By Gordon Garnos
AT ISSUE: For the past several weeks the national media has had a ball blaming ethanol, which is one of South Dakota's major industries, for all sorts of ills, including the high price of gasoline, the weak dollar and the increased cost of food. This negative national publicity to this fledgling South Dakota industry has been most unfair. Two recent studies about ethanol by prominent researchers tell a far different story about this alcohol additive to our gasoline supply. In effect they compliment each other.
THE LATEST STUDY was done by a group of Purdue University agricultural economists. While they say biofuels are a part of the equation of our national predicament today they are not the blame, by far, for the entire enchilada, including a weak dollar, higher prices for food and, especially, the high oil prices. In fact, these economists say the food prices will stay high as long as oil prices are high and the dollar is weak. One shouldn't have to be a rocket scientist to understand that.
The lead person on the study, Wally Tyner, said, "Lower oil prices and a strong dollar would bring pressure on commodity prices to fall." In fact, he said the full effect of higher corn and soybean prices haven't shown up in the grocery prices yet.
Who do you think delivers the groceries, the dairy products, eggs and such to the grocery stores? Think about it. And what is the fuel that these trucks are using. It ain't peanut butter, but diesel fuel that has never had the price tag on it as it is today.
IN OTHER WORDS this entire mess was established through a diverse, complex set of factors and not just on what the production of ethanol has done to corn prices. Oh, one can ask, "What do economists out east know about such things?" In response to that, their entire professional lives depend on what they put down on paper. And if they don't have the answers, who does?
Politicians? I don' think so.
The latest government figures say the cost of food has jumped 7.5 percent since last year. These figures are almost exactly what these Purdue researches have discovered. Stronger global demand, our weaker dollar, increased exports and weather-related production problems around the world have all had a hand in the increased cost of food for our tables.
The researchers noted these factors were too interrelated to be able to say how much of the price increase is caused by each factor. However, they did break down the effect on corn, which has tripled in price since 2004. They estimated that about $1 of the $4 increase in a bushel of corn is because of the subsidies of the ethanol industry, and not the full $4 the skeptics have been hollering about. That's quite a difference. The rest is, pure and simply because of the increased price of oil. Nor can we forget about the subsidies our government gives to the oil people. No, we haven't heard too much about that, have we. Those bucks are a lot bigger than ethanol ever got.
THE SECOND STUDY on fuel was done by John Urbanchuk, a director of the Law and Economics Consulting Group LLC. The South Dakota Corn Utilization Council commissioned this study that showed even the lowest percentage of ethanol blend, E10, saved South Dakota drivers 11.1 cents per gallon at the pump from March 2007 to March, 2008.
What the council wants is to get more pumps that offer gas blended with 15 to 30 percent ethanol to become available nationwide.
Lisa Richardson, executive director of the South Dakota Corn Growers and corn council, said, "All we're asking for is access to the market." And it doesn't even have to be "mandated."
All of their hopes are based on a provision in the 2007 Energy Independence and Security Act that provides $200 million in federal grants to 2014 in a pilot project for gas stations to install blender pumps. They are now mostly in Cenex stations across our state. If this provision isn't curtailed, that market would jump a thousand fold.
Of course, we have heard from the beginning that ethanol could, or might hurt a vehicle's engine. At the beginning of ethanol I had an elderly car that it didn't work in very well. When the newer car came along, it has been E10, 100 percent of the time. Wear and tear? None. Did it screw up the carburetor? Not once. Did it cut the mileage? Very Little, and when you do the math, you save. It is as simple as that.
However, if Governor Rick Perry, from the oil state of Texas, of course, gets his way with the EPA to scale back by 50 percent a mandate in the 2007 energy bill, it will hurt the corn council's desire to get ethanol spread across the country. Ethanol is here to stay. Our great nation needs it. If we use only the 10 percent blend, that is 10 percent less gasoline we won't need that comes to us from foreign countries. We, as consumers, need to protect it and use it. And why everyone doesn't just leaves me baffled....
Gordon Garnos was long-time editor of the Watertown Public Opinion and recently retired after 39 years with that newspaper. Garnos, a lifelong resident of South Dakota except for his military service in the U.S. Air Force, was born and raised in Presho.
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Monday, August 04, 2008
Ethanol has taken an undeserved hit in the national blame game
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