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• I don't think it is that devastating (Score:1)

  by btilly (5037) on 2008.06.02 23:46 (#63129) Journal

  First of all the ethanol thing is not because it makes economic sense. It is because the US government subsidizes ethanol. And then demonstrates its true priorities by putting a tax on ethanol imports. (It is much cheaper for Brazil to make ethanol from sugar than for us to make it from corn.)
  
  Secondly I'm not convinced that prices past $100/barrel are sustainable indefinitely. The issue is that when prices pass $60/barrel, it becomes economic to mine oil sands. We have bigger reserves of oil sands than we do of normal crude. Unfortunately it takes several years to ramp up capacity, and the ramp-up cost isn't paid back unless you can sustain production for several years. But you can bet that oil sand production is ramping up right now. When it comes online in force, that's going to put downward pressure on oil prices.
  
  Thirdly linkages go two ways. If we can get oil from cellulose, the cost of biofuels will put downward pressure on the cost of oil. Which puts downward pressure on the cost of foodstuffs that are currently competing with oil. An increase in the price of meat coinciding with a drop in the price of corn and wheat may change diets, but helps most people's budgets. Particularly those people who are rioting for lack of food now.
  
  Plus economic incentives can lead to odd things. Those models of how bad gamba grass is? If gamba grass can be used to make oil, that gamba grass that nobody eats will get "eaten" by oil production. Right now going in and cutting down that grass is not cost effective. But suppose you get a gallon of oil per square meter of grass you cut. Suppose your profit margin on that gallon was, say, $40. Do you think the wild gamba grass would get cut down?

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  • Re: (Score:1)

    by Alias (5735)

    > First of all the ethanol thing is not because it makes economic sense. It is because the US government subsidizes ethanol.
    
    Subsidies like this are normally (and legitimately) meant to bootstrap industries or counteract temporary imbalances.
    
    You might subsidise ethanol to boot up an ethanol industry quickly, and you can gradually remove the subsidies later, once industry has improved their methods and can support itself.
    
    Other examples in a number of countries are subsidies for solar panels or wind generat
    • Re: (Score:2)

      by Ovid (2709)

      Subsidies like this are normally (and legitimately) meant to bootstrap industries or counteract temporary imbalances.

      Thank god that some people still realize this. All those people out there beating free trade drums and getting erections every time they hear "Adam Smith" like to ignore history. The US still has plenty of industries which have become the size they are due to protectionism (witness the rise and fall of the US steel industry). And anyone who naively thinks that tiny and immature African economies can blithely adopt "free trade" on a level footing with major Western powers needs to pay a little more atte
    • Re: (Score:1)

      by btilly (5037)

      While I agree there can be legitimate reasons for subsidies, I really think that the ethanol subsidy is because of the strength of the agricultural lobby in the government, and not for any nobler policy reason.
      
      On the rest of it, I see there being two alternatives. In one the cost of oil drops. In which case the gamba grass is not cut by people, but some of the other bad things don't happen. In the other the cost of oil stays high in which case it will be worth someone's while to cut that grass. Either a