BP to buy into Brazil Biofuels

Biofuels will help with "energy independence"? What is the definition of "energy independence"? What is the objective of "energy independence"?

Calgary Herald April 25, 2008
Britain's BP took a stake in a big biofuels project and announced $1 billion US in investment jointly with Brazilian partners Thursday, the same day Cosan sealed an $826-million deal with ExxonMobil Corp. "It's a natural trend toward consolidation in the ethanol sector," said Julio Maria Borges, director at Job Economia sugar and ethanol consultants. "In 10 years we'll certainly see Brazil harvesting one billion tonnes of cane with only 20 industrial groups," Borges said.

Phlippines Biofuels

Philippine Daily Inquirer
Among the provisions recommended for inclusion in the roadmap were a ban on planting of biofuel feedstock on all irrigated and highly productive arable land and a ban on use of feedstock that would compete with food, including corn, wheat, soybean and rapeseed.

At least they begin to see foods to fuels, forced by the government, does not make sense. But, why not remove government intervention and dictates and let the market direct agricultural production. Government action by central bureaucratic planning makes things worse. Government planning is not responsive to needs and the market, but instead to lobbyists and special interests - thus typically making the situation worse.

Biofuels and Food

NY Sun April 25, 2008
C. Ford Runge, a professor of applied economics and law at the University of Minnesota, states “I don’t think anybody knows precisely how much ethanol contributes to the run-up in food prices, but the contribution is clearly substantial,”. A study by a Washington think tank, the International Food Policy Research Institute, indicated that between a quarter and a third of the recent hike in commodities prices is attributable to biofuels.

Last year, Mr. Runge and a colleague, Benjamin Senauer, wrote an article in Foreign Affairs, “How Biofuels Could Starve the Poor.”

It takes around 400 pounds of corn to make 25 gallons of ethanol.

A Harvard professor of environmental studies who has advised Mr. Gore, Michael McElroy, warned in a November-December 2006 article in Harvard Magazine that “the production of ethanol from either corn or sugar cane presents a new dilemma: whether the feedstock should be devoted to food or fuel. With increasing use of corn and sugar cane for fuel, a rise in related food prices would seem inevitable.” The article, “The Ethanol Illusion” went so far as to praise Senator McCain for summing up the corn-ethanol energy initiative launched in the United States in 2003 as “highway robbery perpetrated on the American public by Congress.

Food Price/Shortage Complex

There are several issues with using foods for fuel and the impact this is having on the food supply. Warnings have been issued for a decade. However, a balanced perspective on causes is in order when considering the current shortages and price increases. Oil producing countries are attempting to blame food price increases exclusively on biofuels. Issues are much more complex with multiple causes.

The primary problem with the food supply is government involvement to serve special interest groups at costs to others. Some special interest groups are calling for more government action, yet this is a core cause of food problems.

A key issue with biofuels is removing a buffer capacity in the food supply, exposing the worlds food supply to vulnerabilities exacerbated by other factors. Biofuels add to the potential for a "perfect storm" in the food supply.

Factors for the current shortage and price increase, in no particular order, include:
1. Government payments to farmers to not produce crops?
2. Governments erect crop trade barriers preventing free production and flow of goods
3. Biofuels - The USA diverted one-third of corn into ethanol for vehicles. More acreage is set aside for ethanol production. This has increased prices for corn and other staples such as soybeans and cotton.

4. Natural climate cycles cause shortages - U.S. wheat stocks are at the lowest levels in 60 years because worldwide consumption of wheat has exceeded production in six of the past eight years. Back-to-back failure of two years of wheat crops caused by drought in Australia.

5. Energy costs have drastically increased: Farmers also have raised prices because they have been hard hit by spiraling energy costs. This has also driven up the cost of nitrogen fertilizer made from natural gas.

6. Commodity Speculation - An influx of investors and speculators has exaggerated prices. Big Wall Street firms and hedge funds have taken huge positions in futures markets that once were dominated by relatively small operators such as farmers and grain-elevator owners.

