How America is breaking its dependency on foreign oil
American ethanol production replaced about 228 million barrels of imported gasoline or crude oil in 2007. That’s more than all the oil imported from Iraq and nearly half of what was imported from Venezuela, thus saving Americans an average of $45 million a day. (Source: Ethanol Promotion and Information Council, EPIC)
The Texas Farm Bureau strongly supports the use of American renewable and biofuel sources such as ethanol to break our country’s costly dependency on foreign oil, and they attribute the high cost of oil—and the gross profiteering of big oil companies—as the primary culprit of higher food and livestock feed prices.
Without alternative fuel sources such as ethanol, the price of gasoline would spike at least another 14.6 percent. (Source: Merrill Lynch)
Ethanol-blended gas burns cleaner than gasoline.
Ethanol is made from field corn, which is not the same as the sweet corn we find in find in the grocery aisle. While field corn is used in some food products, this use comprises only 5 to 8 percent [pdf] of total corn usage.
One bag of seed corn can produce approximately 1,200 gallons of ethanol fuel. In turn, this can yield 12,000 gallons of 10 percent ethanol-enriched fuel. In other words, Americans can drive 230,000 miles on one little bag of seed corn. This translates into less crude oil imports. And that’s good for our economy. (Source: EPIC)
Producing ethanol in the United States, as well as growing the crops necessary to make ethanol (corn, cane, grass, etc), not only reduces our dependence on foreign oil but creates American jobs, boosts local economies and expands the tax base here at home.
Adding ethanol to U.S. gasoline supplies helps keep gasoline prices down, and it also helps keep the price of crude oil lower by reducing overall demand. (Source: Renewable Fuels Association)
In June 2004, the U.S. Department of Agriculture determined that the net energy balance of ethanol production is 1.67 to 1. So for every 100 BTUs of energy used to make ethanol, 167 BTUs of ethanol is produced.
In BusinessWeek’s 1 October 2007 issue, David Kiley noted that big oil companies—who are experiencing record profits while receiving massive federal subsidies—are overtly and secretly funding the fierce attacks against ethanol.
In August 2008, the Environmental Protection Agency (EPA) judged the claims of ethanol critics to befalse. Rebutting the anti-ethanol critics with objective economic analysis, EPA Director Stephen Johnson strongly affirmed the benefits of ethanol. "Clean, green, domestic, sustainable biofuels that reduce greenhouse gas emissions and increase our energy security are a crucial part of America’s energy policy," Johnson said.
Debunking myths of corn, ethanol
By David Gibson
I have to admit that I actually look forward to buying gasoline these days just to see how much less a tank of gas costs compared with a couple of months ago. But a trip to the grocery store is a different story. Food prices are still going up as they have been doing all year.
To hear the food companies tell it, the cause of rising food prices this year has been the high price of corn. The big food manufacturers have waged a yearlong, well-financed public relations campaign to blame ethanol for driving up the price of corn and grocery bills. It has been an effective message but it should be clear to everyone now that it simply isn't true.
Since June, the price of corn has plunged more than 55 percent. A bushel of corn is now below $3.50, about the same price farmers received back in 1995 even though the cost of growing corn has soared in recent years. While corn prices were falling, ethanol production has been increasing every month, clear proof that ethanol is not driving corn prices higher. But cheap corn hasn't resulted in lower food prices and food giants such as Kraft Foods and Kellogg's have reported higher than expected earnings, due in large part to higher prices for consumers.
To those who understand how food pricing works in our country, the argument that ethanol caused higher corn prices and thus higher food prices just didn't hold water. The cost of farm products represents only 19 percent of what you pay for food at the grocery store. For cereals and bakery products, farmers receive on average only 6 percent of the price you pay. How much corn goes into a $4 box of corn flakes? About 8 cents worth. The rest of the cost is for processing, transportation, packaging, advertising, marketing and profits. And don't forget the cost of executive salaries.
According to the U.S. Department of Agriculture, a 50 percent increase in corn prices will cause less than a 1 percent increase in food prices because foods using corn as an ingredient make up less than a third of retail food spending.
Now that the ethanol/corn price/food price myth has been debunked by the markets, perhaps people will listen to the experts at the Department of Agriculture, the Department of Energy and the Environmental Protection Agency who have been saying all year that America's farmers can produce an abundant supply of corn to meet all of our needs for food and renewable energy. This has been made possible by agriculture research that enables farmers to grow more corn on less land. The productivity increases over the past 20 years have provided an expanding supply of corn for ethanol without reducing the amount of corn available for livestock feed and food products.
In addition to being cheaper and producing fewer greenhouse gases than gasoline made from crude oil, ethanol has become the only effective program our country has developed to reduce our dependence on foreign oil. Every gallon of ethanol replaces a gallon of gas that would have been made with imported oil. Ethanol currently reduces oil imports by about 7 percent.
There is no way that our country can achieve its goal of energy independence without increasing ethanol production. The low price being paid for corn is bad news for farmers, some of whom will not be able to cover their production costs. But it proves we have enough corn for food and for ethanol to reduce foreign oil imports. Now we just have to wait for the big food manufacturers to give consumers a break at the grocery checkout line instead of pocketing larger profits.
David Gibson is executive director of the Texas Corn Producers Board.
Ethanol Down, But Not Out
By Lynne Finnerty
The recent bankruptcy filing by ethanol producer VeraSun Energy Corp. has some Wall Street and energy industry analysts exclaiming that ethanol has lost its shine. This is, definitely, a tough time for ethanol makers, but brighter days could be on the horizon.
VeraSun, based in Sioux Falls, S.D., was the nation’s largest ethanol producer, with capacity of 1.64 billion gallons per year. To understand what has happened to the ethanol Goliath, you don’t have to look any further than the gigantic drop in prices for commodities from corn to petroleum.
