Disproving “The great biofuel fraud”

Someone by the name of F William Engdahl has recently written an article for the Asia Times. This however is not just any article, it is probably THE IDEAL example of an article based on faulty data and misinformation about ethanol. Here I am going to go through a lot of his arguments against ethanol and disprove them one by one. I will quote his statements and then provide a rebuttal with a source (most of the sources can actually be found in previous articles that have been discussed on this site). Don’t get me wrong, there are some valid and descent reasons to be against the mass production of ethanol, Engdahl however seems to get almost everything wrong.

” The center of Bush’s program, announced in his January State of the Union address, is called “20 in 10″, cutting US gasoline use 20% by 2010. The official reason is to “reduce dependency on imported oil”, as well as cutting unwanted “greenhouse gas” emissions. That isn’t the case, but it makes good PR. Repeat it often enough and maybe most people will believe it. Maybe they won’t realize their taxpayer subsidies to grow ethanol corn instead of feed corn are also driving the price of their daily bread through the roof.”

The most often repeated and first major argument of Engdahl’s is that corn ethanol competing with food increases the price of food and that is why food prices have increased so much in the past 18 months. In fact the main reason that the cost of food has gone up so drastically as of late is because of the rising cost of oil. This is because the cost of the actual corn is only a tiny percentage of the total cost of the food that we consume. To confirm this assessment I would refer interested readers and Mr. Engdahl to this report.

“The late American satirist Mark Twain once quipped, “Buy land: They’ve stopped making it.” Today we can say almost the same about corn, or all grains worldwide. The world is in the early months of the greatest sustained rise in prices for all major grains, including maize, wheat and rice, that we have seen in three decades. Those three crops constitute almost 90% of all grains cultivated in the world.”

When the cost of corn (the main ingredient in corn flakes) accounts for a mere 5% of the total cost of the box of cereal, even if the cost of corn doubles again next year it would still only increase the cost of your box of cornflakes by roughly $.20. This is not going to break anyone’s bank. The 90% figure is sensationalist and doesn’t matter even a little to basic supply/demand as anyone who has taken econ 101 can tell you.

“No advocate of the ethanol boondoggle addresses the huge social cost that is beginning to hit the dining-room tables across the US, Europe and the rest of the world. Food prices are exploding as corn, soybeans and all cereal-grain prices are going through the roof because of the astronomical – US Congress-driven – demand for corn to burn for biofuel.”

Correlation does not imply causation.

“Biofuel – gasoline or other fuel produced from refining food products – is being touted as a solution to the controversial global-warming problem. Leaving aside the faked science and the political interests behind the sudden hype about dangers of global warming, biofuels offer no net positive benefits over oil even under the best conditions.”

This is actually almost true, certain studies indicate that there is close to no net positive benefits from corn ethanol, others indicate slight benefits (generally no more than 30% however). Here is a study which likely is close to the truth. “For GHG emissions, E85 produced by dry milling achieves a 19% reduction, and E85 produced by wet milling achieves a 14% reduction.”

You also completely (and conveniently) neglect the expected carbon emission reductions associated with cellulosic ethanol:”Under the near-future case, for E85, woody cellulosic ethanol reduces petroleum use by
70%, GHG emissions by 102%, and fossil energy consumption by 79%.”

GHG = Green House Gas.

“Big Oil is also driving the biofuels bandwagon. Professor David Pimentel of Cornell University and other scientists claim that net energy output from bio-ethanol fuel is less than the fossil-fuel energy used to produce the ethanol. Measuring all energy inputs to produce ethanol, from production of nitrogen fertilizer to energy needed to clean the considerable waste from biofuel refineries, Pimintel’s research showed a net energy loss of 22% for biofuel – they use more energy than they produce. That translates into little threat to oil demand and huge profit for clever oil giants that re-profile themselves as “green energy” producers. “

Joke: What happens when you use crop yield and conversion efficiency data from the 70s when trying to do a life cycle analysis for today?

Punchline: You get data today that would have been a useful argument against ethanol during the 70s!

From the department of energy:

“The most official study of the issue, which also reviews other studies, concludes that the “net energy balance” of making fuel ethanol from corn grain is 1.34; that is, for every unit of energy that goes into growing corn and turning it into ethanol, we get back about one-third more energy as automotive fuel. That may not sound impressive, but bear in mind that while the gasoline that ethanol displaces is largely imported and a high-level pollution source, the mix of energy inputs for producing bioethanol includes much domestic and relatively cleaner energy. On the basis of liquid fuels alone, the net balance is 6.34 (USDA Office of Energy Policy and New Uses, The Energy Balance of Corn Ethanol: An Update).”

Also, the energy balance from sugar cane is between 8:1 and 10:1.

