Thing is liquid fuel (oil or otherwise) is traded on a mostly open, global, market. So the price of ethanol and gasoline are both dictated to a large extent by the supply produced by OPEC. So producing ethanol can only make us “independent” in the sense that it makes OPEC/Venezuelan/Russian oil a smaller fraction of global energy production. But as long as those sources constitute a decent fraction of global production (and you can’t grow enough ethanol to change that) they can still drive up prices on a whim.
I also think the jury is still out on the carbon neutrality thing (at least as far as I can tell surveying the research)- especially if you were already growing corn or had to chop down a rain forest to get your farm land.
Seriously? Do we actually trade fuel ethanol? Why would anyone want it, and if they did, how could we compete with Brazil’s sugar cane ethanol? How odd. My impression is that the only reason corn ethanol is as cheap as gas is because of huge government subsidies to the corn growers. Perhaps the whole situation is even sillier than I realized.
Also, I think the main idea of “energy independence” is that, if it came down to it, we could switch to completely internal energy sources and tell the rest of the world to go shove it. It’d be a diplomatic stick to beat people with in the sense of “we don’t need you”, not an otherwise significant on-going economic factor.
I also think the jury is still out on the carbon neutrality thing (at least as far as I can tell surveying the research)- especially if you were already growing corn or had to chop down a rain forest to get your farm land.
The carbon in the ethanol was extracted from the atmosphere in the past couple years, burning it releases it back. That’s pretty much the definition of carbon-neutral. Pretty much the same should be the case for anything else you do with the corn, including eating it. But, you’re right, there are other considerations. Chopping down rainforest is absolutely not carbon-neutral.
My point is just that the whole energy independence thing is a red herring since energy is traded on an open market. If we suddenly had to depend only on energy produced in the U.S. the resulting price increases would be prohibitive for everyone but the military (and we already have strategic oil reserves).
The whole concept of energy independence is a political cudgel to turn energy politics into security politics by taking advantage of people’s mercantilist intuitions about resources. But in a global free market those intuitions are wrong. Strictly speaking you don’t get to decide where your energy comes from. Often it is cheaper to get it from nearby sources but it is all part of the same pricing system. So yeah, increased domestic production might make us more independent in the sense that foreign countries won’t have quite the same ability to knock prices up but there isn’t a magic line where suddenly we’re “independent”.
Lets say we have 100 oil. 50 of it is produced in the Middle East and the U.S. uses 40 but currently produces 20. The remaining 30% is produced by other countries. An OPEC embargo leaves us with 50 oil about doubling the price (for convenience, usually supply curves are exponential but I’m not an economist I don’t know what the price would really do beyond going up, a lot.). If the U.S. increases production to 40% prices pre-embargo will be lower (since we have a supply of 120) but prices will still increase by a similar amount when we lose 50 of that 120 supply leaving us with only 70 oil. If the whole world turned against us prices would triple (according to our invented price model) as we would have only 40 in supply where once we had 120.
In order to make it so the rest of the world really couldn’t affect us we’d have to be producing a preponderance of the world’s energy such that foreign embargoes would only slightly affect total supply. Either that or we embargo foreign energy imports. But we’d be independent like chopping off your legs makes you independent of bicycles. Also, I imagine if our transportation infrastructure was such that it didn’t use gasoline we’d be much better insulated from price shifts in foreign oil. Like if our cars were all solar powered or if we were taxing CO2 to a prohibitive extent already. But in those cases technology has either rendered oil irrelevant or our economy has already internalized the cost of a foreign oil embargo.
You are. I obviously haven’t thought the issue through clearly and it’s not something I care deeply about, since ethanol is silly for many other, larger reasons, therefore I won’t waste your time with further questions. Definitely moving the whole “energy independence” thing to the “I have no idea” column for now.
In short, we’re “independent” when the cost of importing fossil fuels exceeds the cost of domestic production. The two ways this can happen are drastic technological improvements, and subsidies/tariffs on fuel resulting in economically wasteful overproduction. In the US we tend to give lip service to the former while actually implementing the latter.