Peru and Bolivia: Biofuels Starving Our People

Cato April 22, 2008

"The leaders of Bolivia and Peru have attacked the use of biofuels, saying they have made food too expensive for the poor," reports The Guardian. "Speaking at the United Nations, the Bolivian president, Evo Morales, said the increased use of farmland for fuel crops was causing a 'tremendous increase' in food prices."

"In recent years, we've heard that climate change could be catastrophic for nature and humanity. But it's becoming increasingly evident that over the next few decades, climate-change policies could prove even more catastrophic. ... Climate-change remedies can lead to greater poverty, starvation and disease, as well as widespread ecological destruction -- some of the very misfortunes that they're supposed to prevent. In our haste to address global warming, we have yet to think seriously about our policies' unintended effects. The results have been disastrous, and they're only getting more so."

Oil Countries Blame Biofuels for all food costs

I find it disingenuous that the oil producing countries blame all the increased food costs on biofuels. In other words, they claim no increased energy costs for crop production, fertilizer, food distribution..................... The oil producing countries are purposefully running up prices

Qatari Energy Minister Abdullah bin Hamad al Attiyah said the world would have to choose "what its priority is going to be -- driving or eating." He rejected suggestions that high oil prices were behind the food crisis. "It's not oil that should be questioned, it's biofuels, which are at the root of the problem," al Attiyah said.

When ever you see someone blank slate blame some other group, it is time to take a hard look at them.

Italian Prime Minister

AFP April 21, 2008
"A conflict (is) emerging between foodstuffs and fuel ... with disastrous social conflicts and dubious environmental results," outgoing Italian Prime Minister Romano Prodi told the International Energy Forum here as rising food prices worldwide raise the spectre of famine in some countries.
Agricultural prices were not only being driven by rising demand but also by increased cultivation of biofuels, "creating strong tensions in a number of countries," he said.

Investors burnt in biofuel explosion

Article shows conflicting government interest are damaging small biofuels producers to the benefit of large. They don't discuss, but it does show, the industry is driven by government policies. A little change in policy can easily favor one group over another - not free markets. Yet, they call for more government involvement and incentives????

Globe Asia April 07,2008
In January, the Netherlands announced that it would no longer subsidize the import of palm oil, the main source of “green” power generation, after evidence showed biofuel sources were grown on Asian plantations created from drained peat land with disastrous environmental consequences.

Industry operators say the government should give additional incentives to biofuel users. “No matter where you are, new energy is always more expensive than conventional sources. The government should give incentives to push the development of biofuel,” says Adrisman.

A general problem in the media is that now we are seeing food shortages, they propose a solution of MORE government involvement. They see problems due to a number of factors, many have a root cause in various governments policies, yet the propose a solution of more government?

Updates Today
April 18 (Bloomberg) -- The U.S. and Europe may have to reconsider their promotion of biofuels in the wake of surging food prices around the world, International Monetary Fund Chief Economist Simon Johnson said
World food prices have surged by about 83 percent in the past three years, provoking riots in poor nations and threatening to set back efforts to reduce global poverty, according to the World Bank and IMF.
Reuters April 20, 2006
An official from the International Energy Agency also said the impact of biofuels should have been forseen.
Domain B April 20
Demand for biofuels, along with increased competition for cropland between food and fuel uses, is taking up much of the increase in the global crop production, according to a World Bank report. Food production is failing to keep up with demand, the bank added.
Washington Post April 20 - Worsening Food Crisis
To many, the villain is biofuels. U.S. and European ethanol programs, intended as an antidote to climate change and an alternative to OPEC oil, stand accused of snatching food from the world's hungry. According to India's finance minister, ethanol is "a crime against humanity." And it is part of the problem. The more corn becomes ethanol, the less will be available as food for people and livestock. In the U.S. farm belt, heavy ethanol subsidies, such as a tax break of 51 cents a gallon, encourage the shift. These subsidies were already questionable, in economic terms, before the commodity crunch. That they might contribute to hardship for the world's poor is another argument for reducing them.
Relief Web April 20
The switch to biofuels is correlated with food price rises over the past year, and, with consumption likely to grow, is expected to drive further food price inflation.