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Fast Food vs. Fuel

December 13, 2012
The National Council of Chain Restaurants, a member of the Smarter Fuel Future coalition that includes national petroleum refining and meat producer trade groups, recently launched a new front in the effort to dismantle the Renewable Fuel Standard. The group released a study compiled by PricewaterhouseCoopers, an editorial in the Wall Street Journal and followed up with a round of lobbying on Capitol Hill.

The claims made in the NCCR-funded report are at best unrealistic. The report authors cherrypick data points from two older studies, ignoring alternate outcomes modeled within the same studies, to create a scenario in which more than 6 billion gallons of U.S. biofuel production is eliminated. The U.S. Environmental Protection Agency’s recent study of the potential impacts of an RFS waiver showed that even smaller reductions in biofuel production would be highly unlikely because the price of petroleum gasoline is so high.

In its recent decision to deny the requests to waive the RFS made by members of Smarter Fuel Future, EPA tested 500 scenarios combining different corn, oil and biofuel production price points. In 89 percent of the scenarios, EPA found that biofuel production would remain at its current level because high oil prices drive demand for lower-cost alternatives. In the 11 percent of scenarios where biofuel production dropped due to a waiver of the RFS, EPA emphasized that the combination of “projected fuel prices and corn yields are both unrealistically low.” Gasoline prices would have to drop below $2.00 a gallon wholesale before demand for biofuel would decrease.

Sarah Bittleman, senior energy adviser to Agriculture Secretary Tom Vilsack, also took issue with the Wall Street Journal editorial on the USDA blog, writing, “[I]t is inaccurate to portray renewable energy as either the driving force behind food cost inflation, or as a negative economic factor for our nation. Domestic production of renewable energy has not adversely affected your grocery market on the corner – and in the long term, may well keep fuel and food prices at more reasonable levels for Americans.”

As she pointed out:
“USDA's Economic Research Service estimates that farmers receive about 14.1 percent of the total consumer food dollar (based on the 2010 average food dollar). This suggests that if the price of all food commodities were to double at the farm level, and other production processes were held fixed, food inflation would rise just over 14 percent.

“However, the chance of all other production processes, such as the cost of energy, remaining fixed, are small. That is why America must continue to invest in the homegrown renewable energy that will help balance rising energy costs. Being able to produce more domestic energy from all sources, including renewable fuels, will improve energy security, boost the rural economy and keep the cost of traditional fuels lower.”

Additional evidence calls into question the fast food industry’s lobbying claims.

The National Restaurant Association released statistics this week showing an expected increase in sales and employment in 2013. Total restaurant industry sales are expected to exceed $660 billion in 2013 – a 3.8 percent increase over 2012, marking the fourth consecutive year of real sales growth for the industry. In addition, 2013 will be the 14th straight year in which restaurant industry employment will outpace overall employment. Restaurants will employ 13.1 million individuals next year as the nation’s second-largest private-sector employer, representing 10 percent of the total U.S. workforce.