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Biofuels Have Bumped Up Food Prices 75%?!

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The biofuel industry couldn’t catch a break, even over the three-day summer weekend. The BBQ-chatter fodder? An article in the Guardian citing a “leaked” World Bank report that says biofuels have driven up the price of food by 75 percent. That’s an absolutely massive number compared to figures found by previous reports, many of which were in the single digits.

Its particularly drastic when compared to the U.S. government’s figures. The U.S. President’s Council of Economic Advisors has said only 3 percent of the increase in world food prices can be attributed to corn ethanol. USDA Chief Economist Joe Glauber cited those statistics in a speech in May and added, “I think it’s fair to say the increase in biofuel production has had some effect, but again, what I’d consider a relatively small effect and one that in looking at it it’s important to take into account a lot of other things that are going on outside of the biofuel sector.”

The Guardian article cites sources that say they believe the World Bank report, which was completed in April, “has not been published to avoid embarrassing President George Bush.”

But it’s not just Bush. Other respected research firms have also cited similarly low numbers. In May, research firm New Energy Finance said biofuels are “far from the dominant” factor in rising food prices, and contributed an 8.1 percent increase in global average grain prices. (Although, the research did say sugarcane-based ethanol was found to have added a 70 percent increase in sugarcane prices in Brazil.) Cleantech investor Vinod Khosla, has, unsurprisingly, been a vocal critic of researchers and the media that he says have over-attributed the rise in food prices to biofuels (read his rebuttal to a WSJ editorial here).

So, what could be so different about the World Bank’s research, which the Guardian calls “the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body”? We haven’t read the World Bank report, but the article says the report looked at three factors — grain diverted from food to fuel, land diverted to biofuel production and financial speculation in grains — and says previous reports with lower numbers haven’t considered all these factors.

We’re not sure of all the details, but it’s definitely something to think about. And we’re sure the G8 will be busy mulling this during its meetings this week.

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