Ethanol's Backlash - It Only Makes Sense - Supply and Demand Mr. Smartypants

Washington DC May 18, 2007; The AIADA newsletter reported that according to the Wall Street Journal, the shine is off corn ethanol. In January, when President Bush was extolling the virtues of ethanol, corn ethanol seemed unstoppable. However, since then the government's decision to forcibly divert huge amounts of corn stocks into ethanol has played havoc with key sectors of the economy.

Corn prices have nearly doubled, which means livestock owners can't afford to feed their animals, and food and drink manufacturers are struggling to buy corn and corn syrup. Environmentalists are sour over new stresses on farmland and international aid groups are moaning that the U.S. is cutting back its charitable food giving.

Call it a case study in how a powerful lobby can overplay its hand. While many members are still publicly touting corn ethanol, privately they are backing away from corn-mania.

Senators are said to be readying amendments to offer to the new ethanol bill that would use triggers or waivers to water down the corn element.

Turns out there are huge economic consequences to Congress micromanaging energy policy, and all to aid its campaign donors in agribusiness. A lesson the U.S. is now learning the hard way.