CNN Headline of the Day – Basic Supply and Demand

While running on the treadmill this morning, I was flipping through the channels as I couldn’t manage to run while watching Billy Madison.  Morning TV is such crap, but I’m in Cincinatti and the roads are covered with ice so I’m treadmill bound. 

I never stay on CNN or CNBC because watching news while running is possibly the most tedious thing I could imagine, but the CNN headline caught my eye.  I can’t remember it exactly now, but the essence was “Ethanol Demand Up, Corn Supply Depleted.”  I stopped and listened to the story which was a long and winding discussion where the main points were:

  • Bush just said “we need alternative fuels (e.g ethanol)”
  • Ethanol comes from corn
  • Corn prices have risen from $1.80 / bushel to over $3 / bushel
  • Corn prices are going to keep going up
  • Oil prices are going to keep going down
  • Ethanol will become more expensive and – as oil becomes less expensive – we’ll keep using it
  • This will impact lots of other things – like the cost of beef – which are going to go up

Um – yeah – high school macroeconomics.  I love the broad “the market will take care of this” discussion.  Er, um, government subsidiaries anyone?