Topic: The effects of ethanol subsidies on food prices - Thesis Proposal Example

Tentative Outline Introduction Main Objective Specific Objectives 2. Literature review 3. Methodology Methods of Data Collection Sampling Technique Ethical issues 4. Data Analysis 5. Discussion 6. Conclusion 7. References The Effects of Ethanol Subsidies on Food Prices Introduction Recently, some international agencies including the world trade organization (WTO) and the World Bank have been advocating that governments should remove policies that support subsidization of bio-fuels such as ethanol.

This stand was taken was after the November 2010 G20 meeting that was aimed at considering how to best manage and mitigate the risks associated with the volatility of the price of food and other agricultural products. A recent report indicates that the institution of ethanol subsidies in the US pushed the prices of corn by 17% in 20111. The reason for this is the tight market for maize created by high gasoline prices which has continued to push up the demand for ethanol. From this experience, it may be hypothesized that the existence of subsidies on ethanol leads to an increase in the prices of food products.

Main Objective 1. To determine the effects of ethanol subsidies on food prices Specific Objectives 1. To establish the relationship between ethanol production and food production 2. To establish food prices prior to the removal of subsidies on ethanol 3. To establish changes in prices of food after the removal of subsidies on ethanol 4. To establish if there is a correlation between the existence of ethanol subsidies and food prices Literature review The major argument behind the issue of ethanol subsidies is that whenever the prices of energy are high and the value of a crop in the energy market surpasses that in the food market, crops produced will be diverted to the production of bio-fuels such as ethanol.

The use of bio-fuels helps to maintain low the prices of motor vehicle fuels while at the same time minimizing dependence on petroleum imports. In this respect, high gasoline prices increases the demand for ethanol. However, critics have argued that ethanol subsidies encourage farmers to channel grains to fuel production leading to increased food prices. This is because it creates better markets for maize and other grain products. There are times when bio-fuel production accounts for a significant proportion of the use of various crops.

During the 2007-2009 period for example, it accounted for 4% of the use of sugar beat, 9% for the use of vegetable oil and 20% for the use of sugar cane2. The use of crops to make bio-fuels worsens price inelasticity of demand leading to volatility in the prices of agricultural products. This may mean that policies that support ethanol subsidies force the global food prices to increase. Methodology Data collection will be conducted through a survey and interviews. Different questionnaires will be administered a random sample of farmers, food producing company mangers, consumers and shop owners.

A Extensive analysis of reliable records relating to the use of crops for ethanol production will also be used to obtain information. Secondary literature to be relied on will include books, journals, newspapers and reputable websites. Considering the nature of the research, the study will be limited to New York city, USA. As is commonly the case, the privacy of respondents will remain secret and the study will abide by stringent ethical requirements. The raw data gathered will be analyzed using SPSS software with the objectives in mind.

A correlation analysis will be conducted to establish the relationship between the removal of subsidies and the prices of food in the market. The hypothesis that the removal of subsidies on ethanol results in change of food prices will also be tested. Work Plan Activity No. Activity Time in weeks Week 1 Week 2 Week 3 Week 4 1 Preliminary preparations 2 Literature review 3 Questionnaire design 4 Data collection 5 Data Analysis 6 Report writing 7 Editing of report 8 Presentation of the repo Work Cited World Trade Organization.

New report examines how to better manage food price. 2011. Viewed 5th July, 2011. volatility.Online:http://www.wto.org/english/news_e/news11_e/igo_10jun11_e.hm. Suggested List of References Web Site Energy Refuge. What is Ethanol?. Nd. Web. Viewed 13 July, 2011 . This is a web site that discusses the factual information regarding Ethanol Fuels. There are various issues surrounding Ethanol Fuels that have been clarified. Such as: The sources of Ethanol Fuels, the kind of technology that helps create Ethanol Fuels, The effects of Ethanol Fuels on the environment and the experience of Ethanol Fuels, country wise.

Web Site also elaborates on a basic level about the effects of Ethanol Fuels on fuel and food prices. The web site also enumerates on the criticism that has been levied on Ethanol Fuels over the years. Criticisms such as rise in pollution levels, excessive land use, production of carbon dioxide etc. The Web Site merely touches on issues like the stand of the US Government on Ethanol Fuels; the point that is discussed is the shift of the focus of necessity for domestic production of oil from foreign produced oil.

Web Site provides a well rounded information package for basic information on Ethanol Fuels. Such information is necessary to provide a thorough grounding on the subject of uses of Ethanol as a Bio fuel. The website may be a bit detailed but realizes the idea of studying the basic facts about Ethanol.   Web Site Wisegeek. What are the advantages and disadvantages of Ethanol Fuel? Nd. Web. Viewed 13 July, 2011 . The article on this Website is more like a questionnaire that has been prepared around the issues regarding Ethanol Fuel.

This article provides a very realistic picture about the pros and cons of using ethanol fuel, along with the subsidizing policy of the U.S. Government. It says that, although Ethanol reduces the dependence on imported oil, it may never fully replace petroleum. Despite this fact, it says, Ethanol does burn cleaner fuel. This lesser dependence on petroleum will transform American farmers to be richer than the Sheiks, however, only for a short while. The article has ended on a very neutral note, however, it has not failed to provide the insight necessary to settle the ongoing lengthy debates about the futility of Ethanol fuel, since it is not so.

