Does the demand for corn for ethanol production drive food prices up? Nowhere near as much as the alarmists claim. And much less than other factors. For the average US household, 86 percent of food spending covers the costs of food production – not the raw product. The cost of food includes energy, transportation, processing, packaging, marketing, and other supply-chain costs. Only 14 percent pays for raw agricultural ingredients, such as corn.
And in the global food-supply chain, US ethanol production uses less than 3 percent of the world’s grain supply on a net basis. With long-term productivity gains, American farmers can continue to feed and fuel the world.
But the renewable fuel standard – and ethanol – also face opposition from Big Oil and its allies, who don't want lower-priced, less-polluting competition. Yet the efficacy of ethanol speaks for itself.
Contrary to attacks by the oil industry and its friends, ethanol does not increase gasoline prices at the pump. Ethanol now costs 60-70 cents a gallon less than gasoline. This cost savings is in keeping with the conclusions of a study by economists at the University of Wisconsin and Iowa State University, which found that, in 2011, ethanol reduced wholesale gasoline prices by $1.09 per gallon nationally. In fact, ethanol reduced the average American household’s spending on gasoline by more than $1,200 in 2011.