This Weekend’s News: A New Biofuel Boom?

On Saturday, The Wall
Street Journal reported that the Department of Agriculture will offer
grants and loans to gas station owners to install “new ‘blender pumps’ so drivers
can purchase fuel with a higher ratio of corn-based ethanol.” (A copy of
the USDA’s press release can be found here.)
As the Journal reports, most gasoline
sold in the United States is 10 percent ethanol. But the goal of the subsidy
program is to increase the number of fueling stations that offer E85 pumps – gasoline
blended with 15 percent ethanol – in part as an effort to meet the demand of a
growing fleet of flexible-fuel vehicles that can safely run on gasoline with
higher blends of ethanol. “Gloria Bergquist, vice president of the Alliance of
Automobile Manufacturers, said the number of E85 vehicles in the U.S. is
growing about 10% each year,” according to the Journal. “In 2008, there were 6.1 million such vehicles; now, the
number has increased to about 8.2 million.” The program aims to add about
10,000 flexible-fuel pumps in the United States over the next five years.
Today, “only
about 2,350 fueling stations out of more than 110,000 offer E85
pumps.” 

(In a related post from last March, Christine wrote here on
the blog that though fueling stations are a necessary prerequisite for expanding
biofuel use in the United States, there are
other logistical challenges that need to be
carefully considered and understood.)  

Opponents have cautioned that subsidies for ethanol biofuel would
likely push corn prices higher (corn is the primary feedstock for most biofuels
produced in the United States). In general, these first generation biofuels that
use food-based feedstocks have come under pressure in recent years due to rising
global food prices that are, in part, a consequence of using feedstocks such as
corn and sugar to produce biofuel. “This year, the ethanol industry is expected
to consume five billion bushels of corn, almost as much as the 5.2 billion
bushels that will be used for livestock feed,” the Journal reports. “Corn futures have more than doubled since last
summer on strong foreign and domestic demand, including record U.S. ethanol
output. The USDA, in a crop report issued Friday, said producers of the biofuel
would be consuming even more corn than expected this year. Corn futures on
Friday closed up 1.2% at $7.68 a bushel, near the all-time high of about $7.73
a bushel set Thursday.”

In another article published online last night by The Wall Street Journal, the Journal’s
David Elliot explores why
the U.S. government has been focused on ethanol subsidies (a short primer
for anyone not already familiar with this issue) and warns about instability
associated with higher food prices. “‘(Food)
prices are projected to increase over the next decade and to continue to be at
levels, on average, above those of the past decade,” Elliot wrote, citing a
report from the U.N. Food and Agricultural Organization in early March. He
added, “In terms of global food security, that's a worrying future,
particularly for developing countries already struggling to feed themselves. It
is more worrying when you consider that in some cases producing biofuels causes
a comparable level of damage to the ecosystem as fossil fuels.”

To learn more about the U.S. biofuels industry, see this recent report from
the Woodrow Wilson Center: Biofuels:
Food, Fuel, and Future?

This Week’s Events

At 7:45 AM on Tuesday, go to the New Republic’s
event “Energy Policy: Powering the
Economic Recover.” Then at 9:30 AM, the Bipartisan Policy Center is holding
a panel on, “A
New Era of Energy Security.” At the Aspen Institute at noon, go to “The
Revolution we need in Food Security and Population.”

On Thursday at 10:30 AM, the Press Club will be
hosting a discussion on “The Future of Nuclear
Power.”

At 8:30 AM on Friday, go to the “International Summit on Water in Developing
Countries.” Then at 10:00 AM, SAIS is holding a panel on “Ensuring Equity in the Green
Climate Fund.”