Amidst concerns about oil prices and inflation, journalists forget one thing: government-mandated ethanol.
CNBC’s Erin Burnett ignored the effect it has on the price of food at the grocery store on the March 12 NBC “Today” show.
“Energy prices and a weak dollar are to blame for the rising price of basics like chicken, milk and butter,” Burnett said. “And as wheat prices keep skyrocketing, everything from pizza to cereal will continue to cost more.”
But why are wheat prices skyrocketing?
What Burnett didn’t explain was that as farmers dedicate more land for corn to meet the demand for subsidized ethanol production, land for wheat becomes scarcer, driving up the price.
And as more corn is used producing ethanol to mix with gasoline, less is available to feed livestock or be used for human consumption. As it gets more expensive to feed cows, beef and dairy products become more expensive for consumers.
It’s basic supply and demand, affected by government intervention in the energy and agricultural markets.
Economists like Max Schulz, a senior fellow at the Manhattan Institute, say that “a very high percentage of the blame is directly attribute to the mandate,” a 2005 law requiring 7 billion gallons of ethanol be mixed into the gasoline supply.
But Burnett was right on one point: that “everything from pizza to cereal will continue to cost more.” An energy bill signed by President Bush in December increased the biofuel mandate to 35 billion gallons of ethanol every year.
“[T]hat’s not going to do anything to bring down prices at the pump,” Schulz told the Business & Media Institute after Bush signed the bill, “and it’s also going to have a further kind of serious effect driving agricultural prices higher as well.”
And it’s not just Erin Burnett. The media have largely ignored the pitfalls of government-mandated ethanol, instead blaming everything from a weak dollar to unexplained supply issues for increasing grocery costs.
Burnett’s CNBC colleague Jim Cramer, however, did point out the connection between ethanol and higher prices during a February 27 interview with Democratic presidential hopeful Sen. Hillary Clinton (D-N.Y.).
“Poor people cannot afford what we’re doing with our ethanol strategy,” Cramer told