Ethanol Isn’t Causing Cereal, Gas Shortage

Posted July 17, 2008 at 2:19pm

In the clamor to stem the hemorrhaging in the checkout lane and at the pump for American consumers, the blame game is spinning out of control to assign culpability for rising food prices and $4-a-gallon gas. From corporate boardrooms to office carpools and the halls of Congress, people are yearning to nail a scapegoat for rising energy prices.

Contrary to the well-orchestrated efforts to dismantle the nation’s public-private investment in ethanol, let’s clear up one myth first off. Ethanol is not causing $5 boxes of cornflakes or $4 gas.

Those blaming ethanol for rising gas and grocery bills have an ulterior agenda. Shooting their misguided arrows at homegrown biofuels could damage the gains now under way to displace foreign oil thanks to the recently expanded bipartisan renewable fuel standard.

But recent short-sighted attempts to siphon support away from ethanol at the pump would most certainly not translate into lower food or fuel prices for U.S. consumers. It would, however, increase demand for foreign crude oil. With oil hovering at $140 per barrel, I fail to see how removing homegrown ethanol from the traditional fuel supply would lower prices at the pump.

If the anti-ethanol bandwagon is successful, it would harm America’s vital pursuits to achieve energy independence, advance clean energy and sever the stranglehold petro-dictators have on the nation’s economy and national security.

Perhaps ethanol’s detractors need a stroll down memory lane.

In 1974, Iowans elected me to the U.S. House of Representatives a year after the Organization of Petroleum Exporting Countries deployed its oil embargo as a weapon against the United States, Western Europe and Japan. The oil shock crisis that followed found America asleep at the switch with no long-term, sustainable plan to achieve energy independence. Public policy strides were implemented to improve U.S. energy independence.

But when the oil price shocks wore off in the late 1980s, the United States was lulled into a false sense of security that ultimately has put our national and economic security at risk. American complacency led to more and more imported oil to keep the U.S. economy growing.

When it comes to food prices, economists across the administration have said that biofuels have caused only a tiny fraction of the increase in global and domestic food prices. Rice and wheat, two other major global commodities, aren’t used for biofuels. Their high prices are being driven by global weather, export controls and high-priced oil. Add to that a growing middle class in China and India, which means an increase in food prices without the help of ethanol. The truth is, the increased cost of oil is the biggest driver behind the increased price of food.

Farmers answered the call for more corn to feed and fuel the world to alleviate some of the global stress. Opponents would have people believe that there isn’t enough to go around. The fact is that the 2007 corn crop was 2.7 billion bushels larger than 2006 (when nobody was complaining about ethanol). Take out the 600 million bushels used for ethanol’s growth, and there was still an increase of 2.1 billion bushels available for feed, food and export.

The rhetoric pushed by anti-ethanol organizations has been false and misleading. So, when pulling that next box of $5 cornflakes off the shelf, don’t blame ethanol for the price — there’s only 10 cents worth of corn in each box. Consumers will need to look much farther east, like the Middle East, to find where the rest of the increase comes from.

The United States needs even bolder action — not a knee-jerk reaction — to diversify and expand renewable energy supplies. Detractors would have you believe that we can immediately develop second-generation biofuels. The fact is, undermining today’s corn-based ethanol will virtually eliminate our efforts toward advanced cellulosic biofuels.

Rolling back the clock to undo the world of good created by bipartisan public policies designed to promote renewable fuels, such as the renewable fuel standard, would exacerbate America’s dangerous reliance on foreign oil — let alone bring food and gas prices down.

Iowa State University estimates ethanol use lowers gas prices by 30 to 40 cents a gallon. Removing ethanol from the nation’s fuel supplies would arguably raise prices at the pump for all Americans. Indeed, pumping renewable fuels through the supply stream reduces prices paid at the grocery store and at the pump.

Renewable energy is integral to achieving U.S. energy independence. Since my earliest days in Congress, I have led a tireless crusade to advance renewable energy as a viable and reliable way to shield the U.S. economy from the clutches of oil-rich tyrannical regimes.

As ranking member on the Senate Finance Committee, I have led the uphill fight to help wean America from foreign oil and shepherded key incentives into federal law that give private-sector entrepreneurs and venture capitalists the green light to move forward with better certainty to invest in renewable energy.

As a Midwestern lawmaker, I recognize the benefits homegrown energy harvested from rural America can bring to the local and national economies. Fossil-free renewable energy creates good-paying jobs, displaces foreign crude oil, burns cleaner, protects America’s economic engine and insulates national security interests from volatile regions in the Mideast.

So would the anti-ethanol crowd prefer to trust their energy security with Midwestern farmers or Middle Eastern oil producers?

Although using ethanol as the culprit for higher food and gas prices may sound good, it’s not the solution to the problem. Ditching renewable fuels would dig America deeper into energy dependence.

Despite all the promising public policy benefits presented by investing in renewable energy, short-sighted detractors are trying to slam the brakes on progress. I understand household budgets are pinched at the pump and at the grocery store. Make no mistake. If the anti-ethanol campaign prevails, the United States and American consumers will pay even more dearly for their folly in the short and long run.

Sen. Chuck Grassley (R-Iowa) is ranking member of the Finance Committee and a member of the Agriculture, Nutrition and Forestry Committee.