“The bio-ethanol architects did their homework, we can be assured. It’s increasingly clear that the same people who brought us oil-price inflation are now deliberately creating parallel food-price inflation. We have had a rise in average oil prices of some 300% since the end of 2000 when George W Bush and Dick “Halliburton” Cheney made oil the central preoccupation of US foreign policy. “

As I have already shown, the price of our food is far more dependant on the price of a barrel of oil than the price of a bushel of corn. Obviously as oil prices increase, food prices will increase (with a few year lag since the supply curve does not instantly correct itself).

“Environmental analyst Lester Brown recently noted, “We’re looking at competition in the global market between 800 million automobiles and the world’s 2 billion poorest people for the same commodity, the same grains. We are now in a new economic era where oil and food are interchangeable commodities because we can convert grain, sugarcane, soybeans – anything – into fuel for cars. In effect the price of oil is beginning to set the price of food.””

The reason that people are starving isn’t because there is not enough food to feed the people of the world, it is because the people of the world can not afford to feed themselves due to lack of jobs. Yesterday I wrote about an article which highlights how a Chinese company is buying up millions of acres of Congo palm oil plantation with the intention of creating massive amounts of biofuel. The Congo people are absolutely thrilled about this as it will create jobs for those who are currently some of the poorest in the world and the money will trickle down throughout the rest of the economy so the people can actually buy some food. I would argue that biofuels are actually going to end up reducing world hunger, not increase it. The areas of the world with the largest starvation also tend to be areas where biofuel crops grow best.

” The green claims for biofuel as a friendly and better fuel than gasoline are at best dubious, if not outright fraudulent. Depending on who runs the tests, ethanol has little if any effect on exhaust-pipe emissions in current car models. It has significant emission, however, of some toxins, including formaldehyde and acetaldehyde, a suspected neurotoxin that has been banned as carcinogenic in California.”

You use hyperbole to the extreme: “Compared with gasoline, ethanol tends to produce less benzene and butadiene, but more acetaldehyde and formaldehyde, when burned.” Basically ethanol produces slightly less of some negative compounds and slightly more of other negative compounds. This isn’t even “dubious” and certainly not “outright fraudulent.”

Anyway, you ignored most of the valid arguments against ethanol usage and argued mostly for the bad ones which have already been invalidated on numerous occasions. For example, I would argue that the implementation by the administration has been relatively poor. The subsidies are depleting an already overreaching budget. A carbon tax and possible other taxes on gasoline and large vehicles would be far more effective.

In conclusion I would suggest that perhaps Mr. Engdahl spend more time researching facts and less attempting (and failing) to prove his slogan: “Just because you’re paranoid doesn’t mean they aren’t out to get you.”

Engdahl, F William. “The great biofuel fraud” Asian Times Online, August 1 2007. <http://www.atimes.com/atimes/Global_Economy/IH01Dj02.html&gt;

7 Responses to Disproving “The great biofuel fraud”

  1. Stan Cotton says:

    See site. http://www.joinfoil.org

    Try and sell a imaginative marketing campaign that the public can identify to conventional minds.

  2. I agree that rising prices for grains and oilseeds are not the only reasons for increases in the retail prices for foods. But there is no way that increases in the farm-gate prices of basic commodities (vegetable oils and grains) of 50% or greater are not going to affect the prices of food, especially meats, dairy products and semi-processed foods based on grains.

    I suggest readers check out the recent report by the FAO and OECD, which foresees “the burgeoning use of cereals and other commodities to satisfy appetite for biofuels” helping to keep food prices high over the next decade. “The impact will be felt most keenly by net-food-importing countries and the urban poor. And for farmers who need feed for their livestock, it means mounting costs and lower incomes.” People in Mozambique don’t eat highly processed corn flakes: they eat dried and cracked or ground maize.

    Here is what a recent report from the U.S. Government’s own Foreign Agricultural Service says about the situation in Southern Africa:

    Drought, coupled with high international commodity prices, is putting the food security of a large portion of Southern African consumers in jeopardy. South Africa, the main producer of the staple corn, is suffering from a serious drought with the crop soon to be harvested dropping from a possible 10 million tons at the end of December to about 7 million tons. As a result, about 1.5 million tons of corn, more than a million tons of wheat and the oilseed equivalent of a million tons of oilseeds will have to be imported later this year. High current international prices will also push up costs, which will result in increased hunger for many families in Southern Africa. [my emphasis]

  3. Joel says:

    Ron, your enlightening reply is as usual much appreciated.

    I would like to direct interested reader’s attention to a few parts of the second article that Ron linked to.

