The news out of the U.S. Bureau of Labor Statistics this week was pretty brutal. The agency said that over the past 12 months, the Consumer Price Index for All Urban Consumers (CPI-U) increased – on a seasonally adjusted basis – by 8.5 percent, the highest annual increase in 31 years.
While gasoline has been on an upward rise for the past year, events in Ukraine and the global reaction to Russia’s aggression against its neighbor has triggered an even more dramatic increase in the price of motor fuel over the past six weeks. Fortunately, tempering those price increases in gasoline is the lower price of ethanol, which will now see an increase in use as a result of White House action this week.
President Biden recognized the economic benefits of ethanol by announcing Tuesday an emergency waiver that lifts restrictions on the summertime sale (June 1 through September 15) of gasoline with a 15-percent blend of ethanol in each gallon and removes geographic barriers to the sale of E15 across the nation. The president also said funding support would be made available for biofuels infrastructure and stimulus aid for recovering producers. With a view to the long term, EPA is considering additional action to facilitate the permanent sale of E15 year-round in states that have expressed interest in doing so. The developments are good news for consumers, given that at current prices, E15 can save drivers 10 cents per gallon of gas on average. And many stores sell E15 at an even greater discount.
The Bureau of Labor Statistics said the increases in the indexes for gasoline, shelter and food were the largest contributors to the seasonally adjusted, all-items increase. The gasoline index rose 18.3 percent in March and accounted for more than half of that month’s overall increase.
Unfortunately, the White House action promoting E15 has also brought with it a resurrection of grumbling from oil industry advocates and others claiming that the increased use of corn as a feedstock to make more ethanol is diverting the staple crop from its role as a food source and contributing to higher food prices.
In reality, economists say, food price changes over the course of the pandemic reflect the impact of illnesses and safety measures on labor supply and productivity in the United States. For example, most fresh-market vegetable growers rely on seasonal labor to produce crops and place the crop into supply channels. The pandemic reduced the supply of farm workers in producing regions, while procedural changes implemented to comply with recommended social-distancing and sanitary protocols reduced productivity for processing and packaging facilities.
To the point, the consensus among economists is that the rise in inflation is being driven by disruptions in the supply chain and a significant boost in consumer demand following the pandemic. To claim that the increased production and use of ethanol is driving up food prices totally ignores the reality that food price volatility more often stems from disrupted investment in agricultural productivity, export restrictions, commodity and food waste, a lack of market information and preparedness brought on by the pandemic, monetary policy and currency fluctuations, weather-related crop losses, climate change and high oil prices. It’s important to remember that while about 45 percent of the more than 400 million tons of corn grown is this country goes to ethanol, another 45 percent is grown for grain fed to animals raised for human consumption, while 10 percent is actually used for food. It is also vital to understand that in the ethanol process, all of the protein from the corn used in ethanol production is retained. In other words, we can fuel our cars, save consumers precious money at the gas pump and still feed the animals with the same bushel of corn. Simply put, in the United States, the reality is “food, fiber AND fuel,” not food versus fuel.
