EPA proposing E30 Ethanol blend to enable auto makers to produce higher compression engines for

[Bill USA]

7. petroleum costs are the big driver in food costs. Ethanol is bringing down oil costs, thus it's

impact on corn prices is greatly reduced by ethanol's forcing down oil prices (which lowers the price of ALL farm commodities - not just corn).

Domesticly sourced oil (called: West Texas Intermediate) for decades sold at a premium (6% to 8%) to oil from anywhere else in the world because it has less sulphur and doesn't require as much refining. Starting around 2005 when ethanol was starting to equal a more significant addition to the domestic fuel supply WTI prices started moving down relative to World oil prices. For the last few years WTI has been selling about 14% to 18% BELOW North Sea Brent (oil from anywhere else in the World). Total price swing there is 20% to 26%.


Big Oil vs. Ethanol
(emphases my own)

[font size="3"]The observation that ethanol and corn prices have not tracked and the hope that expanding
ethanol and biofuel production will discipline the market power of oil companies and lead to
lower gasoline prices may strike some as odd, particularly in light of concerns that effort to
use ethanol to reduce oil consumption and import dependence will raise food prices. [/font]
[font size="+1"]Historically the relationship has run in the opposite direction – high energy prices cause higher food prices (see Exhibit 9). The relationship is moderate, accounting for about one third of the variation in corn prices. The relationship reflects the fact that corn production is intensive in the use of liquid fuels and natural gas, whose price tends to track the price of crude.