There is no dought that we, as individuals and a nation, are absolutely affected by oil and enrgy cost. As fuel prices have exceeded $4.00 a gallon, cost of doing business and our personal budgets, have been dramatically affected. Once again, Porter Martin has done an excellent job with his words of wisdom. Our nations dependence on foriegn crude oil, in the short run and the long term, must be harnessed. It is clear that America has the reserves and the technology for alternative means of energy. Porter’s article does an excellent job of explaining the benefits, both short term and long, of biofuels. The use of biofuels, as it pertains to our land values, provides further proof that land is a solid investment. Porters attention is directed more on the use of grain but in our local area, we have already noticed activity in utilizing wood fiber as a source of biofuel. This will create stronger demand for land and timber thus affecting value of you land and timber investments. Please enjoy Porter’s article and used the link to his company’s web site if you wish.
Porter Martin , Summer 2008
How biofuels benefit American family budgets now – and can help even more in the future
Here’s a list of facts you can consider in the debate over whether biofuels such as ethanol make economic sense as food prices rise.
The footnotes point to websites with more detailed information.
- Merrill Lynch commodity analyst Francisco Blanch found that the average U.S. family would be spending $526 more per year on automotive fuels if ethanol and biodiesel weren’t available. (1)
Ethanol production is responsible for about 21% of the price increase in corn, estimated Blanch. Based on that data, Renewable Fuels Association economists estimate a $15 per household increase in retail food costs. Net family saving per family from biofuels: Over $500 per year. (1)
- Iowa State University’s Center for Agriculture Adjustment reported in April that growth in U.S. ethanol output caused retail gasoline prices to be 29 cents to 40 cents per gallon lower than would otherwise be the case. (2)
- In recent months, gasoline blenders have been able to buy ethanol for about 40 cents to 60 cents per gallon less than gasoline. Ethanol blends at the retail pump are typically cheaper per gallon, and per mile driven, than non-ethanol gasoline. (3)
- A study by Informa Economics, Inc. found that only 4% of the variation in the consumer price index of food is related to corn prices. The analysis concluded: “Simply put, the growing U.S. ethanol industry is not the cause of food price inflation.” (4)
I could cite several current studies with essentially the same conclusions. But the anti-ethanol lobby, including the Grocery Manufacturer’s Association, is blaming ethanol – possibly as a scapegoat to divert attention from themselves.
An opportunity is arising as American consumers realize they’re competing for food and energy on a worldwide dinner table.
The opportunity: Redirect some of America’s $700 bil. per year of oil import costs into energy and food investments in America.
Already, biofuels are channeling income from energy into rural America, where it’s being invested to multiply both food and energy production. But this flow of capital is threatened: New, heavily leveraged ethanol refineries face negative operating margins turning $6 per bushel or higher corn into $2.90 per gallon ethanol. Lenders anxious about mortgage industry meltdowns are likely to be impatient with ethanol plants losing money. Biofuel industry insiders expect foreign investors to step in and buy up some ethanol plants for 30 cents on the dollar of original cost.
We need to keep the long-term strategic picture in mind. Almost 75% of the world’s readily available oilfields are owned and controlled by a dozen foreign governments which are constantly opposed to American interests. These include Russia, Venezuela, Iran, Saudi Arabia, Libya and the United Arab Emirates.
Although much of our imported oil comes from neighboring Canada and Mexico, billions of U.S. dollars are funding the agendas of governments openly hostile to America.
Top U.S. leaders have humbly begged oil sheikhs to sell us more and cheaper crude. The Saudis are responding – a little. But it’s in the interests of sovereign governments with oil riches to ration supplies at the highest prices the market will pay.
Why should sovereign oil cartels want to pump more when they can fill every order at $130-plus per barrel? Why should the U.S. refining industry have wanted to build a new refinery in America anytime in the past 30 years, creating extra capacity that would squeeze refining margins?
Biofuel plants have been the only substantial new motor fuel refineries in the U.S. for two decades!
The Latin question “Cui bono?” is an ancient adage which raises the issue of motive. It means literally, “Who benefits?”
Opponents of the biofuels industry know that if they can bankrupt and buy out their really serious future competitor – biofuels from cellulose and other non-food crops – they can perpetuate America’s dependence on foreign crude oil.
I’ll sum up by quoting a comment from Neal Asbury, an American exporter, world traveler and frequent writer on global economics:
“We must demand from our government a comprehensive energy policy that has at its core American controlled solutions. The cost of a barrel of oil has no ceiling as we compete with China for world oil reserves controlled by some of the most despotic regimes on the planet. Unless we act decisively there is no reason why gas will not hit $10 a gallon.
“There is no rational reason why we, with the third largest oil and gas reserves in the world according to the Interior Department, can’t produce enough oil and gas to prevent the Chinese from escalating world energy prices.”