Friday, March 23, 2007

The Ethanol Backlash

From the Wall Street Journal:
HT: WSJ Energy Roundup

I think we've got us a meme here.
For your weekend reading pleasure I had decided last night to offer a 103 page PDF from the Global Subsidies Initiative of the International Institute for Sustainable Development entitled Biofuels-At What Cost.

Dated October 2006, this is a real eye-opener. First, the interplay of mandates, tariffs, direct subsidies and cost shifting make for a very opaque market, which is how many of the players prefer it.

Second, even by oil industry standards where energy is measured in Quads and revenues in B's and T's the numbers are large. $5.5 to $7.3B in 2006 ($1.o5-$1.38/gallon) and rising. Throw in another $10B for increased food and feed costs and we're talking real money.

Finally for investors in rent-seeking organizations there is the real risk that the politicians will change the rules. Heed the words of Sen. Simon Cameron (R&D!-Pa.): "The honest politician is one who when he is bought, will stay bought."

Seriously, at a minimum, Ch. 5 is worth a look.

HT: Econbrowser