Behind the Ethanol Scandal
Issues that appear political are often just economic, and that's the case here. Ethanol, with government aid, is now putting downward pressure on gasoline prices, and the producers of that fuel are howling about unfair competition.
But take away the market pressure of ethanol, do away with the Renewable Fuel Standard, flare enough gas in enough fields, and the market clears at the higher prices fossil fuel producers have built into their own economic models.
The lesson should be clear. The economic assumptions of this decade are wrong. There is a limit to how high natural gas and gasoline prices can rise before the market bites back. Now that this has happened, producers are squealing like stuck pigs.
Is the answer to give the old-line producers the political power they need to drive new supplies from the market so that they can keep raising costs and prices? Or is it to see that squealing as a victory and increase the pressure, forcing a permanent re-examination of the fuel industries' cost structures?The answer to that one, I think, is obvious. The war against oil is being won, and now is the time to go in for the kill. At the time of publication, the author owned no ethanol stocks. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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