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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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RE: More exploitation and abuse of consumers
By Targon on 8/13/2012 10:21:10 AM , Rating: 2
CAFE standards are not as horrible an idea as it may seem at first glance, but when combined with the Ethanol mandates, you end up forcing a reduction of fuel economy with Ethanol, and then a requirement for better fuel economy overall, and THAT is what most should be against.

Getting better fuel economy without sacrificing engine power is the current name of the game, and without the CAFE standards looming over the industry, we would NEVER see this sort of thing. Yes, there has been a slow improvement in fuel economy over the past few decades, but it has taken CAFE to get the auto makers to make fuel economy a priority.

Now, Ford does not seem to be suffering from all of this when it comes to auto sales. Yes, there are some cars that "no one wants", but I don't see anyone complaining that the EcoBoost versions of cars/trucks we see today are so horrible compared to the previous generations, and prices have NOT gone through the roof, so the only issue with "cars no one wants" seems to be the EV market.


RE: More exploitation and abuse of consumers
By Reclaimer77 on 8/13/2012 12:02:42 PM , Rating: 1
quote:
Getting better fuel economy without sacrificing engine power is the current name of the game, and without the CAFE standards looming over the industry, we would NEVER see this sort of thing. Yes, there has been a slow improvement in fuel economy over the past few decades, but it has taken CAFE to get the auto makers to make fuel economy a priority.


First off your premise is false. Hybrids were developed and brought to the market from a 100% private effort. No Government law or CAFE standard caused this to happen. We do not need things like CAFE to spur innovation and economy.

Secondly why do you believe it's the Government's responsibility, and right, to "get automakers to make economy a priority"? That's just fundamentally wrong on so many levels. We the consumer dictate to the automakers OUR priorities. We are their customers, not the Government.

quote:
but I don't see anyone complaining that the EcoBoost versions of cars/trucks we see today are so horrible compared to the previous generations


EcoBoost came out in 2009. Which means it was in R&D years and years before any CAFE increases were being discussed by the Obama Administration. So guess what? Once again, the free market on it's own innovated and improved something without your fantasy of a "Big Brother" making everything good happen.


RE: More exploitation and abuse of consumers
By nolisi on 8/13/12, Rating: 0
RE: More exploitation and abuse of consumers
By Ringold on 8/13/2012 2:48:46 PM , Rating: 2
quote:
No it isn't- there are certain things we need to to keep this economy running efficiently- power, oil, highways, food, national defense, open communication a legal framework to resolve disputes and a workforce.

It sucks, but there's no good (and in some cases none) free market framework for managing many of these items well- the free market is too prone to the interests of profit to manage these in an efficient manner which promote economic growth.


I made bold the important part, because thats precisely WHY free, or relatively free, markets can be designed to manage all of those things you listed more efficiently then government.

I'll take the power and Enron examples together. Enron was an example of poor accounting oversight and the occasional occurrence of corporate malfeasance -- which is no more or less common than government malfeasance (do you watch the news?), because that sort of behavior is human nature, private or public. But the alternative, state-dominated grids, leads to huge losses as political elements lobby for cut-rate tariffs for their base (such as farmers) and inherent inefficiency in staffing and infrastructure decisions, leading to things similar like the Indian black-out and chronic under-investment.

Then you mention oil. Pemex, increasingly Petrobras and other state-owned oil firms are so bad at managing their business (but oddly good at finding lifetime jobs for every child and cousin of politicians) that they have to pay free-market actors, such as Exxon and BP, to either advise, explore, take part of the work or, in fact, do everything and simply share in the profits. Not a ringing indictment of Marxism there.

Then highways. While we can agree roads are a necessary public good you should also be aware that its one of the most corruption-ridden areas of government procurement around the world, even in otherwise 'clean' places like government. Kick-backs abound. If someone along the line had profit-motive to keep costs under control, maybe things would turn out different?

And food! Yes, lets talk about government and food! Articles like this point out exactly why government should stay away from closely managing agriculture output; our governments become captive, hook line and sinker, to the ethanol lobby, to the detriment of us all. And what of famines? Remember rice prices spiking a few years back? There was no lack of rice generally, just some exporting governments decided to block exports to placate their local populations. Global food riots ensued. Cause? Government intervention. Indeed, most famines are government-created, read your history.

