‘Professor Cornpone: Ethanol Lobbyist Newt Gingrich—and the Future of the GOP’

The title is from a Wall Street Journal editorial in January of 2011. I commented on Gingrich’s response to that editorial in the following excerpt from a chapter I wrote for a recently published book by Robert E. Looney, ed., Handbook of Oil Politics, Routledge (2012):

Even if draconian belt-tightening by U.S. motorists could significantly reduce the world price of oil (which is highly doubtful), the benefits of cheaper oil would by definition accrue to other countries.   If the U.S. allowed its own industries and consumers to benefit from the supposed drop in world oil prices (as a result of breaking the oil cartel), that would undo the effort to cut imports.  Most petroleum consumed in the U.S. is not used by passenger cars and demand for petroleum among commercial, industrial and non-auto transportation sectors would rise if any induced reduction in the world oil price was allowed to be matched by a lower domestic oil price (rather than being offset by taxes or rationing).

Consider the protectionists’ old idea that money spent on buying something useful from another country is just lost to the U.S. economy, so we would be much better off buying everything close to home (regardless what it costs, though they never say that).

Attempting to defend ethanol subsidies and mandates, for example, former Speaker of the House Newt Gingrich wrote, ‘It is in this country’s long-term best interest to stop the flow of $1 billion a day overseas… . Think of what $1 billion a day kept in the U.S. economy creating jobs, especially energy jobs which cannot be outsourced, could do.’  That is, of course, a totally false choice.  Apologists for subsidies and mandates are not proposing to pay the same price for domestic fuel as we could otherwise pay for an energy-equivalent amount of imported oil – replacing $1 billion of imported fuel with $1 billion of domestic fuel.  They are talking about paying much more for domestic fuel than we pay for imported oil.   Why else would they be asking for subsidies, tariffs and mandates?

Paying much more for something as important as energy, whether directly or through taxes, makes an economy poorer, and being poorer is no way to create ‘green jobs.’  Money wasted on something like ethanol which politicians favor is money that could otherwise have been spent on something else that consumers favor.