The comments at the end of the page too have proven to be quite fruitful. Popular Magazine Article in an Article Database Marketwire. “Ethanol Reduces Gas Prices by $1.37 per Gallon” Canadian Journal. Web. Viewed 13 July, 2011 . 2011, May 12 The article discusses the importance of Ethanol to the US transportation fuels sector, since Ethanol has aided in reducing the wholesale gas prices by 25 cents per gallon all through the past decade. It has also been stated that Ethanol is an important source of fuel for the entire nation, and any impediment of supply of Ethanol is bound to increase the prices of gas all over again.

The Statistical analysis showed a 14-cent-reduction in gas prices on average. Perhaps more importantly, they also noted that ethanol is now vital to the nation's fuel supply and any disruption to ethanol supply could cause a dramatic increase in gas prices. The article basis its theory based on the findings in a paper authored by two professors Xiaodong Du and Dermont Hayes in the year 2009. The authors have been thoroughly researching the impact of Ethanol on the Wholesale Price Index of the gas prices.

The comparison has been set for three consecutive years and it has been found that a total of 89 cents per gallon price of the gas has been reduced due to the impact of Ethanol. There are certain pockets of areas in the US that are greatly benefiting from the production of Ethanol. Ethanol has proven to be a shock absorber to a badly hit economy, according to Bob Dinneen, the president of RFA. He contends that a boost in the Ethanol production will prove to be a boost to the economy on the whole.

The article may be short but is insightful towards informing its readers with adequate well-researched facts. Popular Magazine Article in an Article Database Biofuels Journal “RFA Ethanol keeping Gas Prices lower” Bio fuels Journal.  2011. Web. Viewed 13 July, 2011 . The article argues relentlessly bringing forth the factors of Ethanol Blending that keeps the gas prices low. It argues saying that should Ethanol be removed from the blending, gas prices are slated to rise to up to $4 every year.

The article accentuates the plausibility of the positive impact of Ethanol on Gas prices in a set of points that bring out the various price indexes under different gasoline prices and ethanol prices. It can clearly be seen that the difference in the price indexes of both are hugely different; ethanol being lower. The article also accentuates the tax payers bliss in case of ethanol blending prices.  Statistically, it proves that ethanol is far beneficial for an average American Household when it is calculated annually, the savings coming up to 100$ a year.

Furthermore it enumerates the benefits of an average driver who drives an ethanol-approved vehicle. This article may be highly technical for some laymen but it is simple and provides proof by way of statistics the importance of Ethanol as a Bio Fuel.   Popular Magazine Article in an Article Database  Hill Jason, Nelson Erik, Tilman David, Polasky Stephen and Tiffany Douglas. “Environmental, economic, and energetic costs and benefits of biodiesel and ethanol bio fuels”. The National Academy of Sciences of the USA. 2006. 103(30).

Although not directly many parts of this article brings over the overwhelming dependence of viable and alternative energy. The article begins with an abstract bringing forth its concern of Bio fuels meeting the environmental needs. It goes on to present the current scenario in Bio Fuels, which is only burgeoning and it statistical proof of lowered food prices in various places. It further goes on to look into the economical necessities of Bio Fuels and the need to further lower the prices of food.

Overdependence on Bio Fuels is not something that it is looking for, but dependence nonetheless. It also explains the advantages of non food feed stocks that are used to produce the Bio Fuels. The objective is met through this article since it gives a well rounded view of the Bio Fuel Scenario. The article further elaborates on the drop in fuel prices due to Ethanol Blending and the ultimate use of Bio Ethanol to the environment due to these factors. Popular Magazine Article in an Article Database  Gardner Bruce and Tyner Wallace.

“Explorations in Bio fuels Economics, Policy, and History: Introduction to the Special Issue”. Journal of Agriculture and Food Industrial Organization. .2007. Web. Viewed 13 July, 2011 This article mainly discusses the relationship of bio fuel production and food. This article is basically an abstract that furthers our insight into the subject of Bio Fuels. There are various disadvantages of Ethanol that has been cited in this abstract, however, in continuation to seeking the right information about how does Ethanol reduce the cost of food prices; this article would be highly operative.

The abstract tries to probe into the issues of Ethanol Subsidies and the effects of Ethanol Subsidies on food prices. The article clarifies its stand on the interrelationships between Ethanol and food prices, whereby taking into consideration the food markets. It also takes into its purview the analyzing of policy matters like subsidies and the option of Ethanol as well as the mandated use of Bio Fuels. Finally, the article brings to the forefronts issues of the environment and the cost of production of these Bio Fuels.

Web Site Energy Financial Resources. Ethanol Field of Dreams. Nd. Web. Viewed 13 July, 2011 . The article provided in this Web Site is in the form of a questionnaire. It seeks to answer certain basic questions about Ethanol, they may seem a bit basic at this stage but the high points in this article are the following two questions. “How does Ethanol Affect Gas Prices”? “How does Ethanol affect Economy”? both these questions are of great value with regards to answering certain basic questions of the what’s and why’s of Ethanol in relation to food prices.