And legal framework. Yes, that is extremely important, particularly with respect to private property rights. Which is something this White House has ignored from day 1, making a mockery of the capital structure at GM and Chrysler, placing the UAW 1st and secured bond-holders, even non-union pension plans, last. Obama seems to of embraced Brazilian president Getulio Vargas' quote "For my friends, anything; for my enemies, the law." When read in that context this article shows, again, Obama trying to benefit the UAW-run Detroit firms at the expense of other automakers, which with their domestic factories are no more "foreign" then GM.

I will, however, concede national defense. There's no good free market way to pay people to kill and be killed in the name of the country.

The strength and power of capitalism is the part that you deride; the profit motive. Regulate things if we must but history is clear that there is no better way to ensure someone is keeping an eye out on the bottom line, because waste and cost-overruns come out of their pocket, versus a government solution, where the treasury has unlimited capacity to tax and armed police forces to enforce its collection. Marxists never want to talk history and facts because its inherently an emotional, philosophical system.


RE: More exploitation and abuse of consumers
By nolisi on 8/13/2012 6:32:26 PM , Rating: 2
Ringold- first, thank you for a thoughtful response- I do appreciate it as it's rare to find in this forum.

First I should clarify- I don't necessarily advocate a government run industry in most (if any situations). However, I do think regulation and government oversight is a necessity in many/most.

Second, states like Israel have proven you that government run can institutions like universal health care effectively and cost efficiently without corruption.

Thirdly, much of the poor management issues you cite in government can be found all over the market, from consumers to corporations.

Poor management (and corruption) led to the collective failure of hedge funds, over leveraging of assets, and lending to unqualified borrowers which caused the financial crisis we just experienced (don't *you* watch the news?)

So I'm sorry, using poor management as a mark against government while the free market has just done this kind of damage is verging on denial.

Lastly, you might reference the fact that government regulation failed to prevent problems, or that government is prone to bribery and kick backs.

You fail to recognize that many of these issues have their roots in the free market.

The market lobbies to soften or eliminate regulation viewed as an impediment to immediate profit growth.

The government may accept bribes and kickbacks, but it's the market who's making the bribes and kickbacks.

You might even accuse the White House of making a mockery of capital structures- but GM and Chrysler failed to protect their capital structures in the first place. You're probably going to blame Unions for that- but unions are simply the free market response to corporate failure/irresponsibility/malfeasance (so again, making my point- blame the market).

BTW you completely ignored my suggestion allowing the free market to govern 95% of the economy including commodities and services. My suggestion isn't for complete government control over markets, or Marxism- but rather managed markets in areas of necessity.


RE: More exploitation and abuse of consumers
By Ringold on 8/13/2012 10:05:54 PM , Rating: 2
quote:
However, I do think regulation and government oversight is a necessity in many/most.


I'd agree there, ground rules are good to have, and regulators that are independent and not captured by industry are key too.

quote:
Second, states like Israel have proven you that government run can institutions like universal health care effectively and cost efficiently without corruption.


It's an open question how much the worlds health systems rely on the research that biotech firms fund on the backs of their American profits, but I'll make this point too: Switzerland strikes a good balance with universal coverage and market competition. It's also relatively easy for smaller nations that are fairly ethnically homogenous to run things cleaner. Things that Sweden gets away with tend to fall apart in largely multi-ethnic democracies.

quote:
Thirdly, much of the poor management issues you cite in government can be found all over the market, from consumers to corporations.


Yes, but capitalism is the nearly undisputed king of economics, now and since the forerunners of Adam Smith, because on the average free market actors do a less bad job then government hacks. Again, because the money tends to come out of their own pocket, and those pockets aren't bottomless.

quote:
Poor management (and corruption) led to the collective failure of hedge funds, over leveraging of assets, and lending to unqualified borrowers which caused the financial crisis we just experienced (don't *you* watch the news?)


