Summary
1. The introduction of Ethanol as an additive was welcomes at first but we are now seeing the repercussions in other areas like food prices that are not welcome. 2. The US might not feel the pinch here but this will cost the developing countries.
Analysis
As we all know and understand, Oil is not going to last more than a few decades and we will need to figure out a way to extend our oil reserves or find newer energy sources.
The introduction of Ethanol was one way to extend our oil reserves maybe by a few years albeit it came with quite a few side affects. I think most analysts knew that this would in turn affect food prices around the world as ethanol would now be consumed by the gasoline market. America’s obsession with cars is one reason for this. The food prices have skyrocketed but this is not really affected richer countries like the US and the UK but poorer countries are paying the price for higher food prices. Studies have shown that over a billion people may not be able to buy food over the next decade or so.
Ethanol also has issues on the automobile front. It does extend oil reserves but we get lower mileage and in some case, we have observed minor issues with automobile engines. Here again, most of us pay attention to the price we pay at the gas pump but do not analyze the mileage and the maintenance costs that closely.
Bottom line, Ethanol is not really a solution towards energy independence and we do have to find a renewal source of energy like solar and/or wind energy/. Both of these technologies are viable, just not cost-effective at this point in time. In my opinion, the US will take lead, innovate and come out with ways and means for energy independence for the world to follow in its steps.
