Pages

Sunday, October 13, 2013

Imminent Land Bust in Mid-West?

Scientific American (h/t Instapundit) reports that the EPA is considering reducing the amount of ethanol required to be mixed with fuel. The crony-capitalists (i.e., socialists) are upset, of course, because they stand to lose money if the government stops forcing people to buy their unwanted, useless product. From the story:
Speculation and media reports about the potential reduction in the blending levels ripped through financial markets on Thursday, spurring a major rally in the shares of independent refiners who have been paying hundreds of millions of dollars to buy ethanol credits to cover their blending obligations. 
Refiner PBF Energy surged by 12 percent, Valero Energy rose 5 percent while corn futures in Chicago tumbled more than 1 percent on the prospect of reduced demand for corn-based ethanol. Ethanol credits known as Renewable Identification Numbers slipped to 40 cents. 
The proposal, if ultimately approved, would mark a significant victory for U.S. oil companies, who have been lobbying regulators and Congress to cut biofuel blending mandates that had been eating into their market share. 
It would also mark a significant blow to the U.S. corn ethanol industry, which has been urging regulators to stand pat at the ambitious blending targets required under the law.
Not only has this misguided policy resulted in higher food and fuel costs (and, since ethanol is bad for engines, ultimately higher repair and replacement costs), but it has caused a boom in prices for farm land in the corn belt. The prices for land, however, are wholly artificial. So, if the mandate for ethanol is relaxed, expect the farm land bubble to burst, or at least deflate.


No comments:

Post a Comment