The price of corn is down from nearly $8 a bushel last spring to about half that today. One would think that the decline in the price of corn, the major feedstock for making ethanol, would help ethanol producers. It would, if VeraSun had not, months ago, locked in supplies at the peak price, wrongly hedging that the corn price would go even higher.
As you’ve no doubt heard, the price of oil has collapsed to about $56 per barrel, down from last July’s peak of more than $140 per barrel. As oil, and the gasoline made from it, gets cheaper, alternatives like ethanol become less competitive.
However, anyone who thinks the price of oil won’t go back up, either when this year’s winter weather really kicks in or next summer when vacationers hit the road, hasn’t been paying attention for the last couple of years. Oil will go back up, as it does every few months when OPEC cuts production or demand rises, and renewable fuels will once again be competitive.
While some ethanol plants are having a tough time, new ones are still starting up around the country. The most recent opening was a new 60-million-gallon capacity ethanol plant in Stockton, Calif., owned by California-based Pacific Ethanol Inc. Another 26 plants are under construction around the country with a projected production capacity of 2.12 billion gallons per year.
The VeraSun news probably has ethanol opponents dancing on the imaginary grave of the ethanol industry. Food manufacturers don’t like paying higher prices for corn and have heaped criticism on a federal mandate that boosts corn demand by requiring more of the nation’s fuel supply to come from renewable fuels.
They say using corn to make ethanol drives up the cost of food. However, recent developments prove that’s not true. Ethanol is still being produced, but commodity prices have plummeted.
Just a few short months ago, VeraSun was reporting soaring revenues. My, how things have changed. But, it’s important to remember what hasn’t changed. Commodity prices will remain volatile—what goes down will eventually go back up. Federal and state renewable fuel standards will ensure ongoing demand for biofuels. The world will continue to need more energy, from all sources.
VeraSun says the credit crunch that prompted Congress to pass that $700 billion financial rescue package also helped push the company toward bankruptcy by impairing its liquidity. So, another factor in the outlook for the ethanol industry, as it is for several other industries, is how bad the credit situation gets before it starts to get better. As long as ethanol companies can weather the credit crisis and get the capital they need, they can continue to operate through this short-term downturn.
And, as long as the nation maintains its support for increasing energy supplies from all sources, including renewable fuels, ethanol will shine again.
Lynne Finnerty is the editor of FBNews, a publication of the American Farm Bureau Federation.
Secretary Schafer Calls Big Food Attack On Ethanol "Totally Off Base"
In a new interview, U.S. Department of Agriculture (USDA) Secretary Ed Schafer lashed out against the perpetrators of a deceptive campaign against ethanol. In his response to a reporter's question about food manufacturers' high prices, Secretary Schafer said, "I just think that they are totally off base. They are building positions that I don't understand. And they're trying to justify the increased costs and the increased profits that they're making at the expense of another industry. That just isn't appropriate."
Secretary Schafer answered questions from reporters after his remarks at the Cellulosic Ethanol Summit in Miami. The full transcript of the reporter's question and Secretary Schafer's response is below. You can listen to the interview here.
Reporter: Mr. Secretary, I wanted to get your—you mentioned GMA during your talk and said they might be the only people that are trying to get us not to move forward. [They] had a press conference yesterday, at least some of those groups. What's your reaction to some of the things they said? They want to do away with all ethanol mandates. And the other thing they said was that it could take as much as two years for the lower corn prices that supposedly impacted food prices earlier this year and drove prices up. They said it could take 18-24 months for that to work its way through the system and have our food prices lower. What's your reaction?
Secretary Schafer: Well, I think they stood up there with no credibility whatsoever. I mean, the reality is they kicked the new kid on the block, ethanol, you know, around—they kicked the new kid on the block around the block. You know, saying that, 'Oh man, all the stuff that is going on is increasing our prices. There is nothing we can do about it. It's not our fault.' And then, you know, when prices go down dramatically over a short period of time they say, 'You know, it takes us so long to adjust.' I just think that they are totally off base. They are building positions that I don't understand. And they're trying to justify the increased costs and the increased profits that they're making at the expense of another industry. That just isn't appropriate.
And importantly, they are working against important public policy in this country of energy independence. Why would they be against energy independence? They're working against increased economic activity. Why would they be against economic activity? The very people that are making money are buying their grocery products. Why are they trying to shut that down? They're trying to justify their corporate policy in increasing costs to the consumer by blaming it on somebody else. That's just simply wrong. In the end, [they] will deserve what comes, which likely is going to be lower purchases of their products 'cause of their increased prices.
Find out more at GrowthEnergy.org.
Senator Grassley (R-Iowa) wants lower food prices or apology
Sen. Charles Grassley (R-Iowa) said Tuesday all he wants from the Grocery Manufacturers Association (GMA) is lower prices for consumers or an apology, according to DTN ag policy editor Chris Clayton.
Grassley wrote a letter to GMA this week reminding the group of its smear campaign against ethanol and its push last spring to tie high food prices to ethanol production. Grassley and GMA slugged it out all spring trying to define the role of ethanol in the rise of commodity prices.
“The association systematically tried to blame ethanol for high food prices without any intellectual factual basis,” Grassley said. “Now the truth is being proven from my point of view and backing up what I said in speeches last summer by recent changes in the market.”
Last summer, corn prices were nearly $8 a bushel and soared along with oil prices. Corn prices have since been cut in half, as have oil prices. Grassley noted the amount of corn being used for ethanol production by USDA is exactly the same as projections in May. When oil and grain prices rose earlier this year, the food companies passed price increases on almost immediately to consumers, Grassley highlighted.
Read the entire letter here [pdf].
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