One of the main arguments against the ethanol mandate, is that it drives up food prices. This is possible by two methods. First, the RFS ethanol mandate increases the demand for corn, which increases the price of corn. Due to the higher prices farmers allot more of their land to grow corn due to the rising prices, which lowers the supply of other crops raising the prices of those crops. Third, farmers who use corn and grain for feed for their animals will have to pay these higher prices, which will increase prices of their products. Several studies have confirmed that the ethanol mandate has increased the demand and price of corn (Lee, 2015). Corn is used as a sweetener, animal feed, food, and ethanol. Lee and Maniloff in their paper The …show more content…
In 2005, crude oil prices started slowly creeping up and in the end of 2007, crude prices skyrocketed to over $90/barrel. From figure 4, it is clear that quite often, the price of crude, maize (corn), and wheat follow similar trends. Beef does not appear to follow the same trend as the others, and may even have an inverse relationship. Lee and Maniloff, show that these crop prices have been correlated in the past and that the ethanol mandate exacerbates any exogenous shock from corn volatility into other crops. 6. Conclusion: Long before there were any subsidies, ethanol was used as a fuel. The addition of the subsidies and RFS mandate have forced the use of ethanol. The mandate has not had significant positive effects on U.S. energy security and has had little to no impact on fuel prices. It also has had negative effects on the U.S. by raising food price volatility. It does not appear that the mandate is having the intended effects, and in fact, may be having more negative effects than anticipated. Perhaps, the intended environmental effects outweigh the need for energy security. However, the food volatility can have very far reaching effects across the economy. It would be interesting to further research the cost/benefit adding in any environmental