What is in this article?:
- Ethanol Study Shows Need To Reform RFS Mandate
- Ethanol industry reacts
An inflexible Renewable Fuels Standard (RFS) has led to volatility in corn prices and a smaller livestock industry, but hasn’t reduced America’s dependence on foreign oil, study shows.
Noting that the chances for harvesting a bumper corn crop diminish with each passing day, Rep. Bob Goodlatte (R-VA) took aim at an issue that is causing growing concern not just in livestock circles, but with consumers as well.
During a briefing for congressional staffers this week, Goodlatte said that news reports have begun to raise the specter that a reduced corn crop will hit consumers’ pocketbooks hard by driving up food prices. “Unfortunately, government policies are only exacerbating this dire situation. Now more than ever, it is important for us all to have a serious conversation about the federal government’s role in supporting ethanol.”
According to several studies, Goodlatte’s concern about the food vs. fuel debate are well-founded. During this week’s briefing, Tom Elam, president of FarmEcon, LLC, Carmel, IN, released the results of his study on the effects off the RFS on fuel and food prices.
According to Elam’s study:
- Current ethanol policy has increased and destabilized corn and related commodity prices to the detriment of both food and fuel producers. Corn price volatility has more than doubled since 2007.
- Following the late 2007 increase in the RFS, food price inflation relative to all other goods and services accelerated sharply to twice its 2005-2007 rate.
- Post-2007 higher rates of food price inflation are associated with sharp increases in corn, soybean and wheat prices.
- On an energy-equivalent basis, ethanol has never been priced competitively with gasoline.
- Ethanol production costs and prices have ruled out U.S. ethanol use at levels higher than E 10. As a result, the U.S. exported 1.2 billion gals. of ethanol in 2011.
- Due to its higher energy cost and negative effect on fuel mileage, ethanol adds to the overall cost of motor fuels. In 2011, the higher cost of ethanol energy compared with gasoline added approximately $14.5 billion, or about 10¢/gal., to the cost of U.S. gasoline consumption.
Using four different measures of gasoline prices and oil refiner margins, from 2000 through 2011, there was no statistically significant effect of increase ethanol production on gasoline prices or oil refiner margins.
Noting that his conclusions regarding ethanol’s effects on gasoline were very similar to a study conducted by the Massachusetts Institute of Technology and the University of California-Davis, Elam told the staffers that U.S. oil refiners are refining as much or more motor fuel now than they were in 2007.
Thus, blending ethanol into the gasoline supply has not displaced any foreign oil imports. “Basically, all ethanol has done is displace gasoline from the domestic market and moved that gasoline over to the export market,” Elam says.