Beer Prices and Ethanol

Recalling all the problems with ethanol that was discussed earlier in my post "The Ethanol Scam", including the increase of world-wide cost of food which is a life and death matter in the Third World countries, is --- an increase in beer prices. From "Biofuel Brews Up Higher German Beer Prices":

Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.

And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley — the raw material for the national beverage — to plant other, subsidized crops for sale as environmentally friendly biofuels.

"Beer prices are a very emotional issue in Germany — people expect it to be as inexpensive as other basic staples like eggs, bread and milk," said Erdmann, director of the family-owned Ayinger brewery in Aying, an idyllic village nestled between Bavaria's rolling hills and dark forests with the towering Alps on the far horizon....

Already, at the annual brewery festival in Aying this week, prices for Erdmann's Ayinger beer were up at $8.60, or 6.40 euros, from last year's 6.10 euros for a 34-ounce mug. That's no small matter for Bavarians, who are among the world's heaviest beer drinkers. They put away about 42 gallons of beer a year _ well above the already high German average of 30.38 gallons per person.

And organizers of the world-famous Oktoberfest in Munich have announced a 5.5 percent price increase: A one-liter mug will cost up to $10.70 at this year's autumn beer festival _ the highest price ever.

...[I]in its first major report on bioenergy, the United Nations tried to temper enthusiasm over biofuels last week, warning that the diversion of land to grow crops for fuel will increase prices for basic food commodities.

That is what happened in Mexico, when increased demand for corn to make ethanol in the United States pushed up the price of tortillas.

...Germany leads in the consumption of bioenergy in Europe with an annual usage of 4.3 percent of overall fuel consumption, according to figures by the Agency of Renewable Energies. Germany also is among the leaders in producing wind energy and recycling garbage.

Beer prices are serious business in Bavaria, which has some 615 breweries and gave Germany its famed beer purity law, which dates back to 1516 and in its current form permits only four ingredients: malted grain, hops, yeast and water.

This does, in a somewhat lighthearted way (even though beer is a serious matter,) point out that all government actions do have unintended consequences. I am of the opinion that the best approach to restraining the use of oil in the West for environmental reasons and national security reasons (which for me the latter reason is an even stronger argument) is imposing a gasoline tax (maybe a carbon tax) with some method (perhaps like the fair tax ideas) to make the tax less regressive (both to the poor and to rural consumers) and to devote a good portion of those taxes to dedicated spending on mass transportation and energy efficient infrastructure modernization. The tax is probably the best method to reduce all the unintended consequences and, directly and clearly, accomplish the desired goal of decreased fossil fuel dependence. Also note most serious economists endorse the tax opposed to other methods, particularly the slippery carbon offset fads, as well as the boondoggle subsidies addressed before.

The Ethanol Scam

From a post by Larry Kudlow over at The Corner comes this article from Rolling Stone, clearly not one of my regular sources, but a fascinating article that proves what some of us have all been thinking for some time. Some snippets from "Ethanol Scam: Ethanol Hurts the Environment And Is One of America's Biggest Political Boondoggles":

...Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price.

Three factors are driving the ethanol hype. The first is panic: Many energy experts believe that the world's oil supplies have already peaked or will peak within the next decade. The second is election-year politics. With the first vote to be held in Iowa, the largest corn-producing state in the nation, former skeptics like Sens. Hillary Clinton and John McCain now pay tribute to the wonders of ethanol. Earlier this year, Sen. Barack Obama pleased his agricultural backers in Illinois by co-authoring legislation to raise production of biofuels to 60 billion gallons by 2030. A few weeks later, rival Democrat John Edwards, who is staking his campaign on a victory in the Iowa caucus, upped the ante to 65 billion gallons by 2025.

The third factor stoking the ethanol frenzy is the war in Iraq, which has made energy independence a universal political slogan. Unlike coal, another heavily subsidized energy source, ethanol has the added political benefit of elevating the American farmer to national hero. As former CIA director James Woolsey, an outspoken ethanol evangelist, puts it, "American farmers, by making the commitment to grow more corn for ethanol, are at the top of the spear on the war against terrorism." If you love America, how can you not love ethanol?

Ethanol is nothing more than 180-proof grain alcohol....

But as a gasoline substitute, ethanol has big problems: Its energy density is one-third less than gasoline, which means you have to burn more of it to get the same amount of power. It also has a nasty tendency to absorb water, so it can't be transported in existing pipelines and must be distributed by truck or rail, which is tremendously inefficient.

Nor is all ethanol created equal. In Brazil, ethanol made from sugar cane has an energy balance of 8-to-1 -- that is, when you add up the fossil fuels used to irrigate, fertilize, grow, transport and refine sugar cane into ethanol, the energy output is eight times higher than the energy inputs. That's a better deal than gasoline, which has an energy balance of 5-to-1. In contrast, the energy balance of corn ethanol is only 1.3-to-1 - making it practically worthless as an energy source. "Corn ethanol is essentially a way of recycling natural gas," says Robert Rapier, an oil-industry engineer who runs the R-Squared Energy Blog.

The ethanol boondoggle is largely a tribute to the political muscle of a single company: agribusiness giant Archer Daniels Midland....

Today, ADM is the leading producer of ethanol, supplying more than 1 billion gallons of the fuel additive last year. Ethanol is propped up by more than 200 tax breaks and subsidies worth at least $5.5 billion a year. And ADM continues to give back: Since 2000, the company has contributed $3.7 million to state and federal politicians.

