Most of my newsline reports coming through the wire lately have been covering the E85 fuel alternative — almost 60% today were articles and OpEd pieces regarding this growing fuel alternative. E85 is a blend of 85% ethanol (alcohol distilled from corn) and 15% regular gasoline fuel. With the amount of corn available in the US, and the taxpayer-funded subsidy paid for farmers to decrease their crop, it seems like a positive idea to take us off of dependency on international crude oil. I’m not so sure I concur, though, as I have often seen U.S. produced products not meeting the financial efficiency of global products — not just oil, but vehicles, TVs and even resources to build houses.

For a while, E85 seemed to be backed mostly by the Republicans including Executive G.W. Bush, but now it seems that even Senator H. Clinton is getting into the act. While I don’t agree with all the ideas in that article, it does offer some good thoughts. I’m not afraid of creating a portable energy source (for vehicles primarily) that requires a large energy input to make it. Taking natural gas and turning it into portable fuel is actually a plus for me: I’ve driven natural gas vehicles and would rather not do it if I had a choice. Imagine if we could take sunlight and turn it into fuel, even at a 50% energy loss. Who cares? You’re taking an energy source that can’t be easily transported and you’re turning it into one that can be. For me, safety and size/power efficiency is more important than what it costs to make, energy-wise.

Attorney General Mike Hatch (Minnesota) says that we shouldn’t expect E85 prices to drop. This article from the AP Wire is correct based on demand on current levels of corn production. Many people believe that the U.S.’ available fields could mean an increase in corn production and an increase in E85, dropping prices, but lately the reality seems that U.S. farmers are not as efficient as we’d hope, and that the demand seems to go up as more E85 and ethanol products are produced. As long as demand continues to meet supply, even increased supply, prices should stay the same. The continued devaluation of the dollar by the Federal Reserve should even cause dollar prices to go up over time. I’m not sure what the answer is, but I don’t think the 50% subsidy talked about in the previous article is the answer. Subsidies have to be paid by someone, and if we pass it on to 100% gasoline users or taxpayers in whole, the bureaucratic overhead of subsidies will make the subsidy a net loss on the market. All we need is more subsidies clouding the real market costs and competition — subsidies also create monopolies and cartels. This article also shows how many subsidies are already disrupting the true competitive nature of almost every fuel by creating barriers and preferential treatment.

If fuel demand increases (as is expected) and corn supply doesn’t increase at a discounted price, could the subsidy of E85 and the increased use that follow have unintended consequences? Absolutely, says FinFacts: Growing use of corn for conversion to fuel may push up world prices of food. If it is true that growing E85 fuel demands could cause less corn to be used for food and for animal feed, we might see cheaper fuel but more expensive food on both the vegetable and carnivore side. While I trust the free market to produce the best harmony of prices according to demand and availability, there is a big concern if subsidies ruin that harmony. Government always reacts too little, too late to market demands, and when they involve themselves in preferential paternalism, they really skew the market for competitive forces.

eMediaWire has a great article on the growth of E85 availability: . Stations Offering E85 Surge to 710. Minnesota tops the market with 189 E85-providing gas stations, and my home state of Illinois comes in second at 120 stations providing E85 fuel. The report also talks about more flex fuel compatible vehicles hitting the market soon (flex fuel means the vehicle can use gasoline or E85 or a blend of either automatically). How many of these markets are being created due to subsidies, though? I really am concerned that regulations and subsidies will take a strong competitor and make it a lagging market that has long term consequences, as the previous article talks about.

The Coloradoan has an OpEd titled Energy independence in U.S.: Why wait?. This opinion piece is sludge, unfortunately, as the author calls for legislation and tax initiatives to promote E85 over regular gasoline. If we want to see another cartelizing market like the crude oil industry has become, legislation, tax initiatives and government promotion of the fuel will be the reason for it happening to E85. Let the market stand on its own — if people don’t want to buy E85-compatible vehicles, if manufacturers don’t want to build them and if gasoline retailers don’t want to sell E85, give it time. If crude oil is really getting more expensive versus income levels, the change will happen naturally, with no need for a push by anyone by the demand and supply curves meeting.

We can even rely on wealthy investors to take the risk — Bill Gates and Goldman Sachs are both investing tens of millions into ethanol alternatives. I’m not sure if either are hoping to take advantage of taxpayer-funded subsidies (that would mean you and I pay a few dollars a year each so that a few selected people can reap millions or more), but there is hope that the market could succeed without government intervention.

Lastly, over the BrownSludge we see another confused OpEd writer who doesn’t understand why gasoline is cheaper today than it has generally been for 30 years. He doesn’t see how inflation works, and he doesn’t understand that consumer inflation in products has caused inflation in wages which has caused inflation in more products. Fuel at US$3 per gallon, filtered water at US$3 per bottle and small houses at US$300,000 per 1/4 acre are all caused by inflation. When you compare these prices to our wages, and then make the same comparison to 1976, you can see that most higher prices today are only slightly higher or slightly lower than the same ratio 30 years ago. Inflation has occured, and only lately are we paying the real price of years of money supply devaluation as our debt burdens get the best of us. The OpEd writer puts a great idea forth that using E85 would mean less subsidies for large oil companies and a better economy locally, but you can not dismiss inflation’s price increase in consumer goods not necessarily meaning a real cost-value increase. Even worse, to think that large oil won’t transition to E85 and take over that market is to be ignorant of how all government works — always help your friends.

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All over the news today, Marathon Oil is opening an office in North Dakota, quoted from KXMA News here. They are planning on extracting 20,000 barrels a day from the 200,000 acres of land they’re leasing.

Minyanville has a little article today covering some shale oil facts and opinions. They mention the thought that there might be nearly a billion barrels of oil in the Mid-Northern states. They also mention that shale oil might be extracted and processed for US$20-US$35 per barrel.

The WSJ has an article on how the oil industry in the U.S. might be losing some of their clout in Congress. Considering all the preferential subsidies and monopoly-creating regulations on the oil industry, I don’t think we’ll honestly see the current oil industry hampered with fewer regulations or restrictions. If anything, we’ll see more laws created to seemingly punish the industry while secretly helping them keep a monopoly over production, distribution and refining.

The Star has an OpEd piece that is all wrong. The writer believes that Canada’s stronger loonie is causing a loss of profits and capital for the country from their exports. He comments on the oil industry being one of the markets being taken advantage of by the U.S. and other weak-currency countries.

The Washington Post has a pro-Statist article about how to fix the oil price concern. With oil still at a low price versus the devalued dollar (compared to 10, 20 and 30 years ago), I think involving more State regulations and taxes will only cause larger problems down the line. What we need is LESS State intervention, rather than more, but it seems obvious that the average educated OpEd writer has no idea that it is a declining dollar that is making prices seem to rise.

Another article from TheStar seems to have a positive opinion on the ethanol fiasco — a fuel that is really inefficient as gasoline but very efficient in padding the pockets of preferred farming companies. Ethanol is a huge burden on the cost of gasoline in my area (the Midwest) due to the paternalist subsidies and huge barrier to competition that the ethanol market has in its favor. I’m glad to see a Canadian talking about it also — rare as most Canadian OpEd pieces seem to be for more State control.

MSNBC says that Republicans are renewing their interest in ANWR drilling. I’m all in support of private ownership of ANWR and private drilling — if a private company makes an error and pollutes the neighbors, they’ll be liable for the costs to fix things, even if it takes years. The entire ANWR issue is too political to get a clear idea of the benefits, especially with both sides using it as way to gain more control over an already over-controlled industry.

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