Among his top domestic priorities in the State of the Union message, President Bush unveiled an “energy security” initiative that may be neither doable nor desirable but is undeniably more big government intervention in the fuels market.
Having earlier posited that Americans are “addicted to oil” — as if this were some sort of perverse or unreasonable choice on the public’s part — he went on in his primetime address to say “this dependence leaves us more vulnerable to hostile regimes and to terrorists, who could cause huge disruptions of oil shipments, raise the price of oil and do great harm to our economy.”
Hypothetically, yes. But do let us remember that Canada is and will be our largest supplier of energy. And that many oil-exporting nations, especially in the Mideast and Central Asia, have nothing else to sell; oil is virtually their only income. And oil remains — and will remain for the foreseeable future — the planet’s cheapest, most effective and most abundant fuel.
Still, it would be nice if there were an alternative and the president thinks he has one, ethanol.
Under the slogan “20 in 10,” he is calling for a 20 percent cut in gasoline usage by 2017. (That’s projected, not current, usage.) And doing so will require producing 35 billion gallons of “renewable and alternative fuels.” The United States produces about 7.5 billion gallons of renewable fuels now, almost all of it ethanol and almost all of that corn-based and all of it heavily subsidized.
The president’s advisers have high hopes for cellulosic ethanol produced from farm waste like corn stalks and switch grass but it can’t be produced at anything like competitive prices. Alternative fuels, meaning principally liquefied coal, have production, pollution and cost problems of their own.
To produce 35 billion gallons of ethanol would require all of this year’s corn crop. To produce enough plant material for renewable fuels on top of current production would require, by one estimate, another 40 million heavily subsidized acres. Agribiz is, of course, delighted.
Foreseeing the likely possibility of spikes in food prices, as the ethanol plants compete with the cattle for corn, or spikes in the price of fuels whose use is government-mandated, the president would give the secretaries of Agriculture and Energy the power to waive or change the fuel standards.
To make this work would require an elaborate, market-distorting federal edifice of mandates, standards, subsidies and incentives — and perhaps a punitive tax on oil to help pay for them. No wonder farm staters like Sen. Charles Grassley, R-Iowa, were cheering so wildly.