This is the question that will be debated live on NPR.org today at 3 PM EDT (19:00 Greenwich Mean Time).
In the report, “Will the Plunge in Grain Prices Mean Lower Food Prices at the Supermarket?,” the RFA points out that, while prices for agricultural staple commodities such as corn, wheat, and soybeans have all plummeted by about 50% in the last half year, food prices at the grocery store have remained highly elevated. At the same time, ethanol production has dramatically increased.
When the above factors are taken together, the link between grocery store food prices and corn ethanol production becomes dubious. Not only that, and also somewhat unintuitively, it seems that the diversion of relatively large portions of the US corn crop to ethanol production has very little effect on even the market price of corn.
To start with, researchers at Iowa State University have found that, even though $1.3 billion was given to the corn ethanol farming industry in the form of subsidies in 2007, the government saved $3.45 billion on what are called loan deficiency payments as a direct result of these ethanol subsidies.
Loan deficiency payments were established in 1985 as a way to ensure farmers’ incomes remained steady even when prices for commodities such as corn were abnormally low. Since 1998 the loan deficiency payment program has cost taxpayers more than $29 billion.
Editor’s Note: This post is a guest contribution by Adam Shake.
Ford Motor Co. Executive Chairman Bill Ford and Dow Chemical Co. Chairman and Chief Executive Andrew Liveris are scheduled to discuss “The National Summit,” which will take place June 15-17 2009, at Ford Field, the home of the Detroit Lions.
“The United States can no longer afford to take economic leadership for granted,” Ford said in a statement issued Monday by the economic club. “The National Summit offers a rare opportunity for leaders to come together to address the issues that impact our global competitiveness.”
DOW Chemical, who may be best known for its supply of Agent Orange to the U.S. Military during the Vietnam War, also made Chlorpyrifos, marketed as Dursban. Dursban was a home and garden insecticide (now banned for home use) and is also a nerve toxin that has been associated with reproductive and developmental toxicity. One study claims that Dow has contributed to 80% of the Chlorpyrifos burden of the United States.
Last week, Hurricane Ike left many US oil refineries hobbled in its wake — including the nation’s largest biodiesel refinery. As a result, oil production is down.
Demand for ethanol in the US is closely tied to oil production because of the federal ethanol-gasoline blending mandate. So as oil production has fallen, so has ethanol demand.
At the same time as Hurricane Ike was downing oil refineries, corn futures — essentially the betting on whether or not the price of corn will rise or fall in the coming months — have risen dramatically due to the volatile financial markets and a general upward trend.
According to a sweeping report released by the Center for American Progress and authored by researchers from the UMass Department of Economics, if the US government were to invest $100 billion dollars over two years in six key areas of green and sustainable development — including advanced biofuels — the result would be the creation of 2 million high-paying jobs across nearly all sectors of employment.
This represents four times the amount of jobs that would be created if that same $100 billion were invested in the oil industry for things like more offshore drilling. It also represents significantly more jobs of much higher diversity, pay, and longevity than were created by the $100 billion spent last April so that all us ‘mericans could all get our $600 tax rebates.
According to a survey commissioned by Cars.com during July, about 50% of US consumers don’t believe that Obama or McCain has a magic rabbit up their sleeve that will lower prices at the pump any time soon
Turns out, 50% of people in the US are wiser than I thought: there is no quick fix or simple solution.
Another interesting result from the survey: 48% of consumers don’t see McCain or Obama as having a particular advantage when trying to work with the auto industry to bring more fuel efficient or plug-in vehicles to the market in the future.
Okay. Let me get this one out of the way: gas hasn’t been all bad. In fact, gas has allowed us to accomplish some pretty amazing things. To be clear, when I say “gas,” I’m using the term as an easy way to loosely refer to all liquid fuel products made from buried and fossilized hydrocarbon deposits.
Ooooh… I can hear the flamers’ keys clicking away furiously already. But, before you type that horribly thought out gunslinging response, hear me out.
Could it be that Americans are finally warming up to the idea that life doesn’t revolve around how good your car looks and that putting food on the table is more important than driving an SUV? I mean really, it’s about time, no? The pundits have been saying it for the past year, but it looks like the prediction that the average American would rather eat than spend money on fuel is finally coming true. Not only that, it’s coming in droves.
The increase to the estimated $440 billion for 2008 is based on an average $90 per barrel crude oil price for the year. In 2002, before the current bull market for oil began, US oil imports cost less than $103 billion. The preliminary figures for last year came to some $327 billion.
With little prospect for cheaper gas prices in the future, any decrease in the US export bill will have to come from a reduction in petroleum usage.
Which brings to mind two important questions:
While gasoline prices continue to inch upward, the U.S. still enjoys some of the cheapest fuel in the world. FastCompany.com put together a list of world gas prices that could make you feel better about $3 per gallon gas.
Country and Price per US gallon:
Norway $ 8.67
Netherlands $ 8.52
Belgium $ 8.36
Germany $ 8.06
United Kingdom $ 7.91
Italy $ 7.68
France $ 7.46
Read the rest of this entry »
An economic analysis released February 25th shows major gains for the U.S. job market and GDP from 2007’s ethanol industry boom (emphasis added):
The analysis, conducted by John Urbanchuk of LECG, LLC, determined that the increase in economic activity resulting from ongoing production and construction of new capacity supported the creation of 238,541 jobs in all sectors of the economy during 2007. These include more than 46,000 jobs in the U.S. manufacturing sector. The goods and services required to produce the estimated 6.5 billion gallons in 2007 added $47.6 billion to the Gross Domestic Product and raised household incomes by $12.3 billion.
While the gains themselves aren’t all that surprising, they may turn the conventional wisdom that “ethanol subsidies are bad” on its head since increased tax revenue actually paid them off: Read the rest of this entry »
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