July 18, 2008

OECD report draws incorrect conclusion

The Paris, France-based Organization for Economic Cooperation & Development (OECD) came out with a report this week that suggests current biofuels are expensive, may not reduce greenhouse gasses by a significant amount and probably don’t help improve energy security. The 119-page report is available here (.pdf).

Some thoughts that pop to mind:
  • Biofuels today are cheaper to produce than gasoline at current oil prices. They also stimulate rural economies and save billions in farm subsidies.
  • Biofuels, including ethanol, reduce greenhouse gases by 30 percent or more. (OECD acknowledged this in the report…yet this isn’t enough? Maybe we should just use more oil?)
  • Biofuels, including ethanol, are already reducing U.S. petroleum needs by more than 330,000 barrels per day, helping to get us started down the road to a diversified fuel system.

OECD’s “model” also noted that a 28 percent decrease in world oil prices would lower grain prices 12 percent. At $6 corn that is 72 cents a bushel. OECD’s model predicts eliminating the current Renewable Fuels Standard would drop prices only 1 percent, or 6 cents. So what OECD is saying, if you believe its model, is that oil prices have a bigger impact on grain prices than the RFS.

How, exactly, then does OECD come to the conclusion that there should be a moratorium on biofuels development? Whose interests would be best served by that?

What OECD and others seem to forget is that you can’t get to advanced – “second generation” – biofuels by dumping the first. They want a magic solution to appear and solve the world's energy problems. But something has to lead the way, to build the infrastructure and prove that it works. Right now in the United States, that is corn ethanol.

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