Cornography - Granite Grok

Cornography

CornatholThe US Senate has overwhelmingly voted to end billions in ethanol subsidies.  And even though the bill has no hope of becoming law–Obama will not sign it–corn prices collapsed on the news. This is instructive for two reasons. 

First a large chunk of the subsidy being cut is paid to oil companies (or blenders) to offset the mandate to add ethanol to motor fuel.  So this is not just some bipartisan effort to screw the corn belt–Big Oil gets tens of billions in support to offset the costs of adhering to environmental mandates.  This measure would remove some or all of that.  With this price support gone, fuels that include ethanol could get more expensive.  Returning real world costs to pricing is necessary to stimulate real world interest in getting corn out of the fuel supply but that will require more repeals of past mandates, none of which Obama will likely sign either.

But this vote does send a message that a different president (not Mitt Romney by the way) might end the rent seekers good fortune within two years and the price of corn has responded poorly to the news.

Second, and this what I really want to address, just the idea of a change in corn policy has had as much as a 12% immediate downward effect on the price of corn.  So how much impact might it have had were it likley to pass?  More.

So how can naysayers continue to insist that a similar act regarding domestic oil production and refinement capacity might not also have a similar impact on the price of oil and everything that uses it, motor fuels in particular?

There are plenty of people who insist that if the US announced tomorrow that it has lifted all its drilling moratoriums, opened up development, streamlined the lease and permitting process, committed to increasing domestic refining capacity, and is willing to let oil and gas companies invest their own money in new technologies to extract more resources, that it would have no short term affect on prices.

I contend that if the US did even one of those things it would have an immediate affect.  Not just say they were going to do it, but to actually do it.  But imagine if we planned to do all of them? 

Oil prices could collapse if the largest customer of global oil became more of a do-it-yourselfer.  But we need a president who understands that cheap energy promotes jobs and growth in every sector, that America is probably the cleanest extractor of it on the planet, and that it is a national security issue worthy of our immediate attention.

But Obama does not agree and as long as this President, the environmentalists, the Farm Lobby, their rent seeking factory farms, and Republican morons like McCain and Romney are addicted to Cornography, we will continue to pay tens of billions up front to hide this failed policy of the past while centuries worth or more of cheap domestic energy sits under our feet.

 

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