DOE $71.1 * 24, 2008; ** $ ) 2007 U.S.

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1 Thanks to Biofuels A gallon of gasoline costs 15% less,* reducing the per-gallon price by 50 cents.** Americans use million gallons a day, or billion gallons a year. ** Americans are therefore saving $71.1 billion each year at the gas pump. Sources: * Merrill Lynch head of commodities research Francisco Blanch, Wall Street Journal, March 24, 2008; ** Assuming $3.36 average U.S. pump price per U.S. Department of Energy (April 2008) and DOE s estimated 2007 U.S. gasoline consumption.

2 Big Oil Making Big Money While consumers are pinched with record prices at the pump and growing food costs, oil companies are enjoying times of soaring profit. The higher costs of oil are being passed on to customers. Yet, oil companies continue to enjoy increasing profits and $18 billion in federal subsidies. Oil Industry Profit Review 2007, Congressional Research Service The oil industry recorded $155 billion in profits, the five major oil companies accounted for 75 percent of these profits. On average, the revenue of integrated oil companies increased by 7.1 percent. With output declining, it is likely that revenue growth was based on increasing prices. Oil Mergers, Manipulation and Mirages: How Eroding Legal Protections and Lax Regulatory Oversight Harm Consumers, Public Citizen s Energy Program Oil companies are using the recently deregulated energy trading markets to manipulate prices. Net income on domestic refineries has experienced much more growth than international refineries. Mergers created a tendency for companies to limit production capacity, then the industry supply decreased and profits increased. The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry, Center for Agricultural and Rural Development, Iowa State University, Xiaodong Du and Dermot J. Hayes The results indicate that ethanol production has significantly reduced the profit margin of the oil refinery industry. Big Oil vs. Ethanol, Consumer Federation of America The oil industry is threatened by ethanol and has systematically used its power to prevent ethanol s success. Consumers have a stake in the use of ethanol, because of the prices at the pump and to combat the nation s oil addiction problems. Supporting increased competition in the automobile fuels market will help discipline a market dominated by a handful of multinational oil companies May 6, 2008

3 Big Oil Making Big Money What They re Saying About Big Oil Major oil companies have now declared war on a key policy that can help alleviate the shortage the expanded production of alternative transportation fuels, particularly biofuels, like ethanol. The oil companies have substantial market power over the distribution of alternative fuels. Consumer Federation of America strain of high gas prices on American families. Shell Inc. reported $9.08 billion in profits for the first three months of 2008, and BP listed $7.62 billion in earnings. Both figures are well above their earnings compared to this time last year, and with oil giants like ExxonMobil and Chevron still yet to report their earnings for the quarter, the total figures for the top five oil companies could easily outpace last year s record take. Rep. Edward Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming Yet so far, only a tiny fraction of U.S. service stations let a driver fill up with ethanol. There are a number of reasons, but one big one is resistance from oil companies Oil companies lose sales every time a driver chooses E85, and they employ a variety of tactics that keep the fuel out of stations that bear the company name. For instance, franchises sometimes are required to purchase all the fuel they sell from the oil company Contracts sometimes limit advertising of E85 and restrict the use of credit cards to apply for it. Some require that any E85 pump be on a separate island, not under the main canopy. Wall Street Journal In 2007, the oil industry recorded revenues of approximately $1.9 trillion, of which 78% was accounted for by the five major integrated oil companies. Profits for the industry totaled over $155 billion, 75% of which were earned by the five major oil companies, with the largest, ExxonMobil, earning over 25% of the total profit. Congressional Research Service Two of the world s largest oil companies announced their profits for the first quarter and highlighted the increasing disparity between the earnings of oil companies and the These companies are defending billions in federal subsidies needed for renewable fuels and clean energy while reaping over a hundred billion dollars in profits in just the last year alone. Rep. Edward Markey, Select Committee on Energy Independence and Global Warming Right now, ethanol may be the only reason prices haven t gone even higher. The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo. Ron Lamberty, American Coalition for Ethanol In recent years, the balance in the world s oil-supply system has shifted, giving the refining industry more power and more profit Privately, OPEC members are irked that U.S. refining margins the profit refiners make in turning crude into gasoline and other products have soared in recent months OPEC officials say that if they pump more oil and depress world oil prices, U.S. gasoline prices might remain high, and the result would be even wider refining margins. In essence, OPEC would be putting more money into the pockets of refiners while its own revenue would be hurt by declining crude prices. Bhusahn Behree and Ana Campoy, Wall Street Journal -2- May 6, 2008

