Ethanol Helps Prevent Higher Prices
Ethanol production is actually helping keep food and fuel prices lower than they would be, notes the Renewable Fuels Association, citing recent news reports.
Without the expansion of biofuel production and use in the US, Brazil and elsewhere, world oil demand would increase and so would the price. Merrill Lynch analyst Francisco Blanch told the Wall Street Journal that world oil prices would be 15% higher. At today’s record prices, that would equate to $132 per barrel of oil.
That may be why Iran’s President Mahmoud Ahmadinejad was quoted Saturday as saying crude oil prices at $115 a barrel are too low.
According to the Associated Press, the Web site of Iran’s state-run television quoted Ahmadinejad as saying, “The oil price of $115 a barrel in today’s global markets is a deceiving figure. Oil is a strategic commodity that needs to discover its real value.”
6 Comments »
Keith Kuper
The notion that biofuel is helping keep food prices down is utter nonsense. Ask any reliable economist what the price of corn would be if 3.1 billion bu. were not being consumed for ethanol in the US during this marketing year. It would be closer to $3 than $6. For most of the world’s citizens, the price of the raw commodity they consume has a larger impact on food prices than energy.
William Winfield
Clearly, an alternative fuel source priced less than crude-derived fuel should lower the market price of oil. Corn ethanol production however will not lower food pricing in any way.
Arable land devoted to food production is the commodity whose use (or misuse) is forcing the increase in food pricing. Even “energy crops” disrupt the food supply when grown on soils typically assigned to food production.
Surrogate commodities pricing will reflect immediately increased corn prices. Flour tortillas will replace corn tortillas. Farmers will feed livestock other grains. Rice or perhaps a potato will replace corn on the cob. All of these will increase in price. It is simple economics. To expect otherwise is delusional.
William Winfield
Cindy Zimmerman
The point is that if ethanol is helping to keep gas prices lower than they would be otherwise, it is also helping to keep food prices lower than they would be otherwise, because higher energy costs are the primary cause of higher food prices.
There is no question that increased demand for corn to be used in ethanol production has helped drive corn prices – although there are other factors, such as increased exports.
It is correct that in less developed countries the price of raw commodities has a larger impact on actual food prices than it does here in the US or in other developed countries. And it is also true that higher prices for some commodities will result in alternative choices for consumers and livestock producers.
Simple economics also will tell you that what goes up must come down. Food prices do fluctuate – even gas prices do. Although there is no way to tell when or how, most economists agree that the current food price situation is short term – maybe two years at the most – before the market works itself out.
Steve
One comment stated taht 3.1 billion bu. of corn is being used by the ethanol industry. Keep in mind that 3.1 billion bu. of corn starch is being used by the ethanol industry. The nutrients are being returned to th efood chain in the form of a high grade of animal feed. It is estimated that 19% of the cost of food is the food stock itself. The energy costs for packaging and transportation is greater than the food stock. If ethanol is holding energy prices in check, it is also helping to hold food prices in check.
Also, history has not seen a corelation between the price of corn and the price of food.
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[...] the Renewable Fuels Association, afterwards ethanol plays a solid role in keeping oil prices round 15 percent lower than they puissance differently subsist (so, round $130+ per barrel if ethanol weren’t in the [...]
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