Monday, June 19, 2006

Prices of substitutes 

You have to give credit where credit is due. But you wonder how heavy-handed this was:
The ethanol industry appears to be abiding by the law of supply and demand, not breaking state law when E85 prices rise, the Minnesota Attorney General says.

An eight-month investigation produced no proof of illegal pricing of ethanol-based E85 fuel.

�I don�t believe there is price fixing,� Minnesota Attorney General Mike Hatch said Wednesday. �What I see is the law of supply and demand.�

Producers, distributors and retailers can charge whatever they want for E85 or other products, as long as they don�t conspire with others to set the price, Hatch said. After serving subpoenas and conducting other forms of investigation, Hatch said, no conspiracy was found.
The heavy hand of government has come down time and again on Minnesota businesses in an attempt to manipulate markets. It does not take a great amount of imagination to believe that markets can figure out how to get cheaper E-85 to consumers that desire it. E-85 already gets over sixty cents per gallon in tax incentives, which is at least a relatively more efficient way of deciding who consumers ethanol. More efficient still would be to remove the tariff wall that blocks the importation of Brazilian biofuels created from sugar. How many more protections for an "infant industry" will ethanol need? And who would be willing to carry it if they could not respond to rising gas prices by using the price to ration ethanol??