Ethanomics, the Economics behind Ethanol

I am all for alternative fuel sources for long-term solutions but in the short term (10-15 years) we also need to increase domestic drilling and domestic production through new oil refineries. Like you say, I think ethanol can play a role in our energy usage, but it cannot solve the issue. I also would like to know more about the subsidies, mainly, are they restricting the growing of additional corn to certain farmers or are they allowing the market to dictate supply through demand. I don't disagree with subsidizing, but i think we do need to let the market work, too.

The ethanol subsidy is a tax credit. It is not a producer payment. Most (if not all) ethanol producers do not see any payment. But the blender of gasoline (the guy who sends it to the gas station) can credit his tax bill with each and every gallon of ethanol he uses.

I am against subsidies because I believe they hinder the market from allocating scarce goods (in this case fuel); however, we subsidize oil tremendously. And at a high cost; soldier's lives, drilling subsidies, awful pollution at the refiners and so on...

But you are right; ethanol is only a part of the solution.