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Key decisions have big costs

Agriculture.com Staff 03/22/2006 @ 1:36pm

Cronyism in Washington, D.C. is costing you. It makes your corn cheaper and your fertilizer more expensive, to name just two examples.

This isn't a rehash of today's woes in Washington. I'm talking about the influence the oil industry has had on agriculture and our country for a century or more.

An early example of costly cronyism involves the Secretary of the Treasury in the 1920s. It was Andrew W. Mellon, who was also an owner of Gulf Oil.

The 1920s is when leaded gasoline arrived on the market to reduce engine knock. Ethanol already was boosting octane around the world, from the Philippines to Brazil, to Europe to the U.S. Blends of 10% to 20% were common.

The fuel additive tetraethyl lead (TEL), developed in 1921 by General Motors and sold by Standard Oil, was a penny a gallon cheaper than ethanol blends. (GM, Standard (now Exxon-Mobil), and DuPont formed Ethyl Corporation to make TEL. They sold off their ownership by 1962.)

In 1925, a horrible industrial accident at a Standard Oil refinery in New Jersey killed some workers exposed to TEL. Others went insane. Newspaper coverage prompted an open debate about the public health risks of the poison (lead) in gasoline. The Public Health Service formed a committee to investigate, and it decided leaded gas was safe. The catch here is that in 1925 the Public Health Service was a part of Andrew Mellon's Treasury Department. Did that have something to do with giving lead a clean bill of health?

William Kovarik, a Radford University professor who has written extensively on the battle between ethanol and leaded gas, thinks it did.

And Kovarik is convinced that if lead had been banned in gasoline in the 1920s (instead of in 1986 in U.S. cars), ethanol would have had a much larger market as an octane booster. "No question about it," he says. "Lead actually knocked alcohol off the market."

The entire course of agricultural history would have been different if ethanol was the octane booster, not lead.

Today, even with dramatic growth, ethanol has only a 3% share of the gasoline market. By 2012, it's expected to have a 6% share. Can you imagine what agriculture would have been like if ethanol had a 10% or 15% share in the 1930s? There's no doubt in my mind that corn prices would have been higher and rural out-migration smaller.

What really happened in the twentieth century was that petroleum replaced markets farmers once had. In the nineteenth century they raised oats and hay for horses. Petroleum replaced that, and petroleum-based fabrics made the market for cotton and wool smaller, too.

I came across Kovarik's work while researching the history of ethanol for Ethanol Extra, where you'll also find links to his research.

Things appear better today. General Motors and Ford are teaming up with ethanol maker VeraSun Energy to make 85% ethanol blends (E-85) more widely available. Progressive oil companies like Shell are putting in E-85 pumps. Farmers are on the verge of recapturing markets lost for a century.

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