FYI, I’ll be on Kudlow & Company (probably around 5:30 EST) to debate ethanol subsidies with Frank Gaffney. 

Something to chew over while you wait for the beating to come: wholesale ethanol is selling today for July delivery at the Chicago Board of Trade for $3.40 a gallon. Given that ethanol has only two-thirds the energy content of conventional unleaded gasoline, we have to multiply that price by 1.5 if we want to compare apples with apples. So to get the same amount of energy from ethanol that we would get with a gallon of conventional unleaded, we would have to pay $5.10 a gallon. What is the wholesale price today for conventional unleaded for July delivery? All of $2.10 a gallon at the NYMEX.

But that’s not all. Gasoline moves from refineries to retail distribution centers via pipelines, and transportation costs are low. It costs a lot more money, however, to move ethanol from processing plants in the Midwest to retail distribution centers because it must be moved by truck and barge (one can’t use pipelines to move ethanol for various technical reasons). So add another couple of dimes to the differential between the price of ethanol and conventional unleaded to account for that, and perhaps another dime or more if you’re shipping that ethanol to the Atlantic or Pacific coasts.

If the answer is ethanol, what exactly is the question?