Ethanol Industry Doesn’t Need Salesmen, It Just Uses the Government

The definition of rent-seeking behavior:

The expenditure of resources in order to bring about an uncompensated transfer of goods or services from another person or persons to one’s self as the result of a “favorable” decision on some public policy.

Ladies and gentlemen, I present to you the modern ethanol industry. The Kansas City Star has a story about how industry representatives now want to require some type of “nation of origin” sticker on all the gas we buy — in an effort to appeal to patriotism, I guess. “Buy American corn instead of evil, foreign oil,” or something like that. Of course, here in Missouri, we are forced to buy gas made with American corn in a 10 percent ethanol blend, because of our state’s obscene ethanol requirement.

I love the response from the oil companies, who know how difficult this proposal would be to implement — and how stupid it is, anyway:

“Growth Energy (the pro-ethanol group) clearly doesn’t understand fuel markets, consumers, supply or demand,” Charles T. Drevna, president of the National Petrochemical and Refiners Association said in a prepared statement.

There is a new gas station not too far from my house that chooses to sell higher ethanol blended gas at lower per-gallon prices. This is not because of the law — rather, it is the market at work. I have not yet chosen to purchase that gas, even though one of our cars can run fine on higher ethanol blends. I may one day choose to buy it; I may not. That is how free markets are supposed to work, rather than passing government mandates to tell everyone they have to put ethanol blends into their engines whether they want to or not.

Here is our case study about the economic effects of the ethanol requirement in Missouri.