The Ethanol Recession?
Posted by Evan Herrnstadt on March 3, 2008
If you had qualms about corn ethanol before, how about facing the prospect of an Ethanol Recession? From the LA Times:
Economists are cautioning that the nation’s growing dependence on corn would make for a double jolt in the event of a drought across the Midwest: soaring prices not just for food but also for gasoline. Analysts now warn that a “corn shock” might not be far off — and it could lead to $5 gas and $3.50 eggs as the effects reverberate across the economy. “We are replacing price volatility from the Middle East with Midwestern weather price volatility,” said Michael Swanson, a Wells Fargo & Co. vice president and agricultural economist.
As our food and fuel sectors become more and more integrated, we face the possibility that high food prices would be made all the more potent by a slowing economy driven by high fuel prices. However, in lamenting the consequences for our grocery budgets, it’s easy to forget that other economies would likely be hit even harder than our own. Lester R. Brown, president of the Earth Policy Institute, notes:
“The rest of the world is less able to pay high prices for food. What’s annoying for us is life-threatening elsewhere.”
Honestly, in general terms, I think we would all do well to think in these terms as we go forward making policy.