News / USA

Cutting Ethanol Subsidy Might Not Impact Food Prices

2007 US law requires use of renewable fuels

With the U.S. ethanol industry consuming about a quarter of the nation’s maize crop, many have blamed biofuels for rising food prices in recent years. The new year brought the end to a $6-billion subsidy supporting the industry, but that doesn't mean food prices will drop because of it.

Hereford Renewable Energy in the Texas Panhandle region is one of 200 plants across the country producing ethanol fuel from maize, which is called corn in the United States.  Reagan Howell runs the plant. Before this job, he ran an oil refinery.

“Honestly, I had not followed the price of corn until I got into the ethanol industry,” Howell says.

But with corn-based ethanol making up 10 percent of most gasoline in the United States, it is one of several factors pushing up the cost of food, according to Purdue University economist Wally Tyner.

“Ethanol is a driver of corn prices and has helped to pull up corn prices and all the other agricultural commodities because they are all linked,” he says.

In the United States, higher commodity prices have helped raise the cost of meat and dairy because livestock feed costs more. But the impacts have been felt most strongly in developing countries that depend on imported food.

Corn-based ethanol makes up 10 percent of most gasoline in the United States, which helps push up the cost of food.
Corn-based ethanol makes up 10 percent of most gasoline in the United States, which helps push up the cost of food.

Last year, with Congress under a mountain of debt and looking for budget cuts, a $6-billion subsidy supporting the ethanol industry looked like a prime target.

“It is expiring. And I give the ethanol industry great credit for allowing it to expire,” says Bob Dinneen, head of the Renewable Fuels Association, an ethanol industry trade group, who says he didn't fight to extend the subsidy because the industry has matured. “We never wanted to be tied to the taxpayer forever, and I think it is great that we are at a point where it has done its job. We are moving on.”

But experts say the main reason the industry has reached this point is not the subsidy, but rather a 2007 law aimed at increasing domestic production of renewable fuels including ethanol.

The law requires gasoline makers to blend renewable fuel into their products. Texas plant manager Reagan Howell notes ethanol is basically the only option.

“We are legally obligated to make ethanol," says Reagan Howell of Hereford Renewable Energy. "It is the only renewable fuel that is commercially viable right now.”

Gasoline makers will be legally obligated to use 50-billion liters of ethanol this year. That will use up more than a quarter of the U.S. corn supply, says Purdue’s Wally Tyner.

“We are not going to see a big change in food prices due to the elimination of the subsidy, because the driver of the policy today is the renewable fuel standard. That stays.”

Some advocates want to relax the renewable fuel standard until corn supplies are larger and less vulnerable to ethanol’s impact.  But with oil prices high, gasoline makers will likely continue to find it profitable to add ethanol.

Though there is more to high food prices than ethanol, the competition between fuel and food is likely to continue.   

You May Like

US Imposes Sanctions on Alleged Honduran Drug Gang

Treasury department alleges Los Valles group is responsible for smuggling tens of thousands of kilograms of cocaine into US each month More

At 91, Marvel Creator Stan Lee Continues to Expand his Universe

Company's chief emeritus hopes to interest new generation of children in superheroes of all shapes and sizes by publishing content across multiple media platforms More

Photogallery New Drug Protects Against Virus in Ebola Family

Study by researchers at University of Texas Medical Branch, Tekmira Pharmaceuticals is first looking at drug's effectiveness after onset of symptoms More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
African Media Tries to Educate Public About Ebolai
X
George Putic
August 20, 2014 8:57 PM
While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video Ferguson Calls For Justice as Anger, Violence Grips Community

Violence, anger and frustration continue to grip the small St. Louis suburb of Ferguson, Missouri. Protests broke out after a white police officer fatally shot an unarmed black teenager on August 9. The case has sparked outrage around the nation and prompted the White House to send U.S. Attorney Eric Holder to the small community of just over 20,000 people. VOA’s Mary Alice Salinas has more from Ferguson.
Video

Video Beheading Of US Journalist Breeds Outrage

U.S. and British authorities have launched an investigation into an Islamic State video showing the beheading of kidnapped American journalist James Foley by a militant with a British accent. The extremist group, which posted the video on the Internet Tuesday, said the murder was revenge for U.S. airstrikes on militant positions in Iraq - and has threatened to execute another American journalist it is holding. Henry Ridgwell has more from London.
Video

Video Family Robots - The Next Big Thing?

Robots that can help us with daily chores like cooking and cleaning are a long way off, but automatons that serve as family companions may be much closer. Researchers in the United States, France, Japan and other countries are racing to build robots that can entertain and perform some simpler tasks for us. VOA’s George Putic reports.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.

AppleAndroid