What? That's a complete rewrite of history. Hedge funds collapsed, but to my knowledge not a single hedge fund got tax payer money. Further, they were no where near the root of the problem. Lehman Brothers did not CAUSE the problem, they were the canary in the coal mine warning us of the rot and looming disaster in the underlying credit market. Any economist not tied to a political campaign on the left or a politically-motivated organization, even liberal economists, can tell you what happened. The sub-prime market essentially did not exist until the government mandated its opening via acts like the Community Reinvestment Act, which forced banks to lend to the poor. Then, in a classic example of how to inflate an asset bubble, Fannie Mae, Freddie Mac and the FHA, all understood to have the implicit backing of the Treasury and therefore by extension the credit of the United States, started throwing hundreds of billions of dollars at the market. So banks, obviously, piled in, underwriting loans and selling them on to the government agencies, or to other banks, pension plans etc who insured them with the government. This was all egged on a bit by artificially low interest rates; I don't necessarily blame the Federal Reserve, as inflation wasn't showing a problem, thanks to low import prices. But in retrospect, the Fed helped fuel the bubble as well.

Like in all asset bubbles, the house of cards eventually came apart. But again, this crisis had nothing to do with the "free market;" look at the % of home loans being originated right now and who buys them. The vast majority? Still being bought by GSE's. There's nothing free about a market that, without government diktat wouldn't even exist, and that is totally dominated by government activity. That's like saying there's a free market in law enforcement because, hey, we've got both city cops AND county sheriffs! Nonsense; banks have just been conduits of government policy that was playing to our national cult of home ownership.

quote:
You fail to recognize that many of these issues have their roots in the free market.


I just pointed out what any of a thousand articles penned by economists on both sides of the isle can confirm; the recent crisis with which you refer was created by government mismanagement of the housing sector, not banks doing so themselves. Note that the CRA was created because banks didnt want the risk of subprime mortgages, thus requiring the CRA to be forced to lend to the poor and those with iffy credit. Look at the banks in China that have people worried too: It's not the loans the banks made freely that give people pause, but the loans the government forced the banks to make to crony-capitalist state-backed firms.

quote:
The market lobbies to soften or eliminate regulation viewed as an impediment to immediate profit growth.


Companies have every right to petition their government as the rest of us, sure. That companies can capture regulators at times is a bad thing, yes. But so are these clowns at the EPA whose mission seems to of been destroying the coal industry.

quote:
The government may accept bribes and kickbacks, but it's the market who's making the bribes and kickbacks.


Ah! I see. Blame the moral failures on the other guy.

quote:
You might even accuse the White House of making a mockery of capital structures- but GM and Chrysler failed to protect their capital structures in the first place.


How is that an excuse for violating property rights? Starting to devolve in to playground-style arguments of "they did it first!" to make the actions of the left somehow excusable.

Long story short, dig past the surface and a lot of "market failures" are because someone in government decided to stick their toes in the water. You'll have to dig MUCH deeper than the recent banking crisis to find genuine market failure. I'll also point out that many people in countries like Sweden have politically evolved on the left so far that it makes American liberals and Democrats look like the stone-age communists they are, because Sweden had a crisis, with government spending as a % of GDP hitting 80% at its peak I believe, before coming to realize they were destroying themselves. Now the country pretty much accepts that some degree of free market competition is necessary almost everywhere. We just haven't collapsed here in this nation yet, and the left is too polarized, blind and uneducated to learn from others mistakes or from history.

Fun side note: Sallie Mae has inflated the exact same sort of bubble in the education market. It's driven costs up, and students have loaded up on debt, exactly how home prices and debt levels soared in the housing market. And this scares the crap out of politicians.


By nolisi on 8/14/2012 1:10:20 PM , Rating: 2
I'm not going to respond to everything because A) you do make some decent points, and there's no need to extend the debate it by arguing minutiae and B)you keep either missing key points in what I'm saying, or make glaring errors - which is what I'll focus on.

quote:
Yes, but capitalism is the nearly undisputed king of economics, now and since the forerunners of Adam Smith, because on the average free market actors do a less bad job then government hacks.


For the most part yes- but in invoking Smiths name, I'm forced to remind you of a few things:
1) he warned against giving the market too much power
2) he advocated government protection of the poor
3) he advocated progressive taxation

quote:
The sub-prime market essentially did not exist until the government mandated its opening via acts like the Community Reinvestment Act, which forced banks to lend to the poor.


Complete and utter bull- this is a complete rewrite of what the CRA did (I've heard this before). The CRA did mandate loans in poor communities- but it did NOT force banks to make risky loan options available to unqualified borrowers, or loan out more money than borrowers could afford.

First- it's ridiculous to think that an act created in 1977, and whose provisions were weakened in the subsequent 30 years had this kind of an impact.

