The heads of ethanol associations from the Brazil, Canada, Europe and the US have sent a joint letter to the leaders of the G8 making the case for the importance of biofuels in reducing the growing demand for oil and the corresponding escalation in prices around the world.
The letter went out over the signatures of Robert Vierhout, Secretary General of the European Bioethanol Fuel Association; Gordon Quaiattini, President of the Canadian Renewable Fuel Association (CRFA); Bob Dinneen, the President of the United States Renewable Fuels Association (RFA); and Marcos Sawaya Jank, the President and CEO of Brazil’s Sugar Cane Industry Association (UNICA).
Noting that the IEA had concluded that were it not for the increasing production of world biofuels producers, oil consumption would expand by 1 million barrels per day, the authors wrote:
As the leaders of the world’s most industrialized nations, you can imagine what would happen to oil prices in the absence of biofuel production.
There can be little question that the increased supply of biofuels is not only lowering oil demand, but also helping to mitigate the devastating impacts of volatile oil and gasoline markets. Francisco Blanch, a senior commodity analyst at Merrill Lynch, concluded in a June 6 investors report that, “On a global scale, biofuels are now the single largest contributor to world oil supply growth. We estimate that retail gasoline prices would be $21/bbl higher, on average, without the incremental biofuel supply.”
As to the issue of the impact of biofuels on food prices, they wrote:
As you probably know, the sudden and rapid increase in food prices around the world has multiple causes, not the least of which is oil already priced at $140 per barrel. Much of the modern world’s agriculture and food transportation are reliant on oil, and drastically higher oil prices increase prices all along the food chain. At the same time, poor harvests due to drought and other adverse weather conditions in a number of countries, growing demand by expanding Asian economies, commodity speculation, the decline in the value of the dollar, and to a lesser extent, the growth in biofuel production are also making contributions. But so too have restrictive government policies that prevent the expansion of local food production.
...Not surprisingly, record prices for oil, natural gas and other energy sources are making it nearly impossible for farmers around the world to produce food at the same low prices with which we as consumers have become accustomed. In Europe, diesel fuel, used to run the machinery needed to raise crops, has doubled in price year over year. In North America, not only are diesel prices higher but so too are other inputs like fertilizer (often based on fossil fuels), which has risen 350% in price since 1999.
As is always the case, context is critical. Biofuel production consumes just 3% of world coarse grain supply. With the incentives a strong global grain market provides agricultural producers, increases in efficiency and productivity by farmers the world will advance far more rapidly than they have in the past, plagued by years of neglect.
...This promise, however, can only be realized if biofuel production is encouraged to continue its evolution. Today, sugar, starch and plant oils represent the feedstock for virtually all biofuel production. But these technologies are only the beginning, the first phase of a much greater biofuel future. Because governments have chosen to invest in domestic biofuel production, new technologies are evolving that will vastly expand the basket of feedstocks from which biofuels are made. It is only through this evolution that developed and developing nations will be able to harness the promise of biofuel production from indigenous biomass material.
...New oil supplies are getting harder and more expensive to find. Existing supplies are dwindling in many of the world’s producing nations. Nonconventional reserves, like Canadian tar sands, pose even more environmental and economic risks. If one of the goals of G8 leaders is to help ensure the long term economic health and energy security, biofuels must be part of your strategy.
Separately, the UK government released the Gallagher Review of the indirect effects of biofuels, which concluded that the displacement of existing agricultural production, due to biofuel demand, is accelerating land-use change and, if left unchecked, will reduce biodiversity and may even cause greenhouse gas emissions rather than savings. As a result, the Review called for a significant slowdown in the introduction of biofuels “until adequate controls to address displacement effects are implemented and are demonstrated to be effective.” (Earlier post.)