  The Web Site may seem a bit elementary but is quite informative for a layman to understand what is at stake, with Ethanol and what is not. It is a value neutral perspective for anybody who seeks to understand the issues surrounding Bio Fuels and Ethanol. The article talks of The Future of Bio Fuels, which is a vital question at this stage. It discusses the vulnerability of the situation with regards to the different nations portraying differences in a single issue. Popular Magazine Article in an Article Database  Friedmann Harriet.

The Political Economy of Food: A Global Crisis. Nd. Web. Viewed 13 July, 2011 . This article, though not directly connected to the points of Ethanol and Bio Fuels, it brings to the forefront the historical prevalence of Food Crisis through the World Wars and on the even of Capitalistic motives. The most significant part of the article as connected to the issues discussed here will be the fact that food crisis had been fuelled by the oil crisis internationally. The paper discusses the implications of food crisis in Japan and other nations affected adversely during the World Wars and the difficulty in getting the resources together in most times.

The importance of citing this paper lies in the fact that the presence of Petroleum, historically was not of much use, and the absence of Ethanol here has been equated with the presence of Petroleum. The recent resurgence of Ethanol as a life saver for the transportation of many of the food products can thus be justified. Popular Magazine Article in an Article Database Rajagopal Deepak, Sexton Steven, Hochman Gal, Roland-Holst David, Zilberman David. “Model estimates food-versus biofuel trade-off”.

 California Agriculture. 2009. 63(4):199-201. DOI: 10.3733/ca.v063n04p199. Web. Viewed 13 July, 2011 .  The article is very relevant to bring about a critical analysis of the true role of Ethanol in the light of the Global food crisis. As mentioned in the Abstract, that Ethanol has only contributed to Energy and Food Security at the time of the Global Food Crisis in 2008 that hit the World; an act for which it has not been credited. The authors of this article have diagrammatically and statistically explained the relationship between lowering food crisis, due to Ethanol supplies which consequently will reduce the price of Gasoline and benefit consumers by substantially reducing transportation fuels.

The authors have built a multimedia Model using the literature on Bio Fuels and Ethanol that is present to produce a model that is highly informative and relevant to the study of Ethanol and Bio fuels. They have agreed that Bio Fuels do raise the cost of food commodities, since the supply of food crops has been reduced, but they have also offered solutions to tackle shortage of food commodities. Popular Magazine Article in an Article Database Sweeter Alternative. “Sugarcane Ethanol in Brazil: Innovative and Sustainable”.

Brazilian Sugarcane Industry Association. 2011. Web. Viewed 13 July, 2011 This particular article has been citied to fulfill the gaps about the advantageousness of Ethanol by placing it in a different contextual framework. Brazil is the second highest user of ethanol and as one reads the article it is evident that the results have been stupendous. The article states the historical significance of Bio Fuel in Brazil and goes on to enumerate the present and the future of Bio Fuels in Brazil itself.

It states that Ethanol has the potential to shape the World markets by providing a paradigm shift in the way the world views energy. This article provides a niche for Ethanol not on the in the United States but also in other countries. This thus fulfills the perspective of Using Ethanol as a Bio Fuel in a lot of levels.       Bibliography Energy Financial Resources. Ethanol Field of Dreams. Nd. Web. Viewed 13 July, 2011 . Friedmann Harriet. The Political Economy of Food: A Global Crisis. Nd. Web.

Viewed 13 July, 2011 . Gardner Bruce and Tyner Wallace. “Explorations in Bio fuels Economics, Policy, and History: Introduction to the Special Issue”. Journal of Agriculture and Food Industrial Organization. .2007. Web. Viewed 13 July, 2011 Hill  Jason, Nelson Erik, Tilman David, Polasky Stephen and Tiffany Douglas. “Environmental, economic, and energetic costs and benefits of biodiesel and ethanol bio fuels”. The National Academy of Sciences of the USA. 2006. 103(30): 1120611210.

 doi: 10.1073/pnas.0604600103.  .  Marketwire. “Ethanol Reduces Gas Prices by $1.37 per Gallon” Canadian Journal. Web. Viewed 13 July, 2011 . 2011, May 12 Rajagopal Deepak, Sexton Steven, Hochman Gal, Roland-Holst David, Zilberman David. “Model estimates food-versus biofuel trade-off”. California Agriculture. 2009. 63(4):199-201. DOI: 10.3733/ca.v063n04p199. Web. Viewed 13 July, 2011 .  Biofuels Journal “RFA Ethanol keeping Gas Prices lower” Bio fuels Journal.  2011. Web. Viewed 13 July, 2011 .

Sweeter Alternative. “Sugarcane Ethanol in Brazil: Innovative and Sustainable”. Brazilian Sugarcane Industry Association. 2011. Web. Viewed 13 July, 2011 Wisegeek. What are the advantages and disadvantages of Ethanol Fuel? Nd. Web. Viewed 13 July, 2011 . Energy Refuge. What is Ethanol?. Nd. Web. Viewed 13 July, 2011 .