Secondly- most banks that made sub-prime mortgages available were NOT subject to the CRA:

http://www.businessweek.com/investing/insights/blo...

http://blogs.wsj.com/marketbeat/2009/05/29/did-the...

Banks willingly went for subprime loans to open up new markets and enhance profit potential, period. Most opinions otherwise ignore the crucial fact that CRA backed loans had historically low levels of default to begin with, and most subprime loans that the did default were outside of CRA regulation.

I even heard the argument that the relaxed standards of the CRA eventually "spread to the rest of the market."

Again- the market choose to go the direction of least resistance, the government didn't force them to. Markets typically go for LCD because it's cheap and fast, not because it's safe and economically viable long term (the essential problem with being completely profit driven).

quote:
How is that an excuse for violating property rights? ...to make the actions of the left somehow excusable.


It's not an excuse. But if you're looking for one- they asked for help. Or did you forget that part? Maybe you'll suggest that government forced them to take bailouts? They did have another option.

quote:
Ah! I see. Blame the moral failures on the other guy.


As for this- I'm not suggesting that we blame one guy or the other (you're actually the one suggesting that). I actually acknowledge that both sides of the equation are to blame in cases of corruption. But by focusing the blame on "government corruption" you (and others) completely dismiss the idea that the market are some how culpable in the process as well.

And secondly- my rudimentary (sarcasm) knowledge of problem solving suggests that you solve the root of the problem. The root of the problem is the market players profit motive- that's what makes the bribes possible in the first place.

Lastly- while the official may be a part of the government- many of our governmental officials came from the market in the first place. Where do you think the influence is going to come from?


RE: More exploitation and abuse of consumers
By DiscoWade on 8/13/2012 6:35:40 PM , Rating: 2
quote:
Then highways. While we can agree roads are a necessary public good you should also be aware that its one of the most corruption-ridden areas of government procurement around the world, even in otherwise 'clean' places like government. Kick-backs abound. If someone along the line had profit-motive to keep costs under control, maybe things would turn out different?


I will give you an example. Here in North Carolina there is a toll highway that is going to be built near Charlotte called the Garden Parkway. In North Carolina it is common knowledge that there is a "good old boys" mentality in the DOT. The route for the Garden Parkway conveniently goes through land that state senator William Current (a Republican) just sold to his son. When funding and planning for the Garden Parkway was talked about being axed, someone created a bogus letter in the DOT's name saying it was needed.
http://www.charlotteobserver.com/2012/06/19/332753...

That is corruption. Although this has changed recently, in North Carolina it is well known that a few eastern towns get all the DOT money while the rest get what is left over. The towns along the US-70 corridor from Raleigh east got favored status. Raleigh projects get escalated, while projects in the other metro areas get delayed. Former governor Jim Hunt was well-known for his corruption and he made sure his hometown of Wilson received many favorable road projects. Those projects are done now and the special eastern towns aren't being favored like they were, but the "good old boys" network remains. Now it is statewide. North Carolina is a very corrupt state.


By Ringold on 8/13/2012 9:39:35 PM , Rating: 2
North Carolina doesn't sound any more corrupt then any other state I follow. I know here in Florida, that is all par for course, at the city, county and state levels. Those sorts of stories break, without much fanfare, in the news all year long, year in and year out. I hear the same from Georgia and Indiana, and when reading news from overseas, I read about it everywhere from squeaky-clean Japan to crony-capitalist former Soviet bloc nations to South America. Like I said, road and infrastructure corruption is probably the 2nd oldest economic activity, right behind prostitution, when one group of guys probably decided the brothel needed a path cleared to it, and some other guy bent them over the yet-to-be-invented barrel to do it.

There's an unquestioning belief it seems like on the left that government spending is good spending, that its inherently more noble and just than private-sector spending, less vulnerable to human error, greed, malice, or ego. History unequivocally says that's not true.


RE: More exploitation and abuse of consumers
By wookie1 on 8/13/2012 5:45:11 PM , Rating: 2
"No it isn't- there are certain things we need to to keep this economy running efficiently- power, oil, highways, food, national defense, open communication a legal framework to resolve disputes and a workforce."

I can agree with you on the national defense and legal framework items, these are the basic functions expected from government - but the others are too important to allow the government to handle. Focusing on the profit motive in the free market ignores the other side of the transaction as well, that the buyer is motivated to spend the least $$, and in a free market will take his/her business to the supplier that can provide the most value for the least cost. Since government services normally enjoy a monopoly, there is no signal or threat to cause the quality of the service to improve or the cost to reduce. Think of the DMV.

