Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

23 June 2008

Obama’s Energy Mistake

Nobody’s perfect. I just posted an essay explaining at length why I gave my second maximum allowed contribution to the Obama campaign. I had and have no buyer’s remorse.

But the New York Times today pointed out an important respect in which Obama’s stated energy policy is deficient. That’s his support for corn-based ethanol.

Energy is a matter of engineering and economics. Politics should have little to do with it. The biggest and most powerful interest group in the country can’t, with all its political influence alone, create a single kilowatt-hour or BTU.

We’ve ignored that essential fact of life for far too long. We’ve let the oil and gas lobby paint us into a corner in which two-thirds of our transportation depend on products from the most backward nations on Earth. We’ve let the coal lobby entice us into overuse of a fuel that produces horrendous pollution and could destroy life on Earth as we know it. And now we’re allowing corn farmers to mislead us into a massive misuse of both corn and energy.

In engineering and economics, numbers matter. For thirty years, we’ve been busy flushing ourselves down the toilet of history by ignoring them.

Now we are ignoring two of the most important numbers in the history of energy policy. One is the fourteen or so times by which the cost of gasoline-powered transportation now exceeds the cost of electrical transportation. That’s the number right now, with further increases likely as the price of oil rises. Another important number is the factor of four—at least—by which cane-produced ethanol beats corn-produced ethanol in energy efficiency. Producing corn-based ethanol wastes energy, and buying it wastes money.

If you haven’t noticed lately, neither the world nor we Americans are awash in cheap energy. We can’t continue to ignore hard numbers like this if we want our society (or the Earth) to survive and prosper. Doing so is just plain dumb.

Obama and his superb staff know this. He and they are far more savvy on both engineering and economics than anyone on McCain’s campaign.

But so far politics has trumped engineering, economics, and common sense.

I can understand the temptation to pander to Iowa corn farmers. After all, it was the good people of Iowa who jump-started Senator Obama’s campaign by convincing everyone that race was not the factor everyone feared. Without Iowa, we would all be facing the prospect of a much less competent and gifted president.

But Iowa farmers are adults. More important, the high price of corn and other crops today is only partly due to our infatuation with inefficient corn-based ethanol. Bigger and longer- term trends are forcing higher food prices, with little probability of reversal. Among them are rapidly increasing worldwide prosperity, especially in China and India, which together account for more than one-third of humanity. Richer people want and can afford more food.

The United States’ corn farmers are among the most efficient and productive on Earth. They are smart enough to know that forsaking the gimmick of corn-based ethanol and opening our market to the vastly more efficient cane-based variety won’t destroy their livelihoods or their prospects for a prosperous future.

The only rational argument I have heard for pandering to them is the notion of energy independence. But cane-based ethanol—which, I repeat, is at least four times more energy-efficient than its corn-based rival—mostly comes from Brazil. Brazil would love to sell us lots if only we would reduce our exorbitant tariffs.

Brazil is not Saudi Arabia, Iran, Iraq, Venezuela or even Russia. It’s a friendly, fully democratic, free-market country. It has an admirable recent economic record, the best of any nation in Latin America. It has been far smarter than we have in weaning itself from the Saudi Oil tit. Lumping Brazil with the most backward nations on earth just won’t wash.

Brazil would not be the only beneficiary of a more rational ethanol policy. Cane-based ethanol can provide an economic path toward renewable energy, reduction of worldwide poverty, and renewal of our global leadership in the Third World. It offers huge economic and social benefits throughout the Southern Hemisphere. The analysis is too complex to repeat here, but it appears in another post.

Just last week, Senator Obama abandoned his apparent pledge to limit his campaign to federal financing. As my last post explains, I understand and support that decision. Without it, the irrational element of racism might deprive us of the leadership of the most gifted politician we have seen in forty years. That decision also revealed the steel inside Senator Obama’s idealism. You can’t promote ideals if you don’t win.

But having lost some credibility with that policy reversal, Senator Obama needs to regain some by showing that he is a realist and problem solver, not a panderer. It is unrealistic to think that support for growing corn in the United States to make ethanol, when a cheaper, more efficient variety is available from Brazil, is anything other than a step sideways in energy policy and a step backward in economic policy.

Energy policy is our most important issue, bar none. To feed our oil addiction, we import more than ten million barrels of oil per day. At $130 per barrel, that’s $1.3 billion per day that we cannot spend on things like health care, education, or our neglected infrastructure. That’s over twice as much as the average daily cost of the War in Iraq ($1.2 trillion, divided by roughly 1,915 days, or $626 million). And, unlike the War in Iraq, which we hope will end soon, our spending spree on oil has no foreseeable end point, unless we provide one through rational energy policy.

Energy policy is too important a matter to get wrong or to pander on. Senator Obama should reverse his policy on corn-based ethanol, promise to eliminate tariffs on foreign cane-based ethanol, and focus his energy policy on nuclear, wind and solar power. He can’t afford to back himself into a corner with foolish campaign promises, and he can’t afford to cede this crucial issue to John McCain.


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