Food or Fuel? Depends on Who is Buying

How money and influence decided for Governor Perry that ethanol and renewable fuel standards are not in the best interest of Texas.

According to an article in the Houston Chronicle Governor Rick Perry is requesting a federal waiver from renewable fuel standards, because the Governor believes that ethanol production is driving up the price of feed corn. Lonnie "Bo" Pilgrim and other livestock lobbies are pushing Perry to seek the waiver, after donating $100,000 to the Republican Governors Association chaired by Perry. According to Texans for Public Justice, Pilgrim contributed $216,500 to Perry's campaign from 2004-07.

The argument that Perry is making is that ethanol production and ethanol subsidies are driving up the cost of corn which is in tern driving up the cost of livestock. Therefore a federal waiver from renewable fuel standards should be granted by the Environmental Protection Agency. The rationale behind this position is because livestock has more of an economic impact in Texas than farming.

However, Perry does not even have the support of any of the twenty-two of the Republican governors.

A study by Texas A&M University found that a renewable fuels standard waiver would not effectively reduce the cost of corn. However, a second study by Texas A&M University after the floods in the Midwest (which destroyed about 2% of the corn crop) was done at Perry’s request found there would be an impact if corn was in short supply.

According to CNNMoney national a reduction by the RFS by just half would corn prices would fall $2 a bushel, which could save more than $9 billion in feed and food costs. However, in the first Texas A&M University study, it is stated that “Corn prices below $4 per bushel are unlikely under any scenario, given the high energy prices expect.”

However, there is more to the high cost of corn than RFS regulations.

Another reason behind the rising cost of corn, and the rising cost of everything is the rising price of oil. The price of corn is directly related to the price of oil. According to an article in the Indianapolis Star a bushel of corn priced at about 5 percent of the price of a barrel of oil and with oil at $140 per barrel, corn is just above $7 per bushel. If the price of oil reaches $200 a barrel that would drive up the cost of corn to $10 per bushel.

The rising cost of fertilizer is another reason behind the rising cost of corn. Do to a shortage in pot ash, fertilizer has tripled and quadrupled from $200 last year to anywhere from $600 to $800 a ton. Fertilizer has gone up in price 228% since 2000. This cost increase is causing some farmers to change crops to soy beans which use less fertilizer, which could in turn increase the price of corn.

The director of research at the Renewable Fuels Agency Geoff Cooper was quoted by CNNMoney saying that Perry “did not come close to demonstrating criteria of significant economic harm. The waiver request does not meet the EPA's criteria, because it affects only a fraction of his state's GDP."

This rising cost of food and fuel is an important and complicated issue. It is easy to point to solutions like a federal waiver from renewable fuel standards or a gas tax holiday. Governor Perry has also supported another one of these solutions; offshore oil drilling and exploration. As he stated in his campaign blog,“It's time to to lift the federal ban on offshore oil exploration to expand domestic production and I applaud President Bush and Senator McCain for calling for immediate action. I join both the president and senator in petitioning Congress to lift this ban immediately.”

These are solutions that appear to offer quick relief, but they do not address the long term problems.

John McCain has called for an end to corn subsidies for ethanol; however, it is hard to determine what McCain’s actual position on the issue is. According to OnTheIssues.org: In 2003, McCain said that ethanol "does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality." Campaigning in Iowa in August 2006, he described ethanol as a "vital alternative energy source, not only because of our dependency on foreign oil but its greenhouse reduction effects." Then in February of this year in Massachusetts, he reverted to his anti-ethanol position.

It is time for our government to start offering real solutions to the energy and emerging food crisis. More of the same is not the answer. Offering solutions that help one group of people and hurt another group of people is not the answer. The answer is to invest in the energies and technologies of the future today. With an administration that has leveled a moratorium on solar power development due to “environment impact,” it is unlikely that these type problems will be dealt with in a logical way in the near future. America is already eight years behind, and every day we weight is another day the next generation is going to have to pay for.