The oil industry seems to be quick to blame corn ethanol and grain prices for high food costs. But maybe they should look in the mirror, especially since the price of grain has little to do with food prices. Energy and oil prices, though, impact everything.
“Farmers have been taking it on the chin while oil companies are raking in record profits,” said Don Hutchens, executive director of the Nebraska Corn Board, in this press release.
Exxon alone had profits of $40.7 billion last year, while the five leading oil companies had a combined profit of $123 billion. Ironically, the entire U.S. corn crop for 2006-07 had a gross value of $32 billion, and only 20% of that crop was used to produce ethanol.
“When you compare the profit of one oil company last year to the total gross value of an entire year’s U.S. corn crop, you can quickly understand why Congress is asking oil company executives to explain why their profits are hitting record levels while the American consumer pays for those profits at the pump and supermarket,” said Hutchens. “The oil companies are also fighting to keep $18 billion in tax breaks over the next decade.”
Hutchens is referring to a hearing called in Washington, D.C., this week to question the oil industry.
The National Corn Growers Association says a more logical explanation for this year’s food inflation can be found in examining energy pricing trends. Retail diesel and gasoline prices are up nearly 40% since January 2007 — and fuel contributes to costs at every step in the supply chain. A recent analysis by economist John Urbanchuk of LEGC found: “By a factor of two to one, energy prices are the chief factor determining what American families pay at the grocery store.”
Yet the oil industry plays dumb. Or maybe they have a magic mirror to boost their egos.
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