Government study reviews biofuel impact on food prices

Responding to a request by Senator Jeff Bingaman (D-NM), the Agriculture and Energy departments released a study this week on the effects of biofuels on food prices. (PDF available here.) Biofuels, and specifically the mandate in the 2007 Energy Independence and Security Act to increase biofuels production, has been criticized for driving up food prices. And there have been calls to repeal the biofuels mandate. In the United States, biofuels are largely made from corn.

The report addressed the issue of how U.S. ethanol and biodiesel consumption has affected domestic agriculture and food prices by stating:

In 2007, the expansion in ethanol and biodiesel consumption is estimated to have increased the Consumer Price Index (CPI) for all food by 0.10-0.15 percentage point. In other words, ethanol and biodiesel consumption accounted for approximately 3-4 percent of the overall rise in retail food prices. During the first four months of 2008, the all food CPI increased by 4.8 percent, with increased ethanol and biodiesel consumption accounting for only about 4-5 percent of the total increase while other factors accounted for 95-96 percent of the increase.

The report estimates that international food prices rose 45 percent from April 2007 to April 2008, but they would have risen only 40.6 to 42 percent if biofuels production in the United States had remained flat. The report cites higher oil prices, improving diets, and drought as primary reasons for increases in the price of food globally.

At the same time, the report concludes that ethanol, mostly blended into U.S. gasoline as an oxygenate to improve air quality, has slowed the increase in gas prices. The study goes on to state that without ethanol, the U.S. would have to use an additional 7.2 billion gallons of gasoline to travel the same overall mileage. That would have pushed gas prices 20 cents to 35 cents higher per gallon than they are now, according to the report. Biodiesel production, however, has not had any significant effect on diesel prices.

—Eric Evarts

Learn about alternative fuels in our guide to driving green.

Comments

[Bob...]

While on a percentage basis that doesn't sound like much of an impact, have you actually looked at what's available in the stores in the midwest? There is almost no fresh corn. And what little that's available is a lot more expensive than before the rush to increase ethanol production. Top that with the lower fuel mileage of "E10" gasoline/ethanol blends and it makes less sense to use our food to generate fuel.

JM2C

[Doris]

Why is it that the Government always feel as though they have to find some poor scapegoat to take the suspision away from the true culprits in these kind of situations?
Another thing they're trying to do, is put a halt on the production of any types of alternative fuels which they can't regulate! Biofuel can be made by anyone in their own back yards. What are they going to do, start a biofuel prohibition like they did alchohol back in the '20's?

[Corny]

First believe NOTHING of what a government report says. All the Lackys at the USDA, DOE, EPA want to be sure not to mess up their pension so they like the KGB (isn't it funny how it's always three letters?) always tote the party line. When the government creates a industry it ceases to evolve but simply grows. If the government had subsidized and mandated the phone company back in the 30's we'd still have a phone with a crank to make it work. These idiots should stop now. We cannot afford their meddling.Says.

[Ryan K Embree]

I worked for a food contract vending and retail food Co. I know the full push-back in pricing per cost. You noticed that every time the media says there is and increase, we get in increase as consumers. I have thought fair and eqaul coverage was a part of the media stigma. How much is the middle east region paying for gas based on what we pay per gallon. Come on how about that, lets see what thier paying in the oil rich nations, that our troops are defending. Here's another good one, how is oil purchased, and do retailers realy set thier own price. I had a friend who owned his own station not more than a year ago he was forced to put new tanks, and pumps in. He also was refused shipment because he would not charge the same in the area market pricing. He believed in volume profit sales, and leading more local customers into the market store for profit building. He is now out of business; They stopped shipment of gas to him. "Dirty, Dirty, and Disgusting Business." What about micro-soft; remember the monopoly scandel. Who is setting prices, there seems to be no fuel shortage, every gas station I pass has plenty of fuel. So if Bill Gates has been incremidated for so called monopoly, shouldn't some-one investigate the "bush' let's see if his oil buddies feel as good about there windfall profits if Bill Gates where president. Yes I know that is rediculous, but if the shoe was on the left foot instead of the right. Some-thing else to consider, is not desiel a by product of manufacturing Gas. I written an report on alternative fuels 10 plus years ago. Propane could be an alternative, som euorpean countries had given gov. grants to people who converted cars to propane. We realy need to consider whether or not our gov. agencies are for us or are only taking care of the top % of wealth in this nation. I feel for all who have famalies and are not making 60,000 or more. Its time for change.

[Cale]

A note about the two authors of this report.

Ed Schafer, Secretary of Agriculture, is a Bush appointee that hails from North Dakota where three ethanol plants are under construction. North Dakota ranks 48th in population and 11th in ethanol production, making ethanol a disproportionately influential industry for North Dakota politicians.

Samuel Bodman,Secretary of Energy,is a Bush appointee that was the former CEO and a Director of the Cabot Corporation at a time when it was one of the nations biggest polluters and whose complacency and cooperation with warlords in the Congo (where they mined raw cobalt) are said to have led to deaths of some 5 million individuals.

Do individuals like this have the credibility to lead a team to investigate the effect of ethanol production on food prices? I don't think so.

[Paul R]

I have to agree with Bob. You have to look at the whole picture, not just part of it.
It may be true that we can decrease the use of Gas by "thinning it out" with Ethanol, but what is the real cost? You get decreased gas mileage with E10 and greatly decreased mileage with E85 (if your car takes it). E10 is also harmful to older cars with older fuel systems (issues with fuel lines) and there has been a sharp increase in the number fuel system repairs required for these older cars. And it goes without saying that the people who own older cars are less likely to be able to afford the fuel system repairs.

[Alex]

It is really refreshing to hear people word over talking about these green solutions. It does not seem that we are going to get any help from the powers that be. Converting food for fuel is about as intelligent as throwing your money in a fireplace to keep yourself warm because you cant afford to pay the heating bills. It does look as if we will need to do things our selves though. Isn't it ironic that the major industrial powers will be supplanted on a small level by "Grass roots" business who convert cars to really cut a significant portion of our dependance on oil and fossil fuels in general. I have been looking at some wesites but there are not many and even fewer of any interest, however I did see a few that really sparked my interest. You should see some of the Motorcycles and hot cars they are converting. I have seen evidence of almost any popular car whether economy or luxury converted with apparent success.

[Tequila]

Although biofuels have pros and cons, their great impact on reviving the nation against turbulent economic dilemma and environmental problems as a result of climate change makes it reasonable for people to use these alternative sources in their daily living. People have found out different sources of fuels as a source of energy. One of these is the discovery of tequila as a potential source of biofuel. Tequila is a unique substance. Tequila is often given blame in stories of drunken debauchery, as are many other beverages of its sort. However, the spirit distilled from the agave may start to become somewhat of a rarer commodity. Researchers are looking closely at Agave, which has been proven as a potent yield crop for biofuel. A recent study from Australia points out that it has almost twice the potential as most other biofuel crops. A lot of people would be willing to give a cash advance or two for an alternate fuel source, as General Motors has revealed their plans for biofuel vehicles to be released in the land under. This may turn out a good story attributed to tequila.