One Tank of Ethanol = Food for One Year

by: The Stalwart

The Stalwart submits: This from Fortune makes Ethanol seem like a very short sighted solution to high oil prices:

We are facing an epic competition between the 800 million motorists who want to protect their mobility and the two billion poorest people in the world who simply want to survive. In effect, supermarkets and service stations are now competing for the same resources.

This year cars, not people, will claim most of the increase in world grain consumption. The problem is simple: It takes a whole lot of agricultural produce to create a modest amount of automotive fuel.

The grain required to fill a 25-gallon SUV gas tank with ethanol, for instance, could feed one person for a year. If today's entire U.S. grain harvest were converted into fuel for cars, it would still satisfy less than one-sixth of U.S. demand.

I think the key idea here is Opportunity Cost. If we just take the simple example above, lets try and guess at what 1 year of nutrition is worth. Fair enough we're probably talking a low-end corn heavy diet, but thats enough to save lives for some. As we remember an NGO's TV ad saying that for the price of a cup of coffee we could feed a child for a day, we could use a number of US$1/day for cost. This simple math would result in US$365 of opportunity cost is lost production. To be more conservative, even if we say just US$0.25 per day of lost value from food, we're still at a good US$90 in lost food production just for one tank of ethanol. Food for thought.

As a side note, fast forward a few years and what we really need is biotech to give us a nice "fuel plant" with its ethanol productive capacity maximized. (there's the idea for Monsanto (NYSE:MON)) Then maybe the fuel could be more cost competitive. Biotech could be oil's worst enemy one day.