The recent attack on corn ethanol is based on the faulty assumption that, of all the factors affecting food prices, the only factor that can be changed by government is the impact on corn demand and prices by ethanol producers. the government can’t do anything about higher demand from world population growth, or about oil prices.
Well, that’s just plain wrong. We’ve long been of the opinion, shared by many, that higher energy prices have much more of an impact on retail food prices than grains such as corn. And a Wall Street Journal oped today argues that there is much Congress can do in this regard, such as allow more domestic drilling. In fact, its headline is “Blame Congress for High Oil Prices.”
But the real news today actually comes from the Commodity Futures Trading Commission, which has announced “multiple energy market initiatives.” Among these initiatives is a crude oil investigation. The CFTC states:
In December of 2007, the agency’s Division of Enforcement launched a nationwide crude oil investigation into practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts. Although the Commission ordinarily conducts enforcement investigations on a confidential basis, the Commission is taking the extraordinary step of disclosing this investigation because of today’s unprecedented market conditions. The specifics of the ongoing investigation remain confidential. All Commission enforcement inquiries are focused on ensuring that the markets are properly policed for manipulation and abusive practices.
The Associated Press has already picked up on this.
We offer a humble blog hat tip to Randy Klein of the Nebraska Corn Board for this information!