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Panel sees ethanol as expensive, inefficient

DANIEL LOOKER 10/19/2010 @ 3:06pm Business Editor

The food versus fuel debate found a new audience Tuesday at the Global Financial Leadership Conference in Naples, Florida sponsored by the Chicago Mercantile Exchange.

The consensus of a panel of experts was that more use of biofuels affects food.

“Ethanol is driving up food prices. The only question is how much,” said Ian Goldin, former vice president of the World Bank and now director of Oxford University’s Oxford Martin School.

One study projects a 42% increase in coarse grain prices over five years, Goldin said, citing a report by the Organization for  Economic Cooperation and Development (OECD) and the Food and Agricultural Organization of the U.N. John Hofmeister, Former President, Shell Oil Company and Founder and Chief Executive Officer, Citizens for Affordable Energy

John Hofmeister, former president of Shell Oil Company and founder of Citizens for Affordable Energy shares that view and mentioned a Rice University Study that says federal subsidies for ethanol cost taxpayers the equivalent of $1.95 a gallon over the cost of a gallon of gasoline.

“The idea of using food for fuel is to me a non sequitur,” Hofmeister said. “Having said that, I believe there’s a role for biomass to be used in the fuel supply system.”

Algae might be a good technology for replacing some diesel fuel, he said. And other crops might make good sources of biomass for fuel. But Hofmeister sees using corn for fuel as a moral issue.

“I think this is a rich-poor issue,” he said. More affluent consumers can adust to higher prices, but “when you’re at the marginal end of the economy, you feel it immediately.”

Goldin was even more blunt.

“I think we should be clear in our minds that this causes people to die of starvation,” he said.

Nor does Goldin see strong environmental benefits. Using ethanol lowers the carbon  footprint of fuels by 3% to 4%, he said, and it causes more carbon output if it’s produced on land taken from tropical rainforests.

It also doesn’t isn’t economically viable, he said, because it depends on subsidies of about $7 billion a year in the U.S. Europe spends about $5 billion a year to support biofuels, mainly biodiesel.

“This is a lawyer's and lobbyist's dream come true,” he said. “It doesn’t make sense for anyone that believes in market forces.”

The exact impact of ethanol on food prices is hard to pin down, said a third panelist, Tim Gallagher, executive vice president of grains and biofuels for Bunge North America.

“Markets find a balance. Does it have an impact on prices? Certainly it does,” he said.

New mandates for biofuel use in the 2007 energy bill caused a shock to the food pricing system but the markets have since adjusted, he said.

He agreed with the others that politically popular government mandates are supporting biofuels.

“Those things are realities and frankly they’re probably not going away very soon,” Gallagher said.

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Cheap Food 10/21/2010 @ 2:29pm once again we worry about cheap and forget that farmers have make a living also. Asking people from the oil industry to comment on this issue is down right silly.

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True Cost 10/19/2010 @ 10:12pm I must say I find all the findings of the so called experts rather amusing when they derive the so called true cost of ethanol yet do not factor in the true cost of oil. It is not simply the cost of the oil from the middle east in terms of the direct price of a barrel of oil but rather the true cost that should be considered. The first Gulf war was fought to prevent Iraq from holding Kuwaits oil supply, there is a cost to that. There is also the cost of protecting the oil shipping lanes with American warships, American aircraft, and the lives of Americans. I remember reading a number of years ago before the whole food vs fuel debate erupted that it was costing nearly a $100 a barrel in indirect costs to get that barrel of oil to America. I would imagine that if the military cost is included ethanol appears to be a rather sweet deal. Goldin's comment that "“I think we should be clear in our minds that this causes people to die of starvation" is full of enough bs to grow a few more bushels of corn in itself. There is a global surplus of crops as we speak, mere months ago it was spoken that we had large stocks of wheat in the world, prices were low, yet people starved, when wheat was $1.50 and corn was $2.00 a number of years ago people starved. Any politician, any CEO, anyone for that matter who will blame ethanol, blame so called greedy farmers, or blame the price of grain for the starvation of individuals in this world, is living in a world where they sit down for supper wearing suits, and rolex's, and smile thinking the masses are ignorant enough to believe what they preach.

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This panel is clearly stacked; here are the facts 10/19/2010 @ 5:29pm Let me begin by saying that I represent Growth Energy, the coalition of America's ethanol supporters. This panel that Dan reports on is clearly stacked, and the distortions it presented have to be addressed. First, the former World Bank VP seems to have missed the most recent report by the World Bank reversing its position on ‘food-v-fuel.’ Their newest study says the connection is minimal – if it exists at all. You can read that World Bank paper here: http://growthenergy.org/images/reports/WPS5371.pdf Second, Joe Glauber, an economist with USDA, went through all these claims and easily refuted them, point after point, in testimony before the Congress. You can read that here: http://growthenergy.org/images/report/Glauber_Testimony_Before_Senate_Energy_Nat_Resources_Cmte.pdf It is really irresponsible for this panel to throw around words like ‘starvation’ in connection to grain ethanol. The corn used to make ethanol in this country is field corn. In fact, a co-product of ethanol production are the Dried Distiller’s Grains which go right back into the food chain in the form of one of the highest-quality livestock feeds on the market. So where exactly does this take food away from people? How exactly does this starve people? To that point, most of the economists who have looked at this issue found that high OIL prices contributed to higher food prices, and that rampant Wall Street speculation had much more to do with driving up food prices. Probably the best refutation came from the food companies themselves, when General Mills CFO Dan Mulligan was quoted in the St. Paul Pioneer Press last year, after his company (the top user of grains in the world) posted a record 51 percent profit increase. In that story, Mulligan said that the public “doesn’t understand” how little grains are to their input costs, and amount to “five or ten percent” of his company’s costs. That’s right from their horses mouth, and shoots down the entire food-v-fuel fiction. You can read more on our blog – including the Glover Park proposal to GMA – on Growth Energy’s blog, here: http://www.growthenergy.org/news-media-center/blog/lets-choose-facts-over-fantasy/

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