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Unintended Consequences III

In September and October, I talked about unintended consequences. I can’t help but ponder the concept, and will continue to post those that strike me as more than a passing thought.

We, as a country, are trying to get away from the stranglehold the oil producing nations seem to have over us. The current $3/gallon price of gasoline is putting a dent in all of our budgets, and the search for alternative fuel is on. Now, I believe that once an ideal storage system (read that – a better battery) is created, we will all be better off as wind and solar energy will gain favor. But, meanwhile, I hear a demand growing for “home grown” fuel in the form of ethanol, created from corn (or other grain). This scares me. It’s not too tough to see that any large use of this piece of the food chain will have a ripple effect on the rest of the system. First the cost of all grains will rise due to the increase in demand. Then the cost of any grain-fed livestock will rise as well. We will have a solution that’s far worse than the original problem. I welcome any view to the contrary.

Here is the futures chart for corn, a scary picture to say the least.

Corn Futures

JOE

  • Augustine February 13, 2008, 1:07 pm

    I think that you’re right on. Hasn’t the price of corn quadrupled or something because of mandatory increased use of ethanol as a fuel?

  • JOE February 13, 2008, 8:51 pm

    Hey, thanks for the post! When I read it, I thought I could put up a chart to back up the story. Corn has risen more than oil during this timeframe.

  • Augustine February 14, 2008, 3:46 pm

    And here’s the crude and gas price chart for the same period: http://tinyurl.com/yry8d9. He who has eyes to see it, let him see it.

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