Tag Archives: biofuels

The Price Relation Between Beer, Barley, Corn, Ethanol and Tortillas

The Denver Post reports that beer prices are rising faster than inflation. Expect it to increase even more by next year. Farmers in Washington State along with those in Idaho, Montana, Minnesota and North Dakota are partly to blame – they have planted 22 percent less barley than last year.

Barley is a key ingredient in making beer and the price of barley has gone up 48% since last year. The impact on beer prices is just starting to show up now since barley contacts usually are bought a year in advance.

Farmers are planting less barley because the expanding market for biofuels like E85 composed of 85% ethanol are driving up corn prices. The Denver Post reports the price of corn futures up 49% since December 2005.

But its not just beer prices that are affected by America’s gluttony for driving. The lack of foresight and action by Bush to raise fuel efficiency standards on cars and trucks to reduce America’s need for more fuel, combined with a push for biofuels, has resulted in increased competition for corn. The push by Bush to switch from gasoline to biofuels is not the answer to America being hostage to foreign oil.

Producing ethanol from corn comes at a price. And its more than just beer. Gwynne Dyer, an independent journalist in London writing in the Toledo Blade on July 10, 2007 notes that the increased use of corn for biofuels is raising food prices worldwide and will mean starvation for more of the world’s poor.

Dyer notes that “the mania for

“bio-fuels” is shifting huge amounts of land out of food production. One-sixth of all the grain grown in the United States this year will be “industrial corn” destined to be converted into ethanol and burned in cars, and Europe, Brazil and China are all heading in the same direction.
The attraction of bio-fuels for politicians is obvious: they can claim that they are doing something useful to combat emissions and global warming (though the claims are deeply suspect), without actually demanding any sacrifices from business or the voters. The amount of US farmland devoted to bio-fuels grew by 48 percent in the last year alone, and hardly any new land was brought under the plough to replace the lost food production. In other big bio-fuel producers like China and Brazil it’s the same straight switch from food to fuel. In fact, the food market and the energy market are becoming closely linked, which is very bad news for the poor.”

Dyer is not the first to question the rush to biofuels. Lester Brown of the Earth Policy Institute is an early critic of what he calls the “ethanol euphoria.” In testimony before Congress last month he stressed that

“The escalating share of the U.S. grain harvest going to ethanol distilleries is driving up food prices worldwide. Investment in fuel ethanol distilleries has soared since gasoline prices jumped at the end of 2005. Once completed, distilleries now under construction could double U.S. ethanol output, turning nearly 30 percent of next year’s U.S. grain harvest into fuel for automobiles. This unprecedented diversion of the world’s leading grain crop to the production of fuel will affect food prices everywhere, risking political instability. “

Brown very succinctly sums up the impending problem with biofuel from corn:

As more and more fuel ethanol distilleries are built, world grain prices are starting to move up toward their oil-equivalent value in what appears to be the beginning of a long-term rise.
The food and energy economies, historically separate, are now merging. In this new economy, if the fuel value of grain exceeds its food value, the market will move it into the energy economy. As the price of oil climbs so will the price of food. If oil jumps from $60 to $80 a barrel, you can bet that your supermarket bills will also go up. If oil climbs to $100, how much will you pay for a dozen eggs?
From an agricultural vantage point, the automotive demand for fuel is insatiable. The grain it takes to fill a 25-gallon tank with ethanol just once will feed one person for a whole year. Converting the entire U.S. grain harvest to ethanol would satisfy only 16 percent of U.S. auto fuel needs

Which gets us back to fuel efficiency standards for cars – Brown notes that there is a simple answer:

“A rise in auto fuel efficiency standards of 20 percent, phased in over the next decade would save as much oil as converting the entire U.S. grain harvest into ethanol.”

I suggest you tell your Senators and Representative what you think we should do. They are currently considering and debating new fuel efficiency standards for cars and light trucks.

The Great Bush Gasoline Reduction Deception.

Two weeks ago President Bush strolled into the White House Rose Garden and announced that he was taking action to reduce gasoline use by 20% over 10 years. Sounds great right.

Only thing is, it’s a lot of smoke and mirrors. First off, when you examine the actual words of what he said it’s really ambiguous as to what he has committed to do regarding reducing gasoline use. He’s really made no commitment to do anything more than study the issue further and what he has proposed is patently deceptive in that overall fuel use by cars and trucks will continue to go up.

One huge problem is that while reducing something 20% sounds great it is misleading and meant to deceive the public. It is a cover for doing very little in 10 years The goal he’s talking about is not a 20% reduction in fuel use, it’s specifically a 20% reduction in “gasoline use”. And three quarters of the 20% “reducing vehicle gasoline use” is actually a fuel shift to alternative fuels like ethanol and other biofuels.

The truth is Bush is only proposing a 5% reduction in gasoline use over 10 years and a 15% shift in use of gasoline to alternative fuels over this 10 year period. While this will have some impact in reducing dependence on foreign oil, the overall impact on reducing global warming is unclear. While shifting to some alternative fuels will reduce global warming gases, a shift to others would actually increase overall global warming gases produced.

The problem remains that all of this is hypothetical – Bush is asking for more study to produce recommendations before he leaves office next year. His answer to global warming is just like his answer to the Iraq War – leave it to the next President.

California has asked for a waiver to increase fuel efficiency standards. Bush’s study proposal is in fact a way for Bush to avoid acting on this waiver before he leaves office. It’s obvious he has no intent to seriously address global warming issues or make any serious attempt to actually significantly reduce our consumption of fuel and oil. The truth is he has the power to act now to increase fuel efficiency standards for cars and trucks. But he’s not going to. He’s not going to do antything to hurt his business friends in the oil industry from continuing to make record profits.

Its really up to Congress to act because Bush has not committed himself to do much of anything. Bush is just playing word games trying to pull another fast one on the public.