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Reduced corn production makes increased ethanol content in fuel worrisome

A new report has been published that looks at the tense negotiations between the White House and automakers over CAFE standards that would push fuel efficiency to 54.5 mpg by 2025. According to the report put together by the House Oversight and Government Reform Committee, the Obama administration "openly played automakers off of each other to gain a tactical advantage over the industry." 
"The inevitable product of this reckless process was a pair of rulemakings that reflect ideology over science and politics over process. … Americans will be forced to drive expensive, unpopular and unsafe automobiles mandated by the Obama administration," stated the report.
However, representative Elijah Cummings (D-Maryland), rejected the report stating, "Any allegations that the White House is seeking to weaken the auto industry are simply ridiculous — this is the White House that saved the auto industry from its near-collapse."

"Japan is angry. Feel like they have been screwed." -- Toyota
The report also features notes from auto manufacturers involved in the negotiation process with Washington. The notes show that foreign automakers particularly were unhappy with the process and felt that the rules were jilted in favor of Detroit automakers. Despite misgivings, most foreign automakers agreed to the deal. Handwritten notes in the report from Toyota stated, "Japan is angry. Feel like they have been screwed."
Automakers maintain that the new requirements would add about $2,000 to the cost of the average vehicle by 2025 or roughly $3,000 when costs from the 2012 to 2013 fuel efficiency rules are figured in. Automakers felt pressure to agree to the Obama administration's fuel economy standards over fears that California would enact even stiffer efficiency ratings if they turned Washington down.
While fuel-efficiency standards are set to increase in the coming years, the White House is working hard to get more ethanol into the nation's fuel supply to help reduce the need for foreign oil. However, the U.S. is currently in the middle of a corn shortage. Ethanol in the U.S. is primarily produced using corn. Corn production in the U.S. has fallen drastically due to drought, and livestock producers fear that increasing the ethanol content in gasoline will result in even less corn being available feed, therefore, raising prices of feed and food supplies.

Severe drought conditions have obliterated this year's corn crop [Image Source: MSNBC]
The Detroit News reports that over 180 members of Congress are calling on the Obama administration to waive increased ethanol requirements in fuel. White House spokesman Jay Carney said, "The EPA has made clear that they're working closely with the Department of Agriculture to keep an eye on yields, and they will evaluate all the relevant information when assessing that situation."
EPA spokeswoman Alisha Johnson said, "We are in close contact with USDA as they and we keep an eye on crop yield estimates, and we will review any data or information submitted by stakeholders, industry and states relating to the RFS program."

Sources: The Detroit News [1], [2]

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Can't believe either side
By topkill on 8/13/2012 10:12:47 AM , Rating: -1
This is the same auto industry that claimed they would go bankrupt and destroy the ability for Americans to buy cars if they had to put in seat belts, then passive restraints, pass safety crash standards, hit 20mpg, yada yada yada.

Lying, whining assholes. STFU already.

On the other hand, what is up with the Obama administration not backing off the ethanol requirements while we're having historical droughts and clear signs that the cost of EVERYTHING on the food side is going to go up because of this.

Are they TRYING to lose the election? Hey, I know...Let't have high fuel prices AND high food prices in a down economy going into an election season! That'll work!


RE: Can't believe either side
By Paj on 8/13/2012 10:29:40 AM , Rating: 2
Welcome to the real world!

Which of the following are correct?
a. food prices will never go up
b. speculators trading in commodity derivatives are good for food prices and the world in general
c. oil is infinite, we can always find more
d. everything is fine, we dont need to do anything
e. none of the above

If you answered 'e', well done!

RE: Can't believe either side
By freedom4556 on 8/13/2012 11:02:27 AM , Rating: 2
I'd personally go with d.

Every time the government intervenes in the auto industry it causes unintended consequences. For instance, they penalized high fuel consumption with the Gas Guzzler Tax and it lead to the prominence of the pickup truck and played a large role in the SUV craze, as they are exempted. Protective tariffs on imports lead to foreign makes like Toyota becoming major manufacturing players here in the states. Restrictions on pick-up truck imports were completely sidestepped by simply bolting on the bed at the dealer, importing as a cab-only in a different tax bracket. Let the market forces sort it out, and if that means we don't need to manufacture cars domestically, then so be it. Don't waste money doing something inefficiently if somebody else can do it better. And if we can do it better, the market will bear that out.

RE: Can't believe either side
By wookie1 on 8/13/2012 1:01:29 PM , Rating: 2
a. food prices go up and down to match the point where the supply and demand curves meet.
b. scapegoating speculators is a popular sport, but note that while sometimes speculation can cause a rise in prices, it is equally likely to cause a fall in prices.
c. oil may not be infinite, but there hardly seems to be a shortage in the next half-century.
d. if by "we", you mean the government, then YES this is the correct answer. Consumers will decide what compromises match their preferences then, not some overpaid unelected beaurocrat paying off his cronies.

RE: Can't believe either side
By Ringold on 8/13/2012 2:58:25 PM , Rating: 2
b. speculators trading in commodity derivatives are good for food prices and the world in general

A fact pointed out by many people but somehow never seems to make it to NBC or other left-wing news outlets is that commodities who do not trade on futures markets, and are thus bought and sold exclusively by producers and consumers, have price volatility generally equal to commodities that DO have options contracts freely traded. The Economist has done a couple good articles over the past few years on it, citing specific traded an untraded commodities, measures of volatility, price records going back decades, etc.

It's hard to imagine how options trading can fundamentally move a market anyway.. Someone selling an option that predicts the price will go up has to be bought by someone taking the other side of the trade, thus cancelling each other out. Even pseudo-Marxist Paul Krugman at the NYT has admitted this with his "It takes two to contango" blog post I remember years back.

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