Mileage (mpg) Using Ethanol Seen 20% Higher Than EPA Says - Bloomberg

[Bill USA]

25. Ethanol's portion of the increase in price of food 9.8% - 15.7%, Energy's portion: 35% - CBO

The Congressional Budget Office looked into this after the huge run-up in food prices from Sept 2007 to early summer 2008. Note that the price of oil/gasoline (and of course, diesel) exploded over the same period.

From April 2007 to April 2008, the consumers index for retail price of food went up 5.1%. Ethanol's share of that increase according to the Congressional Budget Office was 9.8% (0.5 percentage point) to 15.7% (0.8 percentage point). Energy portion of the 5.1% increase was 1.8 percentage points or 36% of the total increase in retail food prices.


http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/100xx/doc10057/04-08-ethanol.pdf

Page 6:

"From April 2007 to April 2008, the increasing demand for corn to produce ethanol contributed, in CBO’s estimation, between 0.5 and 0.8 percentage points to the 5.1 percent increase in the price of food overall as measured by the component of the consumer price index for all urban consumers (CPI-U) that measures food prices."

page 8:

" The cost of (farm) commodities - (e.g. corn, wheat, meat, etc .. Bill USA) makes up about 19 percent of the price of food that originates on U.S. farms and that is sold in stores (see Figure 2). Consequently, an increase of 10 percent in the cost of all commodities would push retail food
prices up by approximately 2 percent.

Note: 0.5 and 0.8 percentage points computes to 9.8% and 15.7% of the total Food Price increase of 5.1%

the CBO also noted, on page 10 of their report, that:

Page 10:

"The impact on food prices resulting from hikes in the price of corn related to ethanol production was smaller than the effect of higher prices for energy.."


"...the producer price index for intermediate energy products could be used as a measure (and may better reflect the costs that the retail food sector faces for energy). Using that measure leads to an increase in energy prices between April 2007 and April 2008 of 25 percent, which implies a direct increase in the CPI-U for food of 1.8 percentage points ([font size="3"]36 percent[/font]) of the increase in food prices during that period."

one thing the CBO did not consider is that ethanol by providing an additional supply of fuel, caused a reduction in the increase in the price of oil/gasoline. Merrill Lynch put ethanol's impact on the price of oil at a ~20% REDUCTION. When you consider that ethanol reduced the price of oil/gasoline/diesel by approximately 20% the NET impact of ethanol on the price of food is more like 1% to 7% of the total increase in the price of food of 5.1%. IF increased demand for corn for making ethanol can drive up the price of corn then by the same laws of supply and demand the increased supply of fuel provided by ethanol decreased the price of oil/gasoline - which is a bigger part of the price of food than the cost of one commodity: corn.