Bullet Points: The Economics of Energy in Agriculture
May 22, 2007
The Economics Of Energy In Agriculture
Neilson Conkin, USDA
- From 1850-1950 the US went from an economy based on renewables to an economy based on fossil fuels. The transfer back to renewables now is a major societal change.
- Most renewable energy will be agriculture based.
- USDA long term projections are 10 years into the future
- In 1850, 90% of energy was produced by biomass.
- The US economy was transformed by the low costs of petroleum
- Especially from WWI-WWII
- Energy intensity in agriculture came down in the 1970’s driven by high oil prices.
- Intensity = amount of energy required to produce a dollar of output
- Ethanol in 2006 was:
- 3.5% of use relative to gasoline
- 14% of corn use
- 20% of corn use in 2007
- US accounts for 60% of global corn exports
- As oil prices went up and the price of corn was low, it was very profitable to make ethanol.
- Fuels Act of 2005 specified for the first time that 7.5 billion gallons of ethanol be generated
- Provides financial incentives to ethanol production
- Ethanol plants are predominantly in the mid-west, close to corn feed
- USDA projects that in 10 years the yearly output in the US will be between 10-12 billion gallons of corn based ethanol.
- Currently the US is producing 4 billion gallons per year
- Corn stocks are near historic lows, thus potential for price volatility
- USDA projects that in 2017 ethanol will compose
- 7% of our gasoline
- 21% of our corn use
- Agriculture and energy Policy are increasingly intertwined
- Farmers are making more money as the demand for bioenergy increases
- The demand for biofuels represents the increasing share of agricultural production, but biofuels remain a small share of our energy consumption
- www.ers.usda.gov Economic Research Service
- For information on bioenergy
- We get more energy out of corn based ethanol than we out in by a factor of 1.34
Q&A
- Water availability will be a factor in biofuel production
- They haven’t projected that out, looking at future droughts
- We import sugar from brazil, but there is a tariff on imported ethanol, so imports are only 7% of US ethanol…
- Current oil prices are right around the level where ethanol would beprofitable without the tarrif
- Government cannot pick winners and losers, research is needed
- An internal combustion engine is fundamentally limited, perhaps we consider external combustion engines as a way of powering the vehicles in this country, IE electricity
- Statement concerning the balance of food vs fuel.
- How much fertilizer are we getting from fossil fuels in unstable regions of the world and would increased ethanol production and therefore increased fertilizer demands keep us dependent upon these volatile regions?
- These calculations have been incorporated into the economic outlook
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