Ethanol will raise cost of food programs by $900 million
A quick follow-up on the E15 warranty post from earlier today. The nonpartisan Congressional Budget Office has found that increased ethanol use in 2007 and 2008 led to a rise in food prices of about 10-15 percent (FIXING OUR MISTAKES UPDATE: this sentence should end: "of the 5.1 percent increase in food prices" - see explanations in the comments below). Looking forward, the CBO said that the federal government will have to spend up to $900 million more on nutrition assistance programs like food stamps and school lunches in the current budget year. Overall, the cost for these programs will increase by $5.3 billion, with higher energy prices driving most of that amount. While automakers are worried about the potential E15 increase because of warranty issues, the AP is reporting that groups like the Grocery Manufacturers Association, American Meat Institute, National Turkey Federation and National Council of Chain Restaurants are coming together to oppose government support for ethanol. Can anyone even draw all the ethanol lines in the sand anymore?[Source: AP]
Photo by clementine gallot. Licensed under Creative Commons license 2.0.
Reader Comments (Page 1 of 2)
steve 12:17PM (4/20/2009)
How are we even considering taking food production capacity and turning it over to produce Ethanol? ( im guesing its something to do with subsidies (from tax payers) to corn farmers and Ethanol distillers)
I am all for Ethanool IF and ONLY IF it comes from waste products, or other sources that have 0 impact on food production capacity.
Is Ethanol financially feasible without $ billions of tax payer subsidies?
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Carney 4:28PM (4/20/2009)
Food vs. fuel is a myth.
Facts: only 1% of US arable land is used for ethanol corn and the large majority of farmland is uncultivated (thus plenty of room for expansion without "turning over" capacity from anything else). Ethanol corn production levels have gone up dramatically, but NOT at the expense of food corn, production of which is ALSO up, as is soybeans etc.
Ethanol subsidies (defined to include tax breaks) total less than $10 billion per year.
What is that compared to the HUNDREDS of billions OPEC (a collection of foreign governments) extracts from the US economy each year in the form of artificially high oil price?
DaveD 2:42PM (4/25/2009)
Carney,
I agree with your goal to reduce foreign oil but disagree on how best to accomplish this. I think that EVs/PHEVs are a more sustainable long term goal and will get us off of foreign oil more quickly.
First, let me say that I agree with you that all vehicles should be flex fuel. And as you know, I support both methanol and butanol and biodiesel as well.
Second, we both agree to get rid of the tariffs on the Brazilian ethanol. I will say that Brazil needs to reciprocate and get rid of some of the ridiculous tariffs they have on EVERYTHING that comes into their country. I do a lot of business there and some of my best friends live there so I hope they don't take offense...but they have a ludicrous policy of hyper protectionism so it's hard for them to complain about us.
But that's not the point...we're hurting ourselves with that particular tariff on imported ethanol...and I'd much rather give money to Brazil than terrorist supporting countries.
So, now to my argument for batteries:
If we spend $10Billion a year on ethanol subisdies, that's enough money to buy batteries to make a huge dent in the oil usage by the average car:
1) It takes about 8kWh to give a car an all electric range of approx 40 miles
2) 40 miles covers nearly 80% of all daily American commutes
3) Prices are quickly coming down to the point where a Lithium Polymer (or some other Li combo) will be available for less than $500kWh (and heading lower)
4) That means that it would cost about $4000 per car if we covered the entire cost with a "subsidy"
So, that $10B would let us cover at least 2.5 million vehicles. That's probably over 25% of all vehicles that will be sold this year (just my guess based on this economy...i'll be surprised if we go over 10 million new cars in the US this year).
Ok, now you're talking about making a real dent in the amount of oil imported. Do that for 3-4 years and think about the impact as battery prices continue to come down and get bettter? Suddenly you're talking about that same $10B covering 4 million new vehicles a year as battery prices come down.
My problem is not with subsidies. Yes, I hate paying them as much as the next guy, but are we getting the most bang for our buck when we do pay them? With batteries, it's a sustainable program that once you pay for the vehicle, it's part of the fleet and reduces the needs for more oil on a permanent basis. We could be eliminating 30-40% of our need for foreign oil within 5 years. Throw in more cheap ethanol from Brazil and we could do some serious damage to the Middle East's stranglehold they have on all of us.
Now let's look at a more aggressive case:
We just bailed out the banks and everyone else that could stick their hand out for Trillions of $$$$$. For $30-$40billion a year, we could have every car sold in America be EV or PHEV within a couple of years and have the entire fleet turned over in 10 years.
