Aug 1, 2007
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
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
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
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
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
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
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
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
the past seven years. Carryover reserve stocks of all grains fell at
the end of 2006 to 57 days of consumption, the lowest level since
1972. Little wonder that world grain prices rose 100% over the past 12
months. This is just the start.
That decline in grain reserves, the measure of food security in
event of drought or harvest failure - an increasingly common event in
recent years - is pre-programmed to continue going as far ahead as the
eye can see. Assuming a modest world population increase annually of
some 70 million over the coming decade, especially in the South Asian
subcontinent and Africa, the stagnation or even decline in the
tonnages of feed corn or other feed grains, including rice, that is
harvested annually as growing amounts of bio-ethanol and other
biofuels displaces food grain in fact means we are just getting
started on the greatest transformation of global agriculture since the
introduction of the agribusiness revolution with fertilizers and
mechanized farming after World War II.
The difference is that this revolution is at the expense of food
production. That pre-programs exploding global grain prices, increased
poverty, and malnutrition. And the effect on gasoline import demand
will be minimal.
Professor M A Altieri of the University of California at Berkeley
estimates that dedicating all US corn and soybean production to
biofuels would only meet 12% of gasoline and 6% of diesel needs. He
notes that although one-fifth of last year's US corn harvest went to
bio-ethanol, it met a mere 3% of energy needs. But the farmland is
converting at a record pace. In 2006 more than 50% of Iowa and South
Dakota corn went to ethanol refineries.
Farmers across the US Midwest, desperate for more income after years
of depressed corn prices, are abandoning traditional crop rotation to
grow exclusively soybeans or corn, with dramatic added impact on soil
erosion and needs for added chemical pesticides. In the US some 41% of
all herbicides used are already applied to corn. Monsanto and other
makers of glyphosate herbicides such as Roundup are clearly smiling on
the way to the bank.
Going global with biofuels
The Bush-Lula pact is just the start of a growing global rush to plant
crops for biofuel. Huge sugarcane, oil-palm and soy plantations for
biofuel refining are taking over forests and grasslands in Brazil,
Argentina, Colombia, Ecuador and Paraguay. Soy cultivation has already
caused the deforestation of 21 million hectares in Brazil and 14
million hectares in Argentina, with no end in sight, as world grain
prices continue to rise. Soya is used for bio-diesel fuel.
China, desperate for energy sources, is a major player in biofuel
cultivation, reducing food-crop acreage there as well. In the EU, most
bio-diesel fuel is produced using rapeseed plants, a popular animal
feed. The result? Meat prices around the globe are rising and set to
continue rising as far as the eye can see. The EU has a target
requiring minimum biofuel content of 10%, a foolish demand that will
set aside 18% of EU farmland to cultivate crops to be burned as
Big Oil is also driving the biofuels bandwagon. Professor David
Pimentel of Cornell University and other scientists claim that net
energy output from bio-ethanol fuel is less than the fossil-fuel
energy used to produce the ethanol. Measuring all energy inputs to
produce ethanol, from production of nitrogen fertilizer to energy
needed to clean the considerable waste from biofuel refineries,
Pimintel's research showed a net energy loss of 22% for biofuel - they
use more energy than they produce. That translates into little threat
to oil demand and huge profit for clever oil giants that re-profile
themselves as "green energy" producers.
So it's little wonder that ExxonMobil, Chevron and BP are all into
biofuels. This past May, BP announced the largest ever
research-and-development grant to a university, $500 million to the
University of California-Berkeley, to fund BP-dictated R&D into
alternative energy, including biofuels. Stanford University's Global
Climate and Energy Program got $100 million from ExxonMobil;
University of California-Davis got $25 million from Chevron for its
Bio-energy Research Group. Princeton University's Carbon Mitigation
Initiative takes $15 million from BP.
Lord Browne, the disgraced former chief executive officer of BP,
declared last year, "The world needs new technologies to maintain
adequate supplies of energy for the future. We believe bioscience can
bring immense benefits to the energy sector." The biofuel market
is booming like few others today. This all is a paradise for global
agribusiness industrial companies.
All this, combined with severe weather problems in China, Australia,
Ukraine and large parts of the EU growing areas this harvest season,
guarantees that grain prices are set to explode further in coming
months and years. Some are gleefully reporting the end of the era of
"cheap food". With disappearing food-security reserves and
disappearing acreage going to plant corn and grains for food, the
biofuel transformation will impact global food prices massively in
Another agenda behind ethanol?
The dramatic embrace of biofuels by the Bush administration since 2005
has clearly been the global driver for soaring grain and food prices
in the past 18 months. The evidence suggests this is no accident of
sloppy legislative preparation. The US government has been researching
and developing biofuels since the 1970s.
The bio-ethanol architects did their homework, we can be assured. It's
increasingly clear that the same people who brought us oil-price
inflation are now deliberately creating parallel food-price inflation.
We have had a rise in average oil prices of some 300% since the end of
2000 when George W Bush and Dick "Halliburton" Cheney made
oil the central preoccupation of US foreign policy.
Last year, as bio-ethanol production first became a major market
factor, corn prices rose by some 130% on the Chicago Mercantile
Exchange in 14 months. It was more than known when Congress and the
Bush administration made their heavy push for bio-ethanol in 2005 that
world grain reserves had been declining at alarming levels for several
years at a time when global demand, driven especially by growing
wealth and increasing meat consumption in China, was rising.
As a result of the diversion of record acreages of US and Brazilian
corn and soybeans to biofuel production, food reserves are literally
disappearing. Global food security, according to Food and Agriculture
Organization data, is at its lowest since 1972. Curiously, that was
just the time that Henry Kissinger and the Nixon administration
engineered, in cahoots with Cargill and ADM - the major backers of the
ethanol scam today - what was called the Great Grain Robbery, sale of
huge volumes of US grain to the Soviet Union in exchange for sales of
record volumes of Russian oil to the West. Both oil and corn prices
rose by 1975 some 300-400% as a result. Just how that worked, I
treated in detail in A Century of War: Anglo-American Oil
Today a new element has replaced Soviet grain demand and harvest
shortfalls. Biofuel demand, fed by US government subsidies, is
literally linking food prices to oil prices. The scale of the
subsidized biofuel consumption has exploded so dramatically since the
beginning of 2006, when the US Energy Policy Act of 2005 first began
to impact crop-planting decisions, that there is emerging a de facto
competition between people and cars for the same grains.
Environmental analyst Lester Brown recently noted, "We're looking
at competition in the global market between 800 million automobiles
and the world's 2 billion poorest people for the same commodity, the
same grains. We are now in a new economic era where oil and food are
interchangeable commodities because we can convert grain, sugarcane,
soybeans - anything - into fuel for cars. In effect the price of oil
is beginning to set the price of food."
In the mid-1970s, secretary of state Henry Kissinger, a protege of the
Rockefeller family and of its institutions, stated, "Control the
oil and you control entire nations; control the food and you control
the people." The same cast of characters who brought the world
the Iraq war, and who cry about the "problem of world
overpopulation", are now backing conversion of global grain
production to burn as fuel at a time of declining global grain
reserves. That alone should give pause for thought. As the popular
saying goes, "Just because you're paranoid doesn't mean they
aren't out to get you."
F William Engdahl is author of the book Seeds of
Destruction: The Hidden Agenda of Genetic Manipulation, about to be
released by Global Research Publishing, and of A Century of War:
Anglo-American Oil Politics and the New World Order, Pluto Press. He
may be reached via his website, www.engdahl.oilgeopolitics.net.