Cars and People Compete for Grain

The United States quickly came to dominate the crop-based production of fuel for cars. In 2005, it eclipsed Brazil, formerly the world’s leading ethanol producer. In Europe, where the emphasis is on producing biodiesel, mostly from rapeseed, some 2.4 billion gallons were produced in 2009. To meet its biodiesel goal, the European Union, under cropland constraints, is increasingly turning to palm oil imported from Indonesia and Malaysia, a trend that depends on clearing rain forests for oil palm plantations.

The price of grain is now tied to the price of oil. Historically the food and energy economies were separate, but now with the massive U.S. capacity to convert grain into ethanol, that is changing. In this new situation, when the price of oil climbs, the world price of grain moves up toward its oil-equivalent value. If the fuel value of grain exceeds its food value, the market will simply move the commodity into the energy economy. If the price of oil jumps to $100 a barrel, the price of grain will follow it upward. If oil goes to $200, grain will follow.

From an agricultural vantage point, the world’s appetite for crop-based fuels is insatiable. The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year. If the entire U.S. grain harvest were to be converted to ethanol, it would satisfy at most 18 percent of U.S. automotive fuel needs.The emerging competition between the owners of the world’s 910 million automobiles and the 2 billion poorest people is taking the world into uncharted territory. Suddenly the world is facing an epic moral and political issue: Should grain be used to fuel cars or feed people? The average income of the world’s automobile owners is roughly $30,000 a year; the 2 billion poorest people earn on average less than $3,000 a year. The market says, let’s fuel the cars.

While it makes little sense to use food crops to fuel cars if it drives up food prices, there is the option of producing automotive fuel from fast-growing trees, switchgrass, prairie grass mixtures, or other cellulosic materials, which can be grown on wasteland. The technologies to convert these cellulosic materials into ethanol exist, but the cost of producing cellulosic ethanol is close to double that of grain-based ethanol. Whether it will ever be cost-competitive with ethanol from grain is unclear.

There are alternatives to this grim scenario. The decision in May 2009 to raise U.S. auto fuel efficiency standards 40 percent by 2016 will reduce U.S. dependence on oil far more than converting the country’s entire grain harvest into ethanol could. The next step is a comprehensive shift to gas-electric plug-in hybrid cars that can be recharged at night, allowing most short-distance driving daily commuting and grocery shopping, for example to be done with electricity. An even more fundamental need is to restructure transportation systems to provide far more options than the personal automobile.

As the leading grain exporter and ethanol producer, the United States is in the driver’s seat. It needs to make sure that efforts to reduce its heavy dependence on imported oil do not create a far more serious problem: chaos in the world food economy. The choice is between a future of rising world food prices, spreading hunger, and growing political instability and one of more stable food prices, sharply reduced dependence on oil, and much lower carbon emissions.

From: Environmental News Network-Know Your Environment

Earth Policy Institute June 1, 2010 12:01 PM