Ambrose: Consumers pay price for government’s ethanol plan

Watch out, because here comes big government on a big mission to grab your wallet at gas pumps, empty it to no avail except to make everyone’s life worse, and then applaud itself for saving the world.

All this is revealed, among other places, in a New York Times front-page story that tries terribly hard to make Wall Street look like the miscreant, even though the story’s own detailed evidence makes the government’s root culpability perfectly clear. The story is about ethanol, but if you look beyond the words, it is about government of, by and for special interests, pretensions of the powerful, and how the rest of us pay. That means you and me, brother, you and me, sister.

But let’s get back to ethanol.

A corn product you can mix with gasoline, it was supposedly going to help make us energy independent as it also helped save us from global warming. From that rationale grew subsidies, tariffs and mandates while a study showed anything meaningful would require ruination of great gobs of land.

Even Al Gore, whose concern about global warming knows few hand-wringing equals, arrived at a pooh-poohing disregard for ethanol, and the ultraliberal columnist Paul Krugman of the Times once conceded it was a factor in rising food prices that had led to riots in some poor countries.

Politicians prize it, however, because, they say, it’s renewable and a possible gateway to other, better biofuels. What they do not say is that processors contribute money and more to their campaigns and corn farmers contribute votes to their electoral longevity.

Why, in 2008, presidential candidate Barack Obama was surrounded by advisers with ties to the ethanol industry, a little checking reveals.

The Times story takes us back eight years during the George W. Bush presidency, when we got a program that would give compliance credits to energy companies mixing ethanol with gasoline in accordance with a governmental formula. The program allowed these companies to sell their credits to other companies that were not fully complying, letting them off the hook of extremely expensive, possibly ruinous penalties. The credits, it was thought, would be costly enough to motivate them to mix more ethanol with gasoline.

Well, says the Times, the program allowed Wall Street to act as a middleman between those selling and buying the credits and, first thing you knew, wily financiers were figuring out ways to control prices.

Consumption declines

Credits went up twentyfold in a six-month period this year, meaning, among other things, that gas pump prices will zoom, too. The Times then goes on to tell us that Wall Street did nothing illegal, notes corporate denials of some of its suggestions, tells us of information limits, quotes a former top federal official as cheering the high credit prices as a victory for the good guys, and informs us about governmental errors.

One of the government’s biggest mistakes was linking its ethanol requirements with estimates of large increases in gasoline consumption when, in fact, consumption has decreased. Compliance by energy companies would leave them sending out ethanol amounts in gasoline that gas stations cannot accommodate without major renovations. That means energy companies cannot blend as much ethanol into gasoline as the government requires even as they must also pay steep compliance credit prices that are passed on to the consumer.

Ethanol is a bad joke. Even before this current threat, it accounted for a big hunk of gas prices while solving nothing to speak of. One of the best answers we have to cut energy costs, boost the economy and decrease greenhouse gas emissions is natural gas, which has already worked wonders, thanks to the free market and hydraulic fracturing technology. But in addition to the war on coal, Obama’s choice to head the Federal Energy Regulatory Commission in Ron Binz has made it sound as if there will also be an eventual war on this resource.

Hallelujah, Washington?