Renewable Fuels – The Basics

• What is the RFS?

• What is the VEETC / ethanol tax credit?

• What is the ethanol tariff?

• What are waivers?

Energy Bill Renewable Fuels Standard

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Cellulosic

Advanced Biofuels

Biodiesel

Ethanol (corn)

“The Effects of Ethanol on Texas Food and Feed”

Texas A&M, April 2008

“Relaxing the RFS does not result in significantly lower corn prices.”

“—with a one-quarter RFS waiver price falling about $0.30 per bushel below the full RFS price a few years hence, and the one-half RFS waiver price falling about $0.50 to $0.60 per bushel below the full RFS expected price.”

Food and Agriculture Policy Research Institute

FAPRI, January 2008

“—implementation of EISA’s RFS (in the absence of the tax credit) will raise corn prices about 19% — the ethanol tax credit of $0.51 per gallon (in the absence of the RFS) supports corn prices by a slightly smaller 11%. Because of the interactions between the two subsidies, it is estimated that joint implementation of both the RFS and tax credit supports corn prices by about 20%.”

What is the Net Cost of Ethanol?Lowers gasoline prices

• Merrill Lynch – ethanol driving a 15% reduction in gasoline prices

• Iowa State University – ethanol lowers gas prices $0.29 to $0.40 per gallon

• Texas A&M - $0.42 per gallon

• At 140 billion gallons of gasoline consumed per year, a 40¢ price reduction gets you $46 billion in lower gas costs at the pump…

Cellulosic Ethanol- next generation

• Waiving the RFS will not allow us to get to next generation – cellulosic ethanol.

• No guaranteed market -will not allow for investment in new technologies to diversify from corn.

• Opportunities involving- switchgrass, wood chips, algae, corn stover, etc

Benefits from Ethanol

• Reduces the reliance on foreign energy sources

• Creates new jobs and economic growth in rural areas

• Enhances the environment

• Consumers and tax payers are the big winners

So what’s behind higher food prices?

• Increasing demand around the world

• Years of dwindling world stocks

• Falling dollar

• Increased participation in commodity markets

• Billions of bushels in new U.S. corn demand

• Cost of production

So what’s behind higher food prices?

• Increasing demand around the world

• Years of dwindling world stocks

• Falling dollar

• Increased participation in commodity markets

• Billions of bushels in new U.S. corn demand

• Cost of production

Trade-Weighted Value of US Dollar in G10 Countries

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Source: Robert Genetski, ClassicalPrinciples.com

So what’s behind higher food prices?

• Increasing demand around the world

• Years of dwindling world stocks

• Falling dollar

• Increased participation in commodity markets

• Billions of bushels in new U.S. corn demand

• Cost of production

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OPEC Revenue,$bil

OPEC REVENUE ON CRUDE OIL SUPPLY DELIVERED, by Quarter$Billion

"Revenue" is calculated as the IEA "supply delivered" times the crude oil price (US RAC).

OPEC revenue has gone from an average of $70 bil per quarter in 2000-2003 to an average of $490 bil in the year 2007. This sixfolding of revenue has meant an increase of $5,0250 bil, which fills coffers for purchases of arms and whatever else.

Source: International Energy Agency (IEA), latest public release.

PRX_IEAanal, GTB-08-02, Mar-11-08

Source: The ProExporter Network