Thing is liquid fuel (oil or otherwise) is traded on a mostly open, global, market. So the price of ethanol and gasoline are both dictated to a large extent by the supply produced by OPEC. So producing ethanol can only make us “independent” in the sense that it makes OPEC/Venezuelan/Russian oil a smaller fraction of global energy production. But as long as those sources constitute a decent fraction of global production (and you can’t grow enough ethanol to change that) they can still drive up prices on a whim.
I also think the jury is still out on the carbon neutrality thing (at least as far as I can tell surveying the research)- especially if you were already growing corn or had to chop down a rain forest to get your farm land.
Seriously? Do we actually trade fuel ethanol? Why would anyone want it, and if they did, how could we compete with Brazil’s sugar cane ethanol? How odd. My impression is that the only reason corn ethanol is as cheap as gas is because of huge government subsidies to the corn growers. Perhaps the whole situation is even sillier than I realized.
Also, I think the main idea of “energy independence” is that, if it came down to it, we could switch to completely internal energy sources and tell the rest of the world to go shove it. It’d be a diplomatic stick to beat people with in the sense of “we don’t need you”, not an otherwise significant on-going economic factor.
The carbon in the ethanol was extracted from the atmosphere in the past couple years, burning it releases it back. That’s pretty much the definition of carbon-neutral. Pretty much the same should be the case for anything else you do with the corn, including eating it. But, you’re right, there are other considerations. Chopping down rainforest is absolutely not carbon-neutral.
My point is just that the whole energy independence thing is a red herring since energy is traded on an open market. If we suddenly had to depend only on energy produced in the U.S. the resulting price increases would be prohibitive for everyone but the military (and we already have strategic oil reserves).
The whole concept of energy independence is a political cudgel to turn energy politics into security politics by taking advantage of people’s mercantilist intuitions about resources. But in a global free market those intuitions are wrong. Strictly speaking you don’t get to decide where your energy comes from. Often it is cheaper to get it from nearby sources but it is all part of the same pricing system. So yeah, increased domestic production might make us more independent in the sense that foreign countries won’t have quite the same ability to knock prices up but there isn’t a magic line where suddenly we’re “independent”.
Lets say we have 100 oil. 50 of it is produced in the Middle East and the U.S. uses 40 but currently produces 20. The remaining 30% is produced by other countries. An OPEC embargo leaves us with 50 oil about doubling the price (for convenience, usually supply curves are exponential but I’m not an economist I don’t know what the price would really do beyond going up, a lot.). If the U.S. increases production to 40% prices pre-embargo will be lower (since we have a supply of 120) but prices will still increase by a similar amount when we lose 50 of that 120 supply leaving us with only 70 oil. If the whole world turned against us prices would triple (according to our invented price model) as we would have only 40 in supply where once we had 120.
In order to make it so the rest of the world really couldn’t affect us we’d have to be producing a preponderance of the world’s energy such that foreign embargoes would only slightly affect total supply. Either that or we embargo foreign energy imports. But we’d be independent like chopping off your legs makes you independent of bicycles. Also, I imagine if our transportation infrastructure was such that it didn’t use gasoline we’d be much better insulated from price shifts in foreign oil. Like if our cars were all solar powered or if we were taxing CO2 to a prohibitive extent already. But in those cases technology has either rendered oil irrelevant or our economy has already internalized the cost of a foreign oil embargo.
Hopefully I’m making some sense.
You are. I obviously haven’t thought the issue through clearly and it’s not something I care deeply about, since ethanol is silly for many other, larger reasons, therefore I won’t waste your time with further questions. Definitely moving the whole “energy independence” thing to the “I have no idea” column for now.
In short, we’re “independent” when the cost of importing fossil fuels exceeds the cost of domestic production. The two ways this can happen are drastic technological improvements, and subsidies/tariffs on fuel resulting in economically wasteful overproduction. In the US we tend to give lip service to the former while actually implementing the latter.