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     Aug 1, 2007
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The great biofuel fraud
By F William Engdahl

That bowl of Kellogg's cornflakes on the breakfast table or the portion of pasta or corn tortillas, cheese or meat on the dinner table is going to rise in price over the coming months as sure as the sun rises in the East. Welcome to the new world food-price shock, conveniently timed to accompany the current world oil-price shock.

Curiously, it's ominously similar in many respects to the early 1970s when prices for oil and food both exploded by several

hundred percent in a matter of months. That mid-1970s price explosion led the late US president Richard Nixon to ask his old pal Arthur Burns, then chairman of the Federal Reserve, to find a way to alter the Consumer Price Index (CPI) inflation data to take attention away from the rising prices.

The result then was the now-commonplace publication of the absurd "core inflation" CPI numbers - sans oil and food.

The late American satirist Mark Twain once quipped, "Buy land: They've stopped making it." Today we can say almost the same about corn, or all grains worldwide. The world is in the early months of the greatest sustained rise in prices for all major grains, including maize, wheat and rice, that we have seen in three decades. Those three crops constitute almost 90% of all grains cultivated in the world.

Washington's calculated, absurd plan
What's driving this extraordinary change? Here things get pretty interesting. The administration of US President George W Bush is making a major public relations push to convince the world it has turned into a "better steward of the environment". The problem is that many have fallen for the hype.

The center of Bush's program, announced in his January State of the Union address, is called "20 in 10", cutting US gasoline use 20% by 2010. The official reason is to "reduce dependency on imported oil", as well as cutting unwanted "greenhouse gas" emissions. That isn't the case, but it makes good PR. Repeat it often enough and maybe most people will believe it. Maybe they won't realize their taxpayer subsidies to grow ethanol corn instead of feed corn are also driving the price of their daily bread through the roof.

The heart of the plan is a huge, taxpayer-subsidized expansion of use of bio-ethanol for transport fuel. The president's plan requires production of 35 billion US gallons (about 133 billion liters) of ethanol a year by 2017. Congress has already mandated with the Energy Policy Act of 2005 that corn ethanol for fuel must rise from 4 billion gallons in 2006 to 7.5 billion in 2012.

To make certain it will happen, farmers and big agribusiness giants like ADM or David Rockefeller get generous taxpayer subsidies to grow corn for fuel instead of food. Currently ethanol producers get a subsidy in the US of 51 cents per gallon (13.5 cents per liter) of ethanol paid to the blender, usually an oil company that blends it with gasoline for sale.

As a result of the beautiful US government subsidies to produce bio-ethanol fuels and the new legislative mandate, the US refinery industry is investing big-time in building new special ethanol distilleries, similar to oil refineries, except they produce ethanol fuel. The number currently under construction exceeds the total number of oil refineries built in the US over the past 25 years. When they are finished in the next two to three years, the demand for corn and other grain to make ethanol for car fuel will double from present levels.

And not just US bio-ethanol. In March, Bush met with Brazilian President Luiz Inacio Lula da Silva to sign a bilateral "Ethanol Pact" to cooperate in research and development of "next generation" biofuel technologies such as cellulosic ethanol from wood, and joint cooperation in "stimulating" expansion of biofuel use in developing countries, especially in Central America, and creating a biofuel cartel along the lines of the Organization of Petroleum Exporting Countries (OPEC) with rules that allow formation of a Western Hemisphere ethanol market.

In short, the use of farmland worldwide for bio-ethanol and other biofuels - burning the food product rather than using it for human or animal food - is being treated in Washington, Brazil and other major centers, including the European Union, as a major new growth industry.

Phony green arguments
Biofuel - gasoline or other fuel produced from refining food products - is being touted as a solution to the controversial global-warming problem. Leaving aside the faked science and the political interests behind the sudden hype about dangers of global warming, biofuels offer no net positive benefits over oil even under the best conditions.

Their advocates claim that present first-generation biofuels save up to 60% of the carbon emission of equivalent petroleum fuels. As well, amid rising oil prices at $75 per barrel for Brent marker grades, governments such as Brazil's are frantic to substitute home-grown biofuels for imported gasoline. In Brazil today, 70% of all cars have "flexi-fuel" engines able to switch from conventional gasoline to 100% biofuel or any mix. Biofuel production has become one of Brazil's major export industries as well.

The green claims for biofuel as a friendly and better fuel than gasoline are at best dubious, if not outright fraudulent. Depending on who runs the tests, ethanol has little if any effect on exhaust-pipe emissions in current car models. It has significant emission, however, of some toxins, including formaldehyde and acetaldehyde, a suspected neurotoxin that has been banned as carcinogenic in California.

Ethanol is not some benign substance as we are led to think from the industry propaganda. It is highly corrosive to pipelines as well as to seals and fuel systems of existing car or other gasoline engines. It requires special new pumps. All that conversion costs money.

But the killer about ethanol is that it holds at least 30% less energy per liter than normal gasoline, translating into a loss in fuel economy of at least 25% over gasoline for an Ethanol E-85% blend.

No advocate of the ethanol boondoggle addresses the huge social cost that is beginning to hit the dining-room tables across the US, Europe and the rest of the world. Food prices are exploding as corn, soybeans and all cereal-grain prices are going through the roof because of the astronomical - US Congress-driven - demand for corn to burn for biofuel.

This year the Massachusetts Institute of Technology issued a report concluding that using corn-based ethanol instead of gasoline would have no impact on greenhouse-gas emissions, and would even expand fossil-fuel use because of increased demand for fertilizer and irrigation to expand acreage of ethanol crops. And according to MIT, "natural-gas consumption is 66% of total corn-ethanol production energy", meaning huge new strains on natural-gas supply, pushing prices of that product higher.

The idea that the world can "grow" out of oil dependency with biofuels is the PR hype being used to sell what is shaping up to be the most dangerous threat to the planet's food supply since the creation of patented genetically manipulated corn and other crops.

US farms become biofuel factories
The main reason US and world grain prices have been soaring in the past two years, and are now pre-programmed to continue rising at a major pace, is the conversion of US farmland to become de facto biofuel factories. Last year, US farmland devoted to biofuel crops increased by 48%. None of that land was replaced for food-crop cultivation; the tax subsidies make it far too profitable to produce ethanol fuel.

Since 2001, the amount of corn used to produce bio-ethanol in the US has risen 300%. In fact, in 2006 US corn crops for biofuel equaled the tonnage of corn used for export. In 2007 it is estimated it will exceed the corn for export by a hefty amount. The United States is the world's leading corn exporter, most going for animal feed to EU and other countries. The traditional US Department of Agriculture statistics on acreage planted to corn is no longer a useful metric of food prices, as all marginal acreage is going for biofuel growing. The amount available for animal and human feed is actually declining.

Brazil and China are similarly switching from food to biofuels with large swatches of land.

A result of the biofuel revolution in agriculture is that world carryover or reserve stocks of grains have been plunging for six of

Continued 1 2 


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( 24 hours to 23:59 pm ET, July 30, 2007)



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