Just the Beginning

Higher prices for beer? Say it isn't so.

Beer prices will rise as the demand for biofuel increases. For beer lovers in Germany, farmers are switching from barley to crops that are currently in favor for biofuel production. Beer lovers are getting hit every which way: not only is the cost for barley increasing because of less supply, but the costs for food are also increasing. Even the UN has realized that biofuels aren't the cure to the "problem":

However, in its first major report on bioenergy, the United Nations tried to temper enthusiasm over biofuels last week, warning that the diversion of land to grow crops for fuel will increase prices for basic food commodities.

That is what happened in Mexico, when increased demand for corn to make ethanol in the United States pushed up the price of tortillas.

The German government subsidizes biofuel crops at the rate of $24.60 per acre, according to the Agency for Renewable Energies, part of the Agriculture Ministry.

Barley production in Germany went down by 5.5 percent in 2007, according to the Bavarian Farmers Association. On the other hand, the production of corn for biofuel more than doubled last year and the production of rapeseed for biofuel grew by 3.4 percent.

Biofuels, which reduce the emission of greenhouse gases believed to cause global warming, have been seen by many as a cleaner and cheaper way to meet the world's soaring energy needs than with greenhouse-gas emitting fossil fuels. European leaders have decided that at least 10 percent of fuels will come from biofuels by 2020.

The problem with that is that there simply isn't enough corn to go around for the already existing demand - food and food products. Prices have spiked for many corn-based products in the US and Mexico. It's even caused a shortage in tequila production. As a result of the increased demand and limited supply, prices have jumped on everthing from beef to soda to bread and everything else that is derived from corn and corn products.

Sugar cane, which is behind the biofuel produced in places like Brazil offers a better alternative to ethanol based on corn, but the US tarriffs on the sugar cane limit its availability here in the US because it is an ongoing remnant of protectionism for the US sugar industry and US agrobusinesses that have obtained ethanol production credits.

That has got to come to an end.

Biofuels may be a partial solution, but they only delay the problem since you have ongoing costs associated with the biofuel. For every acre of a former food crop now dedicated to fuel production, you're not only increasing costs for foodstuffs, but increasing the likelyhood of food shortages, distribution problems, and price spikes.

Those most affected by the run on biofuel? The very people who can least afford it - the poor and those living in the Third World.

Open up the market to allow sugar cane based ethanol to enter the market and stop the ethanol subsidies for companies like ADM. The market distortion caused by the existence of the subsidies and tarriffs has increased the prices of foodstuffs and done next to nothing to actually reduce reliance on petroleum based gasoline.

Also, consider the fact that ethanol produces less energy per gallon than a gallon of gasoline, which translates into higher production, distribution, and use costs that are often ignored by the proponents.