Summer usually means higher gas prices. Conventional wisdom says that people travel more in the summer which raises the demand for gas, and everyone knows an increase in demand will drive up prices. But what if I told you that demand for gas has actually dropped significantly and that crude oil production in the United States has gone up? Believe it or not, American fuel consumption is down 16% since 2007, and for the first time since 1995, our domestic production of crude oil will be greater than the amount we import.
So here’s the million dollar question: why are we still paying record prices for gas? Why haven’t prices gone down as the law of supply and demand would suggest? There’s rarely a simple answer to a complicated question, but the short answer is: corn. Through a bizarre turn of events, corn and the bad energy policies that force us to put corn in our gas tanks are now causing us record levels of pain at the pump.
Ethanol is a grain alcohol, often fermented from corn, which can also be used as fuel. The idea of corn ethanol as a way to stretch limited amounts of crude oil has been around for a long time. Not surprisingly, some of the strongest advocates of its use have been corn farmers and the politicians who represent them. The fact that the Iowa grows a lot of corn and the Iowa Caucuses are an important pit stop for every presidential candidate means that ethanol has always had friends in high places.
But ethanol also became the darling of some environmentalists. They claimed it caused less air pollution than regular gasoline and that growing corn was more environmentally sustainable than drilling for oil. For all these reasons, in 2007, Congress began to mandate that ethanol make up a certain percentage of all gasoline sold in the United States, with the required percentage rising each year. Politically, this seemed like a win: environmentalists were happy with mandatory biofuels, corn farmers were happy with an increased demand on their product, and consumers were supposed to receive at least some relief with prices at the pump.
But last summer we had a drought. This produced the smallest corn crop in seven years, which led to fierce competition between the food industry, the livestock industry (which depends on corn for feed) and biofuel refineries. So ironically, it is now ethanol requirements—which consume five billion bushels of corn each year—that are driving up fuel costs, rather than the price of crude oil.
Bishop Harry Jackson is chairman of the High Impact Leadership Coalition and senior pastor of Hope Christian Church in Beltsville, MD, and co-authored, Personal Faith, Public Policy [FrontLine; March 2008] with Tony Perkins, president of the Family Research Council.