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What happens when an energy crisis meets a food shortage?
Hey everyone, Peter Zeihan here coming to you from the Houston airport on April 12th.
The big news today is that the Biden administration is extending the ethanol mandate in an attempt to lower gasoline prices in the United States. The mandate was first established, we’re pushing 20 years ago now, in order to put corn into fuel mix.
So we have something called E15 gasoline, in much of the United States for at least much of the year is 15% ethanol. This new announcement would allow that 15% to persist within the fuel system year-round. The idea is it’s gonna knock about a dime off of energy costs and or off of gasoline costs. And that, that seems like a reasonable number to me.
The problem is that between events in Russia and Ukraine and China, the world has massive shortages of all of the fertilizers that we use to grow crops.
And any bushel of corn that is being used for ethanol is a bushel that is not being used for something else.
Now, despite the name corn, most American corn is not fit for human consumption, and it’s primarily used for industrial uses. And half of all corn produced in the United States ultimately makes it into an ethanol-fuel mix. This will increase that percentage a little bit.
Now the timing of this has a lot of impact because we are now getting into planting season for most of America. And so farmers are making the decision about what they’re going to put into the ground. Corn is a fertilizer-intensive crop, far more than soy or wheat. And by putting this mandate expansion into place, the Biden administration is absolutely encouraging the planting of corn.
Remember he’s not an economist, he’s a populist, he’s not a Democrat, he’s a populist.
And his goal is to remove whatever pain he can from his constituents as quickly and as seamlessly as possible. This fits with that.
The problem is that any corn we plant now, it means that later when we get to harvest season, is less soy and less wheat and less of the things we actually eat.
And we are already dealing with a global food crisis because of the global food shortage and because, I’m sorry, the global fertilizer shortage. And also because we’re losing, products, most notably wheat from both the Russian and Ukrainian spaces.
So while this will make the American consumer a little happier about gasoline, it will hugely impact the global consumer because of the lack of food at a critical time.
We are now shifting away from producing more food stuff when the world is already in shortage in order to produce more energy for the United States.
So just keep that in mind. This was an opportunity for the Biden administration to get ahead of the food crisis. And instead he’s decided to get ahead of the energy pinch that we’re feeling, not really a great choice here, but we’re gonna feel this a lot down the line.
Okay. That’s it from me until next time.
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The opinions published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
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