Despite ethanol corn production,how come we still have record oil prices?

Question

or is it because of the ethanol mess we're in,since it still uses petrol based fertilizer to grow crops.

Answer 1

Sell Dollars! Sell houses!

Buy Commodities!

Buy Oil!

Corn Futures!

the free market is running amok.

there is no oil shortage, opec are totally bemused. there is no grain shortage except rice, the stocks are a little down (again due to unregulated free market) but there is still grain in the silos.

Answer 2

It is because we will pay what ever the price is.

If we were willing to pay $100 per gallon of milk, how much do you think dairies would charge?  No business sells their product for less than people are willing to pay.

There are global and poliltical reasons for the recent increases, but ultimately the high price is due to the inelasticity of demand -- meaning that demand does not decrease even as the price goes up.  If we were to ever become more sensitive to price -- meaning to stop buying it when the price went up -- we would not see these increases.

Answer 3

The drop in value of the dollar has some effect.  If the dollar were to go back up in value in relation to other currencies, it would help reduce or stabilize the cost of oil.    As some others have said, we still use oil to make ethanol so you are not really reducing that much oil consumption.  And the growth in China and India have created a higher demand for oil.  All of these are driving the prices up.  

If we were to drill for more oil domesically and increase our refining capacity, maybe do some coal to oil conversion, that would help stabilize and reduce prices.  It isn't a permenant solution, but it could ease the cost of oil and gasoline until a alternative (biofuels, electric, whatever) gains widespread acceptance and use.

Answer 4

not to mention all of the equipment used to harvest and process the corn--that stuff isn't run by solar power.

Answer 5

Ethanol was a replacement for a chemical called MTB, which was determined to cause cancer. MTB replaced lead as an additive back in the day. Remember leaded gas, then they removed the lead with MTB and called it unleaded gas. Ethanol was chosen because it is green and doesn't have the harmful effects like other additives.

Answer 6

The biggest drivers in the price of oil right now are demand from China and India and speculation in the market.  A level supply in the face of rising demand will cause price increases.  The largest producers of oil have signaled they have little intention of ramping up production.

Speculation in the market also causes price increases.  When you have investors betting that the price will increase and sinking huge sums of money to back this up, this can actually help cause the increase in prices.  Speculation in this market involves making contracts to buy oil at a certain price at some future time.  Investors make money in this scheme when the price rises above their contract price.  The investors buy based on the contract price on the specified date and then immediately flip the oil at the higher price, earning a profit.