Fuel to food – the perfect storm

Fuel to Food Senate hearing

On June 12, 2008 the Senate Energy and Natural Resources Committee held a hearing to examine the relationship between “food versus fuel”.

First, some of the facts:

According to the Energy Information Administration, at the end of first week of June, 2008, the United States of America used 9,411 million barrels of motor refined gasoline. If you break this down to the lowest measure that people understand, gallons we used 4,538 gallons of gasoline a SECOND last week.

According to Alexander Karsner, Assistant Secretary for energy efficiency and renewable energy, part of the U.S. Department of Energy, we used 9 billion gallons of renewable fuels in 2008. If all cars could run on ethanol that would give us 3 1/3 days of gasoline independence. Corn ethanol, according to the Energy Independence and Security Act of 2007 (EISA) will be capped at 15 billion gallons by 2022. The rest, 21 billion gallons, must come from cellulosic ethanol.

There is not one viable solution right now for us to get off the dependence of foreign oil. There is no such thing as an alternative source, we need every energy source we can get our hands on. But planting corn isn’t going to make it for the United States. I’m not even sure we could use just garbage to ethanol for all our mobility needs, the need is that great.

But biofuels do help in a couple of ways. Karsner said that biofuels have increased the US fuel supplies, which has reduced the price of fuel paid at the gas pump by “somewhere around 20-35 cents a gallon.” The secretary of Agriculture and Energy said that biofuels represents a “4-5% increase of the 45% increase in global food prices.” Gasoline went up 31%, but gasoline is not used to transport or produce food.

Then why is the price of fuel going up so quickly? The Perfect storm.

Everything you own has been in a truck at one point or another. Last year at this time the price of a gallon of diesel cost $2.79. Today the price of a gallon of diesel is $4.69 a gallon. Imagine spending $2.79 to go 5 miles one year and then having to spend $1.90 more, an increase of 68%, to go the same 5 miles the next year.

This was before the Iowa flooding that will certainly increase the price of corn, which will increase the price of food.

And we haven’t gotten through hurricane season, which could increase the price of diesel, which would increase the price of food.

Does ethanol increase the price of gasoline?

In an April, 2008 study, LECG, a consulting firm, did a study on ethanol using Missouri as an example of how ethanol saves money for the retail consumer at the gas pump. Most noticeably, the study used the retail price of gasoline of April, 2008 was $2.91. In June, just a couple months later the average price of gasoline is $4.05. Also of note is that Iowa has just been flooded and no one knows how much of an effect this will have on the price of ethanol, but you can be assured that ethanol, too, will increase in price.

According to the Energy Information Administration (EIA) Missouri drivers used more than 2.9 billion gallons of gasoline in 2007. The E-10 mandate represents nearly 295 million gallons of ethanol or 4.5 percent of U.S. ethanol production.

LECG says the price for an E-10 blend is projected to be 7.2 cents per gallon below that of conventional gasoline over the next ten years resulting in annual savings of nearly $214 million, or $54 per driver per year. If LECG used todays gasoline price the price savings for an E-10 blend would have been $1.20 per gallon.

Imagine we had enough ethanol to make all gasoline E-10. If we use the numbers the LECG used in April, 2008 to represent the entire United States they are staggering. The United States uses 146 billion gallons of gasoline a year. If we add E-10 to all 146 billion gallons of gasoline it would reduce the price of a gallon of gasoline by 7.2 cents in April, or reduce a gallon of gasoline by $1.20 in June. Remember, this was before the Iowa floods, and the price of ethanol may go up.

We can also take the price of 9 billion gallons of ethanol, which equates to 6.75 billion gallons of gasoline, off the trade deficit, as we have substituted that with ethanol.

The Senate committee will be happy when the 2nd generation ethanol using non-food sources to produce ethanol comes onboard. I talked to David E. Rodgers, Deputy Assistant Secretary for Energy Efficiency within the Office of Energy Efficiency and Renewable Energy (EERE), U.S. Department of Energy at the end of May, 2008. Rodgers says that all six cellulosic ethanol production plants are on schedule to be up by 2012.

Another scarce resource used by ethanol

Fuel to food is not the only concern with corn ethanol. Water is also being talked about as a scarce resource. It take 3-4 gallons of water to produce one gallon of corn ethanol. The third generation ethanol should require a cap on the amount of water, or the type of water you can use to make ethanol.

General Motors has partnered with Coskata, a cellulosic ethanol company that they say will take less than a gallon of water to produce a gallon of ethanol. They will be able to make ethanol out of waste, including used tires.

Bill Roe, CEO of Coskata says that some other cellulosic ethanol productions may take 6-7 times as much water to produce a gallon of gasoline.

Subsidies for ethanol

Everyone that shops for an appliance for their home, or new dual pane windows for their home knows to look for the energy saver award sticker. Not only does it mean that they will use less energy with that appliance, but in some cases they will get a rebate for buying that product.

My neighbor, Sheri, will be getting a federal tax refund from the dual pane windows she just put in. Why? Because our government realized awhile back that if they subsidize the purchase of an energy saving device we would consume less electricity.

The American Council for an Energy-Efficient Economy projects total electricity savings to reach 7.8% of total projected U.S. energy consumption. By 2020, savings from already existing standards should be equivalent to the annual energy use of about 23 million American households.

Under the Kyoto protocol, the U.S. would need to reduce carbon emissions by approximately 505 million metric tons (MMT) in 2010. Standards already adopted by the energy saver award program will cut U.S. annual carbon emissions 65 million metric tons by 2010, almost 13% of the required amount to meet the Kyoto protocol.

There are subsidies for every energy we use, including nuclear and hydrocarbons, such as oil and coal. The subsidies are in place to reduce our consumption while still giving us all the amenities we enjoy. The subsidies are hoping to create the most efficient technology at the consumer end, so that we use less energy.

People don’t question the validity of the end goal for the desire for energy independence, but the path taken to arrive at that end goal is in question. Each step has to be questioned.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.