Corn for the Car

Kelly Durham

Did you know that you’re paying more for food so you can put corn in your car?  As goofy as that sounds, it’s true and it’s another ‘pocketbook’ issue of which you should be aware.

In 2005, Congress passed and President Bush signed the Renewable Fuel Standards Act.  This act was an attempt by the government to influence the free market by requiring a portion of our fuel supply to be composed of renewable fuels—in other words, ethanol.  The farmers and the ethanol producers loved the new law.  They predicted it would boost the market for their crops/product by creating a new government mandate.  The law certainly did that!

  

 It also did some things that are less appealing.  Corn is the ‘renewable’ product most easily converted into ethanol.  As a result, 40% of the US corn crop now goes into your gas tank instead of onto your table.  With the government mandating the use of corn ethanol, food prices have gone up 22% since 2005.  In comparison, core inflation is up 14% over the same period.  

Now, we all pay more when we go to the grocery store and buy meat, poultry or pork because these animals are fed corn.  In effect, our pocketbooks are subsidizing the ethanol industry.

But we benefit from the use of ethanol in our fuel supply don’t we?  You’ll be surprised to learn that we don’t!  Even though gasoline containing ethanol is cheaper, it is less efficient than conventional gasoline.  Fuel economy (according to government figures) is actually 25% less with gasoline containing ethanol.

This issue isn’t on the national agenda right now, but it will be in 2013.  Wendy’s has joined with other restaurant companies, grocery stores and other retailers to object to this government intervention in the marketplace.

Kelly Durham

Rutland Advisory Board Member
President, First Sun Management Corp.