As the alternative energy craze continues, we'd like to interject a little commonsense into the debate. The quest for plentiful energy in ethanol or other cellulose-based alternatives to fossil fuels is probably more reminiscent of people with cellulose between the ears, irrespective of corn. We cannot fathom why people think it's a good idea to try and sate our marginal energy demands with human food.
Corn in particular costs a great deal to produce: land, labor, water, fertilizers. Not to mention the amount of processing required to create ethanol. But all that aside…corn is used as food, and it's a staple! It's already being used to near capacity. It's not as if we've got an excess of it, well, coming out of our ears!
Oil Eases While Corn Rises
By Chris Flood, The Financial Times
Free markets are unlikely to heavily pursue ethanol because it's not cost efficient. But corn prices should stay very high as the government creates subsidized, artificial demand for corn-based energy.
This issue has its tentacles buried deeper into the world economy than most immediately see. For example, corn shortages around the world have spiked prices so high many Mexican citizens cannot get corn tortillas. This in turn has caused political trouble for fledgling President Felipe Calderon—whose agenda of free market reform is threatened because his citizens are unhappy without this dietary mainstay.
Alternatives to fossil fuels need to be pursed up, not down. Ask any quantum physicist and they'll tell you all things are made of energy. Energy is limitless in the cosmos. The question is how to get at it and harness it.
There is a hierarchy for all kinds of energy. Fossil fuels are relatively low on the ladder. But fossil fuels are high enough up that they require relatively less energy input (or effort) to produce than they do to use. That makes fossil fuels cost efficient. Very often, initiatives like ethanol and wind power require MORE energy to create and harness than they actually provide! The result is a net loss. (Check the basic laws of thermodynamics if you don't believe us.)
Instead of looking to the "lower" forms of energy, we need to climb the ladder. The higher levels of energy are cleaner and far more efficient. One reason hybrid cars have a chance to become a viable alternative (as battery technology advances over time) is electricity is higher up the energy hierarchy than fossil fuels.
Nuclear energy is even further up the ladder—it's much cleaner and more efficient than oil or electricity. With nanotechnology and advances in physics, we could be talking about getting energy from nuclear fusion, not just fission, at some point in the coming years. An excellent book by Peter Huber and Mark Mills highlights the point.
The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy
by Peter Huber, Mark P. Mills
Right now, the US is trailing the world in pursuing nuclear energy. France (yes you read that right) is among the world's leaders in producing clean nuclear energy. We suspect the US isn't going for it because of psychological barriers and a "not in my backyard" attitude toward nuclear energy. We say, let the free markets decide how to pursue new forms of energy, not the government. That'll get the corn out from between our ears very quickly.
For more information on the energy sector, visit the Fisher Investments on Energy website.