LUFT/GAFFNEY: Fact vs. fiction on food vs. fuel

Set America Free members Gal Luft and Frank Gaffney write:

Back when oil cost $3 and $4 per barrel, the increased use of ethanol was blamed for high food prices, food riots and starvation of the poor. Senior United Nations official Jean Ziegler called the use of food crops for fuel a “crime against humanity.” Anti-American demagogues like Hugo Chavez and Fidel Castro seized the opportunity to pile on to the anti-ethanol jihad.

Competing explanations for the rise in food prices – such as the role of speculators, the rise in oil prices and the increased demand for meat in China and India – were given short shrift by the “smart” people. Ironically, at the very moment that oil prices were at an historical high, the only alternative fuel available to keep gasoline prices from going even higher was facing an unstinting and ferocious attack. The last few weeks have clearly demonstrated all this was a farce.

An immutable fact is now clear for all to see: Food prices track oil prices, regardless of how much corn is used for ethanol production. When oil was selling at a premium, the costs went up for essential components of our food supply – especially those associated with operating agricultural machinery, fertilizers, packing, labor and transportation. When prices came down, the price of corn quickly followed.

In fact, oil has now fallen nearly 50 percent from its record $147 a barrel in July 2008. In the same period, corn prices have fallen by the same percentage, from $7.50 a bushel to under $4 today.

Did the price of corn drop because we used less ethanol? No. To the contrary, since the summer, ethanol production has actually risen nearly 10 percent.

It is now clear it was not ethanol that drove up the price of grain, and therefore the price of food. Rather, it was a result of the same speculative forces that jacked up oil prices. When the bubble created by hedge funds and other speculators popped in the current financial crisis, commodity prices declined.

This is not to say ethanol had no impact at all on food prices. It did. But this impact was marginal in comparison to the other factors at play.

Read the whole thing, for it is good.

Comments are closed.