4 Ethanol: Helping Limit Fuel Prices While critics accuse ethanol of driving up food prices, what many do not realize is that without ethanol, energy prices would be even higher. Increased fuel costs would no doubt increase food prices. Following are just a few of the studies that show ethanol is a key factor in keeping fuel prices from rising.. Impact of Ethanol on Retail Gasoline Prices in Missouri, LECG LLC, John M. Urbanchuk In 2007, Missouri drivers saved 7.7 cents per gallon at the retail pump by filling up with a 10 percent ethanol blend, totaling a savings of $158.2 million, or $40 for each of Missouri s 3.9 million licensed drivers. That savings is expected to reach 9.8 cents per gallon or $72.80 per driver in Over the next decade, Missouri drivers will save 7.2 cents per gallon thanks to ethanol, amounting to annual savings of $214 million or $54 per driver. The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry, Center for Agricultural and Rural Development, Iowa State University, Xiaodong Du and Dermot J. Hayes Growth in ethanol production has allowed for retail gas prices to be $0.29 to $0.40 per gallon lower than it would have been without ethanol. The results of gas pricing savings varied in five U.S. regions according to the region s access to ethanol, ranging from 39.5 cents in the Midwest to 17.1 cents in the Rocky Mountain region, mainly because of the comparatively low gas consumption. The production of ethanol has reduced the profit margin of the oil industry. The Impact of Ethanol Production on Food, Feed and Fuel, Ethanol Across America By adding to the nation s fuel supply, increased ethanol minimizes the impact of gas price increases. The amount of raw grain materials in many food products is not enough to significantly impact the cost paid by the consumer. The Effects of Ethanol on Texas Food and Feed, Texas A&M University Relaxing the renewable fuels standard does not result in significantly lower corn prices. This is due to the ethanol infrastructure already in place and the generally positive economics for the industry. What is Driving Food Price Inflation? Federal Reserve Bank of Kansas City Supplies of agricultural commodities are expected to tighten further as worldwide populations grow and incomes rise, boosting demand. Marketing costs have risen sharply over the last 50 years, consuming a greater share of the retail food dollar. Over the past three decades rising labor and energy costs have boosted that [marketing] share steadily, from 67 percent in the 1970s to 80 percent today. Labor costs have emerged as the biggest component of the retail food dollar. In the year ahead, labor costs are expected to fuel food increases. Energy prices are also a large component of the retail food dollar, boosting prices by raising the cost of processing, manufacturing and transporting food May 5, 2008

5 Ethanol: Helping Limit Fuel Prices What They Are Saying About Ethanol and Fuel Prices The high price of gasoline is going to spur more investment in ethanol as an alternative to gasoline, and the truth of the matter is that it s in our national interest that our farmers grow energy as opposed to us purchasing energy from parts of the world that are unstable or don t like us. President George Bush Francisco Blanch, a commodities expert for Merrill Lynch, said biofuels like ethanol lower gas prices by at least 15 percent on a nationwide basis. According to Farm Bureau Federation senior economist Terry Francl, gas would cost 5 to 10 cents more per gallon if it was not blended with the corn-based fuel. Francl also said that consumers and taxpayers are saving $7 billion to $14 billion in gas costs as a result of increased ethanol use. Higher oil costs have increased gasoline prices 70 cents per gallon over the past year. And oil companies have been quick to shift the blame to farmers and ethanol. The production of ethanol also helps to diversify our energy infrastructure with local production of renewable fuels. Bear Stearns analyst Nicole Decker estimates that the 400,000 barrels of ethanol produced daily in 2007 could displace the gasoline output from 2-3 average oil refineries Associated Press, January 2008 The E-10 mandate in Missouri will save money for Missouri consumers and drivers. The price for an E-10 blend is projected to be 7.2 cents per gallon below that of conventional gasoline over the next ten years resulting in annual savings of nearly $214 million, or $54 per driver per year, at the consumer level with no loss in revenue for the state from gasoline taxes. John Urbanchuk, Impact of Ethanol on Retail Gasoline Prices in Missouri This analysis suggests that the growth in ethanol production has caused retail gasoline prices to be $0.29 to $0.40 per gallon lower than would otherwise have been the case. Xiaodong Du and Dermot J. Hayes, The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry Ethanol production has a considerably negative impact on the gasoline price. This indicates that over the sample period, ethanol has a significant substitution effect on gasoline. Xiaodong Du and Dermot J. Hayes, The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry The availability of ethanol essentially increased the capacity of the U.S. refinery industry and in so doing prevented some of the dramatic price increases often associated with an industry operating at close to capacity. Xiaodong Du and Dermot J. Hayes, The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry The nominal increase projected for food prices over the next ten years should be more than offset by the effect that ethanol will have on the price at the pump. Ethanol Across America, The Impact of Ethanol Production on Food, Feed and Fuel -2- May 5, 2008

