Grainnet

RFA: Record Oil Prices Reinforce Need for Renewable Energy Alternatives

Washington, DC--In what seems like a broken record, crude oil hit a new high of $89 a barrel on Oct. 17.

Boosted by geopolitical concerns, supply concerns in this country and wild speculation that has come to define many commodity markets, oil prices are setting new records each day.

The unabated rise of oil prices will end up costing Americans at the pump as well as in the grocery aisle.

“The wild rise in oil prices at a time when prices should be holding steady underscores the kind of volatility in the marketplace that is only being mitigated today by the use of renewable fuels like ethanol,” said Renewable Fuels Association President Bob Dinneen.

“The nearly 6.5 billion gallons of ethanol the U.S. will produce this year is going a long way to help meet the growing demand for gasoline.

"By blending ethanol in gasoline today, refiners can save consumers up to 10 cents per gallon and help soften the inevitable rise in gas prices thanks to record oil prices.

"Unfortunately, not all refiners are capitalizing on the economic advantages of ethanol blending.”

According to oil industry analysts, oil refiners could be passing savings of up to a dime a gallon along to consumers if they blend ethanol into their gasoline.

Tom Kloza of the Oil Price Information Service (OPIS) told CNNMoney on October 2:

"[Ethanol’s] cheap, and you can cheapen the price of gasoline," said Tom Kloza, an analyst at the Oil Price Information Service.

"Everybody is trying to get the logistics worked out so they can have ethanol in their gasoline by 2008."

Kloza said using that blend would shave 4 to 10 cents off the price of a gallon of gas.

Dinneen continued, “Ever-escalating oil prices will also be felt by Americans in the grocery aisle.

"Petroleum is critical to the processing, packaging and transportation of all our favorite foods from t-bones to corn flakes to beer.

"By a factor of two-to-one, oil prices are more responsible for escalating consumer food prices than the price of feedstuffs like corn.

"Given the escalation in oil prices over the past two years, it becomes clear why a trip to the grocery store costs Americans more.”

Bruce Babcock, a professor of economics at Iowa State University, recently explained the role of energy in food pricing to Diane Rehm of National Public Radio this way:

“I did a couple of calculations [and] crude oil prices are up about 60% over the last two years, gasoline prices [are] up 50% [and] diesel [is] up more than 50% and if you look at the share of the retail food dollar accounted for by energy prices relative to commodity prices, I think that energy prices would probably have a greater share – so if you actually increase energy prices by 50% or 60% that’s going to have a bigger impact on the price of food than higher commodity prices.”

Additionally, Acting Secretary of Agriculture Chuck Conner recently addressed the issue of rising food prices, saying:

“And all retail food prices continue to be impacted, of course, by the large factor of the retail price of oil.

"About 80 cents of every retail dollar spent on food goes to cover processing, packaging, distribution and marketing costs.

"Of course you recognize all of those are very, very intensive consumers of energy and directly impacted by rising energy costs.”

For more information, call Matt Hartwig at 202-289-3835.