Friday, July 04, 2008


Guardian, UK - Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian. The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil. . .

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers here have described higher food and fuel prices as "the first real economic crisis of globalization".. . .

"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertilizer prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

I-R Squared Blog Spot A report from a Missouri-based research organization debunks the claim that Missourians are saving money through a state law requiring that retail gasoline contain a minimum of 10% ethanol. The report is in reaction to an assertion by the Missouri Corn Merchandising Association (MCMA), alleging that Missourians will save more than US$ 285 million through the E-10 mandate in 2008, and nearly US$ 2 billion over the following decade. . . However, the report by the Show Me Institute reveals two fundamental flaws with this calculation. One is that it fails to take into account the fact that E-10 blended fuel is cheaper because ethanol producers receive tax credits and other subsidies. . . The MCMA also does not take into account that E-10 blended fuel is about 2.5% less efficient than pure-grade gasoline, meaning that Missourians will be filling their tanks more often. When both of these factors are taken into account, the ethanol blending mandates are shown to be costing Missourians about US$ 118 million per year.