Monday, May 5, 2008

Renewable Fuels Association: "Ethanol Reduces Food/Fuel Prices"

I've been asked why I don't post more on ethanol. Okay how's this grab ya, via AgWeb:

The Renewable Fuels Association (RFA) says as consumers throughout the world face record oil and food prices, the impact of ethanol production is being criticized rather than appreciated for helping to keep oil prices lower than they otherwise would be. It is also often overlooked that prices for commodities like wheat and rice have risen higher than others and that these are crops not used in ethanol production, says the group.

Without the expansion of biofuel production and use in the US, Brazil and elsewhere, world oil demand would increase and so would the price, says RFA. Merrill Lynch analyst Francisco Blanch told the Wall Street Journal that world oil prices would be 15% higher. At today’s record prices, that would equate to $132 per barrel of oil. RFA states the following:

  • In 2008, worldwide ethanol production is expected to reach more than 16.2 billion gallons which is equivalent to 1 million barrels of oil per day.

  • According to one estimate, as of April 4, the US consumed over 1.9 billion gallons of ethanol, the equivalent of nearly 46 million barrels of oil. Without ethanol, the oil industry would have had to draw down gasoline inventories and import those barrels.

  • Without ethanol in America’s gasoline supply, gasoline prices could be more than 25% higher than they are today. Diesel prices, already higher than gasoline, would be another 16% higher....MORE
Here are some of our other posts on ethanol, in reverse chronological order (the last one, on the cost of subsidies dates to Mar. 17, 2007):
What Proportion of Food Price Increases is Attributable to Ethanol?
Ethanol, Rent-seeking,ADM and God
The Ethanol Backlash