With the free market transactions, both parties freely agree to the terms of the transaction. With the government monopoly, one party is forced at the point of a gun to accept the terms defined by the government. It's sometimes surprising to see how many people prefer to structure society for the latter.


RE: More exploitation and abuse of consumers
By nolisi on 8/13/2012 6:42:04 PM , Rating: 2
quote:
Focusing on the profit motive in the free market ignores the other side of the transaction as well


Actually, no it doesn't, the profit motive on the other side of the transaction still exists- in their case to preserve profit. That is taken fully into account.

quote:
free market will take his/her business to the supplier that can provide the most value for the least cost.


This is a bit of a fallacy when it comes to necessary services. Do you have a choice in electricity/water providers? Do they compete for your business, raising market efficiency and promoting innovation? Or does profit motive factor into the equation and does the power company turn off generators to raise prices sometimes?

In certain areas, we have no choice but to accept monopoly. My suggestion: eliminate profit motive in these areas. In other areas, implement very simple "don't shut off the generators to raise prices to please your stockholders" style regulation.


By wookie1 on 8/14/2012 12:43:27 PM , Rating: 2
"Actually, no it doesn't, the profit motive on the other side of the transaction still exists- in their case to preserve profit. That is taken fully into account."

Spending as little as possible, preserving profit, whatever you want to call it - the buyer wants to spend as little as possible and the seller wants to gain as much as possible. If the 2 parties find a price agreeable to both, a deal can be made. For some reason, it is considered greedy that the seller wants to gain as much as possible but not greedy that the buyer wants to give as little as possible.

For certain services that are dominated by infrastructure costs, a monopoly system has evolved. Very few services fit this description, I think that you named both of them. Telephone used to be included, but obviously there are now many phone service options. Back when telephone was a monopoly, you even had to buy the phone itself from a company store, then there was deregulation and prices dropped and you can even buy a phone at any store now (if you still use a land line).

Eliminating the profit motive eliminates what drives further investment and focus on efficiency. This should be avoided to the maximum extent possible. When investment in businesses is voluntary, the business plan must be more solid than when the government wrenches taxpayers' money away and drops it on poor business plans.

You started with the argument that certain things are needed for the economy to run efficiently - power, oil, highways, food, national defense, open communication, and a legal framework to resolve disputes. I would argue that only national defense, and a legal framework are items where government should be involved. The others are already proof that the free market can provide these. For oil (gasoline?) and food, you have many options of types and brands available at many stores, all without some government mandate. What would a government-only food supply look like? What variety would you be able to get? We have plenty of open communications even despite government efforts to obstruct it. I also don't buy the suggestion that highways would not be built if not for the government.


By Reclaimer77 on 8/13/2012 6:55:22 PM , Rating: 2
Okay I'll let you enjoy your Communist anti-free market fantasies. My BS tank is all full at the moment.

The free market is self-regulating and smoother running than you give it credit for. There's no good alternatives that are any better. Especially Government-run.


By wookie1 on 8/13/2012 12:53:33 PM , Rating: 2
"without the CAFE standards looming over the industry, we would NEVER see this sort of thing...there has been a slow improvement in fuel economy over the past few decades, but it has taken CAFE to get the auto makers to make fuel economy a priority."

CAFE just restricts what types of cars consumers are allowed to buy. The cars offered by automakers reflect the preferences and priorities of the consumers. Car models that don't get cancelled quickly, as there are many makes and models competing for sales. Don't blame automakers for being slow, when they're just following what consumers want. Obviously, consumers don't prioritize super-high fuel efficiency to the same degree as the government, but instead prefer more space and some level of power and other amenities.

Also remember that it is the CAFE standards that killed the station wagon and pushed people into SUV's. The net result certainly wasn't less fuel usage, as the SUV's get worse mileage than a station wagon. It just wasn't practical to get a SW to meet the CAFE requirements that were enacted on cars, so people had to move to trucks to get the vehicle they wanted.

As far as the president "saving the auto industry", that seems laughable. At most, we spent 10's of billions to save GM. Other automakers were holding up fine. I doubt that the gov't subsidizing GM "saves" their competitors, though, who have to foot the bill for their debts and capital costs while GM's debt was reset to 0.


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