The cost of food is almost entirely made up of things like transportation and packaging, and the prices of these inputs increase as oil prices rise. The average distance food travels from source to plate is 1,500 miles – and with unstable gas prices, the cost of transportation adds up quickly. Because it is actually these production costs that dictate food prices, we see that oil prices drive up food prices in a near-perfect correlation.
Some may claim that newly discovered U.S. reserves of oil and natural gas will help insulate the United States against volatile oil prices. But the reality is that because oil is an internationally traded commodity, oil price fluctuations are a global phenomenon. Increases in non-OPEC production (including here in the U.S.) simply allow OPEC producers to withhold portions of their supply, thereby keeping the total world supply artificially scarce and prices high.
Increased transportation costs not only negatively affect supply chain costs for food shipment, they also affect personal transportation decisions. In an industry with notoriously high rates of turnover, rising gasoline prices mean higher barriers for our workers to even get to work, and increasing financial stresses when they can’t.
Breaking this dependence on an unpredictable world market for limited oil supplies can only be achieved by creating oil alternatives such as ethanol and advanced biofuels. Conveniently, these same renewable fuels also offer us a solution to combating the deleterious effects of climate change – their combustion produces up to 60 percent fewer emissions than gasoline.
The RFS has already been highly instrumental in combating rising gas prices, saving consumers $1.09 on every gallon of gasoline in 2011. For small businesses like ours, every penny in reduced costs allows us to invest in our operations and our employees. Our nation’s dependence on oil is raising those input costs, and while ethanol may not be a silver bullet, it is one of the only alternatives to oil that exists, and is a step in the right direction.
Barth is the president of the Board of Founding Farmers, a local restaurant with locations in DC and Maryland.