The Iraq War has also been a boon for ADM and other ethanol producers. The Energy Policy Act of 2005, which was pushed by Corn Belt politicians, mandated the consumption of 7.5 billion gallons of biofuels by 2012. After Democrats took over Congress last year, they too vowed to "do something" about America's addiction to foreign oil. By the time Sen. Jeff Bingaman, chair of the Committee on Energy and Natural Resources, proposed new energy legislation this spring, the only real question was how big the ethanol mandate would be. According to one lobbyist, 36 billion gallons became "the Goldilocks number -- not too big to be impractical, not too small to satisfy corn growers."

Under the Senate bill, only 15 billion gallons of ethanol will come from corn, in part because even corn growers admit that turning more grain into fuel would disrupt global food supplies. The remaining 21 billion gallons will have to come from advanced biofuels, most of which are currently brewed only in small-scale lab experiments. "It's like trying to solve a traffic problem by mandating hovercraft," says Dave Juday, an independent commodities consultant. "Except we don't have hovercraft."

The most seductive myth about ethanol is that it will free us from our dependence on foreign oil. But even if ethanol producers manage to hit the mandate of 36 billion gallons of ethanol by 2022, that will replace a paltry 1.5 million barrels of oil per day -- only seven percent of current oil needs. Even if the entire U.S. corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use.

Another misconception is that ethanol is green. In fact, corn production depends on huge amounts of fossil fuel -- not just the diesel needed to plow fields and transport crops, but also the vast quantities of natural gas used to produce fertilizers. Runoff from industrial-scale cornfields also silts up the Mississippi River and creates a vast dead zone in the Gulf of Mexico every summer. What's more, when corn ethanol is burned in vehicles, it is as dirty as conventional gasoline and does little to solve global warming: E85 reduces carbon dioxide emissions by a modest fifteen percent at best, while fueling the destruction of tropical forests.

But the biggest problem with ethanol is that it steals vast swaths of land that might be better used for growing food. In a recent article in Foreign Affairs titled "How Biofuels Could Starve the Poor," University of Minnesota economists C. Ford Runge and Benjamin Senauer point out that filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn -- roughly enough calories to feed one person for a year.

Thanks in large part to the ethanol craze, the price of beef, poultry and pork in the United States rose more than three percent during the first five months of this year. In some parts of the country, hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars. And since America provides two-thirds of all global corn exports, the impact is being felt around the world. In Mexico, tortilla prices have jumped sixty percent, leading to food riots. In Europe, butter prices have spiked forty percent, and pork prices in China are up twenty percent. By 2025, according to Runge and Senauer, rising food prices caused by the demand for ethanol and other biofuels could cause as many as 600 million more people to go hungry worldwide.

If you can, the entire thing is worth reading to get the passion the author puts into his opinion. Again, this isn't surprising to me but is good to see my suspicions in print. Corporate subsidies remain a huge problem in this country and so often violate my rules about how free trade is a good thing. And besides "Big Corn" my other favorite egregious example is "Big Sugar" and the subsidies for that industry that have caused many of our candy manufacturers to move offshore, particularly Canada, to escape the ridiculous sugar prices in America due to propping up "Big Sugar" to the detriment of industry and the consumer.

Pope Benedict on Environmentalism & Evolution

John L. Allen in his weekly All Things Catholic reports on Pope Benedict regarding the environment and on evolution:

One could say that summer 2007 is when the Vatican decided to go green. First came an announcement in June that more than 1,000 photovoltaic panels will be installed atop the Paul VI Audience Hall, allowing the building to utilize solar energy for light, heating and cooling. A month later, the Vatican became the first state in Europe to go completely carbon-neutral, signing an agreement with a Hungarian firm to reforest a sufficiently large swath of Hungary's Bükk National Park to offset its annual CO2 emissions.


To some, these may seem curiously cutting edge moves from a pope whose recent decisions to revive the pre-Vatican II Mass and to reaffirm claims that Catholicism is the lone true church have cemented his reputation as the ultimate "retro" figure. He sometimes brings to mind the famous quip that rolling back the clock is a perfectly reasonable thing to do if it's keeping bad time.

So what gives?

..."Everyone can see today that humanity could destroy the foundation of its own existence, its earth, and therefore we can't simply do whatever we want with this earth that has been entrusted to us, what seems to us in a given moment useful or promising, but we have to respect the inner laws of creation, of this earth, we have to learn these laws and obey them if we want to survive," Benedict said. "This obedience to the voice of the earth is more important for our future happiness than the voices of the moment, the desires of the moment. … Existence itself, our earth, speaks to us, and we have to learn to listen."

From there, Benedict said, we may also learn anew to listen to the voice of human nature as well, discovering in other people and in human communities moral laws that stand above our own ego. In that regard, the pope said, we can draw upon the great moral experience of humanity. Doing so teaches that human liberty never exists in isolation from others; it works only if it's rooted in a sense of common values....

And given some rather confusing statements from a number of sources on where the Vatican and Catholicism in general stands on evolution, here is what the Pope said:

"Presently I see in Germany, and also in the United States, a fairly bitter debate between so-called creationism and evolutionism, presented as if they were mutually exclusive alternatives: whoever believes in a Creator cannot believe in evolution, and likewise whoever believes in evolution has to exclude God," Benedict said. "This opposition is an absurdity, because on the one hand, there are many scientific proofs in favor of an evolution that seems to be a reality that we have to see, and that enriches our understanding of life and of existence as such. But the doctrine of evolution does not respond to all questions, above all to the great philosophical questions: Where does everything come from? How did everything start on the path that finally arrived at humanity?"

...To put this into a sound-bite, Benedict believes in both evolution and creation, each understood on its own terms. Speaking later in the session on a different topic, Benedict XVI said that this passion for synthesis is the spirit of Catholicism, always seeking both/and solutions.

And one more unrelated tidbit from the pontiff that I liked while he was discussing change in the Church and in society:

"Yet," Benedict said, "while falling trees make noise, growing ones are silent."

If you have some time the entire article is interesting both in fact and tone.