Bunge executive criticizes ethanol mandate
Carl Hausmann, chief executive of Bunge North America, doesn’t view the conflict between food and fuel as a moral issue. His company is an investor in several ethanol and biodiesel plants. But he nevertheless opposes government mandates for biofuel production, he said at RCGA breakfast this morning.
Crops will be used for fuel if it’s economical to do so, Hausmann said, and there’s nothing wrong with that. Hausmann says he knows farmers who heat their houses with corn-burning stoves because even $7-a-bushel corn is a cheaper heat source than $120-a-barrel crude oil. But when the government requires the use of billions of gallons of biofuels annually, as Congress did in the 2007 energy bill, Hausmann says it has gone too far:
I believe very much in free markets. … I hate government mandates, including biofuels.
Bunge, one of the world’s largest agribusiness companies, knows it will be affected by debates over nutrition, food safety and the future of family farms. Hausmann says he hopes regulators will recognize the global nature of the agricultural supply chain and won’t overreact to safety and security concerns:
There is no greater incidence of imported food-borne disease than of domestically grown food-borne disease. We need to protect our food safety, but I hope we don’t resort to protectionism.
(2 votes, average: 4 out of 5)
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
Likewise, I believe very much in free markets and dislike government mandates. Unfortunately, OPEC, Russia, Venezuela, and others who provide 70% of our oil, don’t particularly care for the U.S., but they like it very much when the U.S. adheres to free market principles (because they do not). We have proven on many occasions that when oil or electricity prices are low, investment in alternatives is low, then when oil prices skyrocket, we are unable to respond quickly enough with alternatives. We’re not talking about the neighborhood coffee house. We’re talking about the transfer of $700 billion this year out of our country. We need favorable mandates in place for domestic alternatives (ethanol, natural gas, etc.) to catch us up to the trillions we’ve invested in the oil business infrastructure during the last century.
Which Party Will Make or Break Biofuels?
Biofuel is a bright spot in our economy. Corn Belt states now have cheap fuel, expanding economies, and budget surpluses. Ethanol refineries are coming online in numerous other states: Texas, Louisiana, Florida, Arizona, Oklahoma, Georgia, New York, Pennsylvania, and California. Alternative feedstocks such as sorghum, organic waste, biomass and algae are being introduced. The State of Louisiana and Renergie are building a network of small, localized sweet sorghum ethanol plants, with a 5 to 1 return. Subsidizing biofuels creates jobs, stimulates our economy, and generates County, State, and Federal tax revenue. Money back in your pocket. Every dollar spent on biofuel subsidies results in $10 in economic stimulus. So go figure.
Merrill Lynch reports that ethanol blended into regular gasoline lowered the cost by 15% and saved 60 billion dollars this year. The new ethanol blender pumps will make a bigger impact, depending on who gets elected President. Typically, blending ethanol with gasoline is done in large quantities by oil companies or fuel distributors. Who ever does the blending gets the 51 cent per gallon tax credit. With the new onsite blender pumps, the retail gas station will get the tax credit. That changes everything. Retailers are expected to pass along most of the blending subsidy to the consumer. Thus, the various blends, E20, E30, E40, E50, E85 will be about 40 to 50 cents a gallon cheaper at the blender pumps. Cheaper than ethanol already is. The Republican Party wants to discontinue the blending subsidy and take this discount away from you. The Democrats want you to have it.
Ethanol blended at the pump will compete head-on with regular gasoline. This is why Big Oil wants the Republicans to get rid of the blending subsidy. They are threatened by the coming blender pumps. Ethanol blends might soon outsell gasoline, as is the trend in Iowa, Minnesota, Kansas and other ethanol producing states.
The Republican Party receives huge campaign contributions from Big Oil and their intermediaries. Their battle cry is drill, drill, drill, which we need to do. But drilling now will only impact fuel prices moderately, 7 to 10 years from now. And why all the fanfare about offshore drilling, when oil companies already have 6,000 oil leases they’re not using?
The Republican platform also calls for eliminating the 54 cent per gallon import tariff on foreign ethanol. What they advocate is that we should lessen our dependence on foreign oil by replacing it with a new dependence on Brazilian Ethanol. This would increase our Trade Deficit and the interest we pay on the National Debt, because we pay for imported fuels with debt instruments and Government Bonds. Importing Brazilian ethanol would not save you much. After shipping and handling costs from Brazil to the U.S., oil companies would pocket the rest. The consumer might save a penny or two at the pump, but your hidden cost would be 6% floating interest on imported fuel paid for with debt instruments.
By following the Republican plan to end the ethanol import tariff, we would trade one dependency for another, drive up the Trade Deficit and the National Debt, and pay more revolving interest on imported fuel. Instead, we need to keep stimulating domestic biofuels.
The subsidies we pay on petroleum based fuel are SIX TIMES higher than what we pay on ethanol and biodiesel, even while oil companies make record breaking multi-billion dollar profits. If the Republicans want to discontinue the biofuels subsidies, they should also discontinue the petroleum subsidies. But, instead, they fight to keep $50 Billion worth of annual petroleum subsidies intact. Republicans are clearly aligned with their benefactors - Big Oil.
The Republican plan to end affordable biofuel subsidies would disrupt a sector of our economy that is thriving and cost you 40 to 50 cents a gallon at the pump. Ending biofuel subsidies is poor judgment and NOT in our National Interest.
The Republican Deception is: Big Oil First – Not Country First.
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Edward–Biofuels aren’t lowering the cost of gas–they cost more to make than it costs to make a gallon of gas. All they do is cause a spike in the cost of food.
End subsidies? Petroleum does not compete in the fantasy “free market” either. Flawed argument; deceptively flawed. Research grants, tax loopholes, subsidies… we’re talking about petroleum here also! End them all, or not at all.
I do not like any mandates. This is the land of the free and mandating Ethanol usage is like the seat belt mandate. I read in History that the reason we declared our independence was to have the right to make our own choices. As far as reducing the cost of driving in my case ethanol has increased my cost of driving per mile from $0.18 per mile to $0.21 per mile, that is only $0.03 but when you drive 25,000 miles per year that amounts to $750.00. The other item is driving the same 25,000 miles I will use 1,219.51 gallons of gasoline, using E-10 I will use 1,428.5 gallons of E-10 which is 10% ethanol and 90% Gasoline, that means I will use 1,285.7 gallons of gasoline. If we are trying to reduce our imports, when I was in school 1,219.5 was a smaller number than 1,285.7. Using these numbers is the average mileage I get on unleaded gasoline is 20.5 miles per gallon, with E-10 the best mileage I get is 17.5, and I have gotten as bad as 15 miles per gallon. I am going to guess that my average mileage on E-10 is closer to 16 miles per gallon which means that I would use an additional 120.55 gallons of unleaded gasoline. If the government is going to mandate ethanol, they should eliminate the subsudy, and demand that ethanol have as many BTU’s per gallon as unleaded gasoline.