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Diverting Attention from Rising Food Costs

November 19, 2012
The EPA on Friday Nov. 16 rejected the petitions by governors of several states to waive the Renewable Fuel Standard for the coming year. The petitions were filed in August 2012 while farmers across numerous states suffered the worst drought in recent history. While everyone recognized the severe economic hardships caused by the drought, the agency found that the evidence did not show that the RFS “would likely or even probably cause harm to the economy.”

The conclusion reached by EPA mirrors the conclusions of several independent academic studies, including one by Purdue University and the Farm Foundation, another by Iowa State University and a third by the University of Missouri. Notably, the Purdue study found that a waiver of the RFS could not change the economic losses already caused by the drought.

Still, opponents of the RFS continue to try to place blame for high food costs on renewable fuel production. The American Fuel & Petrochemical Manufacturers and allied groups have launched an expensive public relations campaign to make Americans believe that rising food prices are caused by the RFS “diverting” corn from use for food and animal feed. But the EPA analysis – and the academic studies – showed that blending ethanol into the U.S. fuel supply makes good economic sense, and using corn for ethanol is “simply more profitable than selling it into the food or feed markets.”

The fact is that the price of oil has the greatest impact on food inflation – and most other measures of inflation – as the U.S. Energy Information Administration recently wrote. Further, the International Energy Agency recently found that the high cost of oil is putting the brakes on worldwide economic growth. Congress established the RFS to encourage the use of existing biofuels and the development of advanced biofuels in order to reduce our reliance on foreign oil. Continuation of that policy is a necessary part of the U.S. energy renaissance envisioned by IEA.