That is one HELL of a deal compared to what we pay for the wars in Iraq and Afghanistan, for the damage to the environment, hell...just for the HUNDREDS OF BILLIONS OF DOLLARS or even TRILLIONS we'll send to OPEC in that same time period.
We have no political will as a country. It's too hard to get us to do anything at all and my problem is that I don't think that ethanol is sustainable and serves as a distraction.
Also, I think we may have a problem with water availability coming that will make all of this look like a picnic. Ethanol takes a lot of water to produce and that is another crisis we don't need.
http://www.technologyreview.com/energy/22428/
We've only got so much subsidy money to go around, I just think it could be better spent elsewhere. Ethanol has been getting subsidized for 30 years. If it can't stand on it's own yet, then we're wasting our time and money. Let the Brazilians have that market and let's electrify our transportation sector as quickly as possible.
George Oerther 3:50PM (4/26/2009)
Steve, here's the answer. www.ire-incorp.com non-food biomass production of ethanol coupled with a food/fuel/fallow cropping cycle to balance food and fuel while preserving soil fertility and using 2 water technologies for irrigation to bring formerly arid lands into production. short, sweet, and simple. you can reply to my address on the web site
Cellien 12:19PM (4/20/2009)
Funny, oil prices are WAY down yet food prices are still just as high as when gas was $4+, which they said was a direct cause of the high prices.
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Seth 12:45PM (4/20/2009)
That's because food prices are determined by the quantity of food eaters v food supply. More people are eating more food causes the price to go up (specifically in the 2 most populous countries - china and india where the standard of living is going up).
Food v. fuel has been debunked.
Cellien 1:41PM (4/20/2009)
Well that's kinda my point. Tomorrow's study could debunk the blaming of ethanol for high food prices.
Nixon 6:11PM (4/20/2009)
Cellien, actually Food Commodity prices have gone down. As have prices for basic foods in the grocery store. Only more refined foods have stayed up.
Orng Crush 12:45PM (4/20/2009)
Major error in this blog post. The Congressional Budget Office report said ethanol increased food prices 0.5-0.8 percent. In their exact words “CBO estimates that from April 2007 to April 2008, the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices.”
Or, in other words, 10-15 percent OF the 5.1 percent total increase in food prices in 2008. This report is not at all damning of ethanol. The industry has always argued that they had a minimal impact on food prices and that energy costs and food company profits were the main reasons.
This report confirms that oil and other energy costs were the greatest drivers. It does not explain why prices are still high (but the profits argument does, when you note that manufacturers are faring much better than most industries in the current economy and have, in fact, acknowledged in quarterly reports that price increases have led to increased profits).
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Sebastian 6:04PM (4/20/2009)
Sorry about this. I've just been alerted to this mistake and will fix it in a minute. Thanks for the clarification
Kwolek 1:07PM (4/20/2009)
Sebastian Blanco is publishing false information here. FALSE: “The nonpartisan Congressional Budget Office has found that increased ethanol use in 2007 and 2008 led to a rise in food prices of about 10-15 percent.”
Here’s the TRUTH: The Congressional Budget Office stated that corn ethanol was only responsible for a small portion of the TOTAL jump in food prices. So, if food prices jumped 15% for that period, ethanol was only responsible for 10 to 15% of that, which equals 1.5% to 2.25%. This is not a significant impact. Their report stated that the main cause of skyrocketing food prices was the increase in crude oil prices and transportation fuels. Commodities speculation was another major cause.
The Congressional Budget Office also stated in their report that ethanol increased the domestic fuel supply and had a positive impact in reducing imported oil. This reduced the price of regular gasoline and offset the modest food price impact.
In a recent article called “Ethanol Innovator Driven to Replace Oil”, Thom Gabrukiewicz quoted Jeff Broin, head of Poet, the largest ethanol producer in the world: "In 2007, the (ethanol) tax incentive, that tax break, was $3.3 billion, but the ethanol industry returned $4.6 billion in tax revenue to the Treasury," Broin says. "We saved $8 billion in farm payments because we eliminated farm payments for the first time in almost 40 years. We saved the consumer $40 to $60 billion in gas prices with extra supplies that kept prices down. We added $47 billion to the Gross Domestic Product." (Jeff Broin – Poet Ethanol)
Sebastian you don’t know much about corn ethanol. Get your facts right, and stop spreading false information about ethanol.
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PabloKoh 5:13PM (4/20/2009)
(To Tim Below:)
Stop pasting the same stupid comment in every story relating to ethanol. At least have the decency to write something new addressing the story at hand.
