Hawkeye Republican

Beer drinkers beware: a barley shortage in 2006 will raise the price of German beer this month. What's the cause of this great evil? Ethanol.

Kudos to the bloggers at Foreign Policy, a quirky journal of international relations trying its darndest to differentiate itself from the grandeur of Foreign Affairs, for bringing this story to my attention.

Lobbyists for the beer industry, who are apprently not having much success in Venezuela (see: Hawkeye Republican 04/04/2007), claim that subsidizing corn, soybeans, and rapeseed grown for alternative energy sources gives farmers an incentive to plant these crops in their fields instead of barley. As a result, the supply of barley decreases, which causes its price to increase. Since barley, an input in the brewing process, is more expensive, the price of its tasty final output is also more expensive.

In other words, from society's point of view, the only thing worse than driving to the bars in downtown Iowa City is driving a car that runs on ethanol to the bars in downtown Iowa City.

But wait, there's more to this story. The decrease in barley production could also be due to the fact that larger breweries in Germany band together and form an oligopoly in the beer market to keep barley production low. With those businesses using their market power to decrease the supply of barley and increase the price of beer, it's hard to blame ethanol subsidies alone for emptying the pockets of poor, drunk college students everywhere.

Fewer subsidies and more competition means cheaper beer. Hugo Chavez beware.