The Death of Biofuels

This AP story claims that corn-based ethanol is dead and that Mexico's tortilla crisis in 2006 killed it.

Basically, it was when the price of tortillas rose rapidly in 2006 and into 2007 that people began to realize that societies needed to use food to feed people rather than feed their vehicles. Mexicans freaked out about this. I was in Mexico City as this was happening and it dominated front-page headlines almost every day.

I wonder if corn-based fuels are dead though. Certainly U.S. policy makers, particularly powerful politicians from farming states have no intention on letting it die. And does anyone think that American consumers will not clamor for ethanol once gas prices rise again? Certainly American consumers are more concerned with gas prices than starvation in the developing world.

The lesson of the story is that biofuels are alive and well. But not in ways that help U.S. politicians. Ethanol from Brazilian sugar has proven to be pretty effective with little affect on the world sugar supply. Europeans use rapeseed. But none of this means giant profits for American agribusiness.

At the core of the issue is scarcity. Food prices have gone up for many reasons. There are too many people on the planet. People in China, India, and Brazil want to eat like Americans. They want to drive and live like Americans too. We want to have more things every day. All of this takes up precious land and resources. While we definitely should not be taking food out of people's mouths to drive our Hummers, the problem of food prices, hunger, and scarcity run far deeper than just fuel.

Why Platinum Prices Should Matter To You

Platinum prices have reached an all-time high at over $2K an ounce. The official reason is a drop in supply due to some mine problems in South Africa. But more generally, we are seeing metal prices skyrocket around the world. The reason--overconsumption. It is exactly the same as price changes in oil. There is a limited amount of resources on the planet. More and more people want to use those resources. Thus, the price goes up.

We think of oil as a huge deal, and it is. But we think this way because cars play a giant role in our lives in a very visceral way. We pay directly for gas and we love cars. But these other metals are equally important, especially within in a technological global community. The expanding demand for a lot of these metals comes from computers. In fact, it is questionable what computers will be made of in 50 years because a lot of these metals are going to become extremely expensive. Platinum itself is particularly important for cars because it goes into catalytic converters. But it can serve for a discussion of rising prices for metal of all kinds.