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Friday, January 11, 2008

The Ethanol Scam

Another example of abuse of State power was the mandate for ethanol to be mixed with gasoline. This had the effect of driving up corn prices and food prices. A lot of farmers switched to growing corn for ethanol instead of other crops.

Government-mandated ethanol was, in effect, a huge subsidy for corn farmers.

If ethanol really is more efficient, then the free market would choose it eventually. As the price of oil rises, ethanol and other alternative fuels will become cheaper. Besides, most of the increase in the dollar-denominated price of oil is really a decrease in the value of the dollar. If you look at "price of oil" divided by "price of gold", then the price of oil hasn't increased that much.

Of course, you don't see government police shutting down gas stations for providing ethanol-less gasoline. The implied threat of State power forces everyone into compliance. Besides, large gasoline corporations love this regulation. They pass on the cost of the ethanol as higher prices. Their profit margin as a % of price stays the same, due to "market forces". Their absolute profits increase as the retail price increases.

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