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Food versus Fuel

May 2008

Increased Fuel and Fuel Prices

There have been calls to review biofuels policies in Europe including a report last month by the International Monetary Fund stating that among other factors, biofuel production is contributing to a food crisis. Rising food prices are leading to new perspectives in the biofuel production industry. A number of US Senators, including Presidential Candidate John McCain, are calling for a suspension of the EthanolMandates and Subsidies that are considered to be fueling a Green Fuels Industry Boom.

Clean Energy Expense

The clean-energy research firm 'New Energy Finance' has found that oil is a larger contributor than biofuel when it comes to the rising cost of putting food on the table. The rising cost of oil is not only to blame when it comes to increasing food prices. Farmers who grow food crops are also experiencing increased production costs such as fertilizers and pest control methods. The world population continues to grow and food patterns are changing causing market fluctuations in supply and demand. In food oils such as palm and soy, the higher price of oil has contributed to 18 percent of the increased cost in soy prices.

While food production costs can be linked to Biofuel production, it is not considered to be a dominant factor. The New Energy Finance report finds that areas where biofuel productions have had a significant impact were due primarily to "overly rapid application of support schemes and protectionism." Profits in corn ethanol have shrunk, and soybean biodiesel plants are being threatened by increasing costs in soy. Additionally, the rising costs of grain are also causing problems for related biofuel producers.

Corn Ethanol Under Fire

Corn-based ethanol has come under fire because it does not significantly reduce carbon emissions, and typically results in lower mileage when compared to gasoline. Cellulosic Ethanol, made from wood and agricultural wastes or even municipal garbage, may prove to be a better solution as it does not utilize a food source and provides an alternative to landfills. While Cellulosic Ethanol production technology is still experimental, alternative fuel production as a whole can benefit from the infrastructure established by corn ethanol.

 Related:
 The Cost of E85
 More Corn Please
 A Gallon of E85
 Outlook for Ethanol Industry
 Ethanol Production Costs
 Texas Gas Tax Relief


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