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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 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.


"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein














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