|
Written by Rachel Patterson
|
|
Tuesday, 09 October 2007 |
Even the most politically profitable, and therefore highly
government-protected, industries are subject to market forces. Ethanol,
a bio-fuel grown from corn, is supported by huge US government
subsidies (not entirely unrelated to the importance of the Iowa Caucus)
and this has led to overproduction on a massive scale. Transportation
services cannot keep up to supply the coasts and few gas stations even
supply it.
The current glut is in response to high levels of subsidies and
tax-incentives for ethanol farmers and producers passed in the recent
years. Ethanol is one of those policies that has so many positive
political outcomes, catering to both environmentalists and the farming
lobby, that it won't die despite a series of problems including the
high energy levels required to produce and transport the fuel.
It's a perfect example of what happens when governments try to
implement a product or a policy perceived as socially necessary without
consideration of the markets that interact with it; is there a demand
for ethanol fuel and does the infrastructure exist to get it from
producer to consumer? In a free market, these problems work themselves
out as various demands rise and fall.
Instead we're left with a situation like the one here, where
government-supported producers realize they have nowhere to sell their
product and no way to move it around. The government should really let
the producers fold and see if there is a demand for alternative fuel on
the open market, but that won’t happen. Transportation companies will
surface if the demand for their services continues, but the only
solution to the demand problem now is to require gas companies to sell
the fuel – a government devised solution to a government created
problem.
For now all we have is barrels and barrels of ethanol – all dressed up with nowhere to go.
 |
Subscribe to this comment's feed