    “South African agriculture is based on an unprotected free market system and
    imports of wheat are also expected to exceed a million tons while oilseed products
    (meal and oil), exceeding the equivalent of a million tons of oilseeds, will also be
    imported. The open regime kept food prices low when international commodity
    prices were low and the Rand strong, causing local production to decrease. This
    policy has now led to higher domestic prices, which may limit local and regional sales while import costs increase dramatically. Consumer prices of grain- and
    oilseed-based products are especially vulnerable to the increases.”

    This seems to indicate that the people starving is more an unfortunate consequence of a free market system than necessarily of price increases. Had demand had been tighter all along then the South African nations would have planted more corn to begin with and would thus not be in as dire a situation. It is terrible that these people are starving now and I would encourage private donors and governments to aid those in need, but it is the result of the supply lagging behind demand combined with serious drought. Once supply catches up (south African nations will plant more in the future), the system will get back into sync and starvation levels will normalize. The truly terrible thing is that we allow anybody to starve when there is plenty of food to go around on the planet.

    “Parts of Zimbabwe are of particular concern as early indications are that cereal crops
    in much of the southern half of the country have been decimated by the long, dry
    spell in January and early February. Zimbabweans have suffered through the
    world’s highest inflation rates in recent years. The economy is in tatters and, despite hunger all round, much of the country’s productive farmland is not being
    cultivated. It is estimated that roughly one quarter of all Zimbabweans have left the
    country, often illegally, in order to find work and something to eat. Zimbabwe’s
    ability to import is severely restricted by foreign exchange shortages.”

    So instead of blaming ethanol how about we work with the governments of these countries to get that land cultivated to get some food into the bellies of the people.

  4. Joel, you say:

    So instead of blaming ethanol, how about we work with the governments of these countries to get that land cultivated to get some food into the bellies of the people.

    You make it sound like an either-or situation. Yes, much starving in the world is the fault of poor food distribution systems and other local problems. But the fact is, as the FAO, the OECD, and numerous other reputable institutions have said, the extra demand for crops created by first-generation biofuels is pushing up prices, aggravating an already tight market situation. Expanded output will ease it somewhat, but at a considerable cost to the environment — as we are seeing in the United States, where farmers that used to plant corn and soybeans in rotation are now planting corn-corn-soybeans, or corn on corn.

    Frankly, I’m surprise that you, as a self-styled advocate of cellulosic ethanol, defend so strongly corn ethanol and the policies that continue to support it.

  5. Joel says:


    If we were to hold ethanol production at it’s current level in years to come, corn prices would once again go down as the market stabilizes (although not as low as they were). The recent price surge has been caused more by the shock to the free markets and the expectation that demand will continue to rise due to the subsidies given to corn than because of long term scarcity of the resource. Give the farmers a few years to prepare some more fields, get the cultivatable Zimbabwean land producing at least something, get rid of the corruption that blocks equitable resource availability in these governments and you will see the supply and demand come back into sync and thus prices will decrease.

    The WFP is meant to provide temporary aid while the long term problems get fixed. The real problem seems to be that the long term problems are not getting fixed and these governments are not supporting their people. Wikipedia on WFP

    “WFP strives to eradicate hunger and malnutrition, with the ultimate goal in mind of eliminating the need for food aid itself.”

    It seems like food aid has become a necessity to these countries and this is the real problem as they are becoming dependent upon it. You know how it goes, “give a man a fish and he will eat for a day, teach a man to fish and he will never be hungry again.” Giving them fish to eat while they learn to fish is great, but we need to make sure that they are indeed learning to fish.

    “Where farmers that used to plant corn and soybeans in rotation are now planting corn-corn-soybeans, or corn on corn.”

    There is a difference between irresponsible crop planting (what we are seeing in the US), and generating at least something from the majority of a country’s cultivatable land (see Zimbabwe). I am completely for making sure that crops are planted in a sustainable way.

    You are right when you question why I defend corn ethanol. I am a firm believer that cellulosic ethanol will be far better oil alternative in the long term than corn ethanol. A lot of the criticisms for corn ethanol however have little to no merit and I don’t want to see people trying to use these same fake arguments to block cellulosic ethanol progress once it becomes an economically feasible alternative. As you know, the debates that go on in the halls of congress are unfortunately less informed than the debates that go on around here. It would be highly unfortunate if cellulosic ethanol progress was slowed by some misinformation or a confused senator.

    Also this does not seem (at least from my perspective) to be a direct subsidies issue. As regular readers of this site know, I am an advocate for a carbon tax rather than a subsidies approach to alternative fuel implementation. If a carbon tax were implemented it seems like there would be a similar shock to demand as we have seen with the US government mandate+subsidy which wouldn’t solve this problem of temporary price increases. I would be interested in your (and GSI’s) opinion on this however.

  6. Jim Wagner says:



    Eating Fossil Fuels


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