like the Euro-Americans who have spent so many years on the continent that they have picked up the affectations of the local people.

“Oh Daddy, I wish you’d buy me another watch,” said one of the girls. “I think I left my Cartier watch at the beach house. I can’t find it. It’s probably lost.”

The conversation about watches continued for a while. Then, the subject of ethanol came up.

“Are we still in ethanol?” one of the girls asked.

“Yes…we’ve done real well with it too. But I’m not putting any more money in. People are wising up…”

“What do you mean?”

“Well, ethanol doesn’t really make any sense economically…it’s too expensive to produce per unit of actual energy. Not really competitive with oil. And it doesn’t make sense environmentally either. By the time you figure out all the damage to the environment done by planting corn…harvesting it…transporting it…and then turning it into fuel, it’s more than you get from oil. No…ethanol only makes sense politically. Iowa votes early. And Iowa raises corn. No politician wants to oppose ethanol.”

“Well, how did we make money in ethanol if it doesn’t make sense?”

“Just ’cause it doesn’t make sense doesn’t mean there’s no money in it. The government’s been subsidizing ethanol on the one hand…and inflating the dollar on the other… The subsidies make producing ethanol very attractive for that partnership we’re in. And then, with the dollar going down, the price of oil goes up – and the price of ethanol too. That’s why we’ve done so well…thanks to the politicians.”

“Then, why don’t we stick with it?”

“I don’t know…I just smell a change coming on. People don’t like to think about kids starving in Africa and Asia while we’re burning corn in our gas tanks. And the whole economy is going soft…which could cause the price of oil to go down. I tell you, we had a very good run…we should be happy with it…and let it go at that.”

“Well, Daddy…will you buy me another Cartier watch to replace the one I lost? You can use some of the money we made from ethanol.”

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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Comments

  1. This was quite a fascinating read. I hope it is not too long before people realize the scam of burning what was designed for the human body in a gas tank. I don’t know why folks can’t plainly see that more harm is done to the environment with fertilizing, hauling, and processing corn to manufacture ethanol. Farmers are ripping out hay and planting corn to help feed the ethanol industry (and their bank accounts). Who can blame them? But, quality hay is the beginning of affordable beef and dairy. $5 milk in the U.S. doesn’t seem to be getting this message across… funny… gas is cheaper than milk. Are we in store for a global famine? Time will tell.

    Reply
  2. Soon we can start burning USD in the gas tank instead :) At least you can eat corn.. pretty soon the USD won’t be worth squat.

    Unpopular Truth
    March 11, 2008
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  3. Biofuels are a disaster for the environment and for world food supply. The answer to transport energy is electric. The technology exists now for small cars that will go a couple of hundred kilometres on an overnight charge, or lesser distance on rapid charges. The switch to electric cars needs to get underway in a jiffy though – we need to save oil for perhaps centuries of air travel, shipping, big mining and agriculture – and stop wasting it on SUV’s to get to the hairdressers in.

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  4. Not all biofuels are a loser as corn is. Sweetgrass provides much more energy than corn per unit, grows in average soil, takes no fertilizer, uses little water, and is much more efficient than corn. The reason sweetgrass is not already the defacto biofuel is purely political…

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  5. Religion,do-gooders,and beaurocrats are the disease—- the source of all problems aired on this interesting site— the inherent inadequacy of these types compels them to pretend they are the cure.When this nasty disease is in remission creative and productive people are able to function in a way that mimics nature.Nature is perfection, 100% efficient,no such thing as waste.

    geoff watt
    March 13, 2008
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  6. Geoff Watt, do you really believe Nature made itself?
    Do-gooders are much better than do-baders.
    We need bureaucrats or we’d have no Public Services; ie Anarchy.
    Nature is not perfection but efficient. Nature consumes the weak and the old. Nature is ruthless greed. Society’s problem is that it acts like animals following the law of survival of the fittest. We need to lift ourselves above that and find room in our higher nature for love, compassion and justice.It is the animalistic behaviour of those in power that cause us the crisis we have today.

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  7. Dear peanuts—-you are sounding suspiciously like a do gooder.Check the history books — virtually all mass murder and mayhem is justified by religion and doing good.If you cant find the books check out what George bush is up to — one million dead,entire countries trashed. all in the name of doing good — problem is not many people are saying they feel good.Nature may at first glance appear ruthless but the essence or spirit of nature is in fact perfection itself — the very thing we all seek.Nature allways seeks perfect balance for all creation.If it werent for the ‘consumption of the week and old’ –you and i would not be here in our current form.

    geoff watt
    March 14, 2008
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  8. Geoff, aren’t do gooders part of this messed up world we all inhabit? How can you say that do gooders aren’t part of nature? INHO you need a more robust theory!

    knowingisbeing known
    March 14, 2008
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  9. knowingisbeingknown —Yes you are on to it.We are all part of the evolutionary process.Enlightenment is an elusive beast.It is very frustrating to see arrogant coercive greedy people assume control.I suspect a final showdown may be imminent.This should see the phoenix rise from the ashes.Good people e.g. Ron Paul are begining to appear.critical mass will flick the Ron paul resonance switch to on and a harmonic tone will mesmerise the punters.

    geoff watt
    March 15, 2008
    Reply
  10. Whilst I am from the Geoff Watts school of thought, I think I agree with Peanuts. The problem being that Peanuts ideas will never be realised, and whilst yours won’t either, they will surely be much closer.

    Reality is a b1tch

    Reply

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