And as stated by other commenters below, there is a huge error in the story. It should be pulled by ATBG.
Tim 1:14PM (4/20/2009)
So let me get this straight…
I'm paying MORE in taxes so that gov’t can give “free money” to corporate farms like ADM as subsidies so that they can grow corn (food) to make into ethanol so I can pay MORE at the pump for my E-10 fuel so I can get WORSE gas mileage and use MORE fuel while paying MORE for Meat and other corn based products. My cornflakes (and everything else food related) are sky high! Now they are talking cap & trade so they can turn hot air into gold?
Who came up with this silly plan... big oil, the farm lobby, corrupt progressive-fascists, Midwest senators, Martians… who?
Why are we “peon” hard working tax payers always paying more and getting less so that our money (payment for labor) can be redistributed to corrupt politicians, giant corporations, bureaucrats and those who produce nothing at all but excessive whining?
It’s NOT fair and I don’t feel so well…
The Bird Feeder: http://www.youtube.com/watch?v=GaklEq36_dk
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PeterG 2:34PM (4/20/2009)
Yep. As insane as it sounds you have it essentially correct. We pay multiple times over to use a worse fuel with worse mpg. I want my MPG back.
The environmentalist have never favored ethanol, it was driven by lobby groups. Main beneficiaries:
Big Agri.
Distillers.
Domestics like GM who use the Ehtanol loophole in Cafe.
Plus, we have only begun to look at the crazy water usage in making a single gallon of ethanol. I think most sane folks should be able to realize Ethanol is a massive mistake on multiple fronts( Cue Carney, the Ethanol lobbyist defending this madness to the death).
Hopefully sanity will prevail and we won't end up with a 15% dilution of our gas.
Tim 2:09PM (4/20/2009)
PeterG,
It's gov't we're talking about here... sanity has nothing to do with it!
SteveCT 2:20PM (4/20/2009)
The government in this country is a reflection of the American people (who, it must be noted, are generally lazy, greedy, and poorly informed and are often just plain stupid--there's a reason the Founders feared the specter of 'too much democracy'). In this case, it's mostly people in Iowa, who have been ramming this ethanol crap down our throats ever since they snagged the #1 spot on the list of presidential primaries.
Carney 4:18PM (4/20/2009)
PeterG, I am not an "ethanol lobbyist" - if I were I'd probably make a lot more money, which would be nice.
However, if I worked for the ethanol lobby, I
1) wouldn't support dropping our stupid tariffs on imported ethanol, and
2) I'd ignore (rather than advocate) methanol, the alcohol fuel that can be made from any biomass without exception, including crop residues, weeds, trash, even sewage (NOW, with no additional research necessary, unlike cellulosic ethanol).
Carney 4:53PM (4/20/2009)
Tim, you have paid far FAR more in "taxes" to Uncle Saud and Uncle Hugo due to artificially increased oil prices and cars unnecessarily locked in to gasoline ONLY, than you will ever pay to Uncle Sam to support ethanol.
Even Adam Smith, free trader and free enterpriser extraordinaire, supported subsidies for industries vital to national security, for example sailcloth (in his day the vital "fuel" of the Royal Navy). Ultra free marketeer guru Friedrich Hayek supported state intervention to break up monopolies and trade cartels even in the private sector, and OPEC is a coalition of foreign governments.
As for miles per gallon, it's IRRELEVANT if the fuel is renewable, affordable (PERMANENTLY not just during a crash), clean, and doesn't fund our nation's enemies.
With all our ancestors sacrificed, including on the home front, to win past struggles, are you really going to whine and whine over having to fill up ten times instead of nine times in a given length of time, if that's what it takes to clear the air of the vehicular contribution to smog, ozone smog, and acid rain; to end the threat of another Exxon Valdez or 1973, 1979, or 2008 style oil shock; and to de-fund the various strains of Islamist terrorists?
If so, we'll make the dratted fuel tanks a little bigger for you! Jeez!!
Tim 5:33PM (4/20/2009)
Carney (#14) said:
"As for miles per gallon, it's IRRELEVANT if the fuel is renewable, affordable (PERMANENTLY not just during a crash), clean, and doesn't fund our nation's enemies."
I'm so glad to hear that you feel that way!
Please tell me where you live so I can bill your for my (now more expensive due to ethanol) fuel.
Thanks again!
(wow it must be nice to be made of renewable money.)
why not the LS2LS7? 8:47PM (4/20/2009)
There's no ethanol loophole in CAFE.