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Sales of Ethanol-Burning Cars Up 10%

Downside: Price of corn rising quickly

April 7, 2008

Sales of E-85 capable/flexible fuel vehicles and hybrid electric vehicles were up significantly while clean diesel vehicle sales fell slightly.

"Gas prices, consumer incentives, and the increasing number of alternative-fuel models available to consumers continue to play a role in the rising popularity of these vehicles," said Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers.

But McCurdy said the news is not entirely good.

"And while we're pleased these vehicles continue to grow in popularity, refueling infrastructure challenges may prevent the promise of these vehicles from being fully realized. For example, out of more than 170,000 refueling stations in the U.S. less than 1,500 offer ethanol."

There may be another problem for cars using ethanol.

As commodity prices have soared, food processors are mounting a growing backlash against the government's ethanol mandate, accusing it of making good grains harder to come by, and therefore, more expensive. The criticism escalated last week when corn prices rose to a record $6 a bushel.

"The federal government's food to fuel mandates are diverting one quarter of America's corn supply from kitchen tables to fuel tanks, and the result is corn selling for $6 a bushel," said Scott Faber, a Washington lobbyist for the Grocery Manufacturers Association Faber.

"In tough times like these, Congress and the Administration need to take a hard look at the unintended consequences of these mandates that raise food prices without offering a significant environmental benefit."

The ethanol industry rejects claims that its biofuels that are driving food prices higher. Industry spokesmen says food prices are going up, long with everything else, because of skyrocketing fuel costs.

The U.S. Government subsidizes the conversion of corn into ethanol, which is then added to gasoline at a concentration of up to 10 percent for use in most vehicles and up to 85 percent for some vehicles. Food industry economists point out that until the last few years, corn was used mainly to make feed for livestock and poultry, but has increasingly been diverted into ethanol because of hefty federal subsidies.

"The biofuels policy that is driving higher prices of corn, other grains, and soybeans will cost the U.S. economy more than $100 billion from 2006 to 2009," said Thomas Elam, president of FarmEcon LLC, a food industry consulting firm. "It is inevitable that these costs will be passed along to consumers."

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