Reality Check: The Price of Ethanol

By Ben Swann email

With gasoline prices once again hovering around four dollars a gallon and oil companies set to announce what are expected to be record profits this week, President Obama wants a repeal on subsidies for oil companies.

Specifically the White House wants 4 billion dollars in taxpayer subsidies for oil companies to come to an end.  While that is worth exploring, there is another Congressional mandate for bio-fuels that taxpayers are footing the bill for.  No one seems to talk about this, but this one could be causing hunger across the world.

The United States,  purchased less than half the amount of food aid this year that it did in 2000, while spending the same amount of money.  That is because the cost of that food is so much higher than it used to be and the U.S. gasoline policy is partially to blame.

"The President sent a letter earlier today to the leaders of the House and Senate urging them to take immediate action to eliminate unwarranted tax breaks for the oil and gas industry and to use those dollars to invest in clean energy to reduce our dependence on foreign oil."  said White House Spokesman Jay Carney.

That is true.

The President wants to move that 4 Billion dollars into more investment in clean energy.  Already Congress is putting 6 billion in subsidies into ethanol.

In 2007, the Energy Independence and Security Act was passed by Congress to mandate the mix of bio-fuels into the gasoline. The blenders receive a tax credit of 45 cents per gallon of ethanol.

Right now, 24% of the U.S. corn crop is now going to ethanol production.

Even so, bio-fuels have done nothing to reduce the price of gasoline in the U.S as we clearly see from the current sky-rocketing gas prices.

When it comes to alternative energy, oil companies say they are the ones already paying a large share.

"If the President wants to put this money in renewables he should know that one out of every five dollars invested in renewables today in America are being invested by oil and natural gas companies." says Rayola Dougher from the American Petroleum Institute.

There is a bigger issue than just gas prices here.

Because of corn being used for Ethanol, U.S. reserves of field corn are at their lowest levels in 15 years.   The corn demand for ethanol is now at 4.9 billion bushels per year.

Because of that corn prices have almost doubled, from $3.49 a bushel in July of last year to $6.10 in January of this year.

Because of subsidies, there are fewer farmers growing wheat and cotton and more growing corn.

So here is what you need to know.

The corn that is not going into the market from the U.S, plus, drought in Russia and China, are creating food shortages world-wide.  That means increased food prices for you and me.

But consider this.  1.2 billion people worldwide make $1.25 or less a day.  Of that $1.25, they spend 50% to 80% on food and the rest on medicine or education.

Causing the price of food to double world-wide in just 7 months for a bio-fuel plan that isn't working while over a billion people won't be able to afford food.  That isn't just a debate over economic policy, it is a debate of what is immoral.

And that is Reality Check.