Government study reviews biofuel impact on food prices[SIZE=-1]
Responding to a request by Senator Jeff Bingaman (D-NM), the Agriculture and Energy departments released a study this week on the effects of biofuels on food prices. (PDF available here.) Biofuels, and specifically the mandate in the 2007 Energy Independence and Security Act to increase biofuels production, has been criticized for driving up food prices. And there have been calls to repeal the biofuels mandate. In the United States, biofuels are largely made from corn. The report addressed the issue of how U.S. ethanol and biodiesel consumption has affected domestic agriculture and food prices by stating:
In 2007, the expansion in ethanol and biodiesel consumption is estimated to have increased the Consumer Price Index (CPI) for all food by 0.10-0.15 percentage point. In other words, ethanol and biodiesel consumption accounted for approximately 3-4 percent of the overall rise in retail food prices. During the first four months of 2008, the all food CPI increased by 4.8 percent, with increased ethanol and biodiesel consumption accounting for only about 4-5 percent of the total increase while other factors accounted for 95-96 percent of the increase.
The report estimates that international food prices rose 45 percent from April 2007 to April 2008, but they would have risen only 40.6 to 42 percent if biofuels production in the United States had remained flat. The report cites higher oil prices, improving diets, and drought as the primary reasons for increases in the price of food globally.
At the same time, the report concludes that ethanol, mostly blended into U.S. gasoline as an oxygenate to improve air quality, has slowed the increase in gas prices. The study goes on to state that without ethanol, the U.S. would have to use an additional 7.2 billion gallons of gasoline to travel the same overall mileage. That would have pushed gas prices 20 cents to 35 cents higher per gallon than they are now, according to the report. Biodiesel production, however, has not had any significant effect on diesel prices.
?Eric Evarts
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