6 Ethanol Helps Lower Fuel Prices American Farm Bureau Federation, March 12, 2008 Americans are feeling the pinch of high gasoline prices, but the fuel could cost as much as 5 cents to 10 cents more a gallon if it was not routinely blended with ethanol. Overall, U.S. consumers and taxpayers benefit from saving $7 billion to $14 billion in lower gasoline costs as a result of increased ethanol use. Merrill Lynch, March 24, 2008 Without biofuels, which can be refined to produce fuels much like the ones made from petroleum, oil prices would be even higher. Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren t increasing their output. Biofuels are playing a critical role in satisfying world demand, says Fatih Birol, chief economist of the Paris-based International Energy Agency. Without them, it would be much more difficult to balance global oil markets he said. John Urbanchuck, LECG The use of a 10 percent ethanol blend saved Missouri drivers 7.7 cents per gallon at the retail pump in 2007 for a total savings of $158.2 million, or $40 for each of Missouri s 3.9 million licensed drivers. Reflecting current gasoline and ethanol price movements the savings are expected to average 9.8 cents per gallon or $72.80 per driver this year as 10 percent ethanol used statewide in Center for Agricultural and Rural Development, Iowa State University, April 24, 2008 The growth in ethanol production has caused retail gasoline prices to be $0.29 to $0.40 per gallon lower than would otherwise have been the case. The analysis shows that the negative impact of ethanol on gasoline prices varies considerably across regions. The Midwest region has the biggest impact, at $0.39/gallon, while the Rocky Mountain region had the smallest impact, at $0.17/gallon. May 1, 2008

7 A Tale of Two Corns When you re driving down a highway in the Corn Belt and see acre after acre after acre of corn, don t jump out and grab an ear for some impromptu corn on the cob. Chances are, it s the wrong sort of corn. There are two corns in the United States, and field corn is by far the most common, grown on more than 99 percent of all corn acres. While a small portion is processed for use as corn cereal, corn starch, corn oil and corn syrup for human consumption, it is primarily used for livestock feed, ethanol production and other manufactured goods. It s considered a grain. Sweet corn is what people purchase fresh, frozen or canned for eating. It s consumed as a vegetable. Unlike field corn, which is harvested when the kernels are dry and fully mature, sweet corn is picked when immature. The following statistics from the U.S. Department of Agriculture (for the year 2007) will give you a sense of the size of these two vastly different industries. Field Corn 93.6 million planted acres 13.1 billion bushels produced (366 million tons) Crop Value: $52.3 billion Sweet Corn 631,400 planted acres 2.9 million tons fresh and processed Crop Value: $625.5 million fresh; $236.9 million processed What do some of these words mean? A bushel of corn is 56 pounds, about the weight of a large bag of dog food. An acre is about the area of a football field. A ton is 2,000 pounds, about the weight of a small car. How Field Corn is Used 47% of field corn produced in the United States (6.15 billion bushels*) is as feed for livestock such as beef, pork or poultry. 24% (3.1 billion bushels) is used for ethanol production. Besides the ethanol this produces, this corn also will result in approximately 24 million metric tons of high-protein livestock feed in various forms and about 2.5 million pounds of corn oil. 19% (2.5 billion bushels) is exported to other countries. The top five countries to which the United States exports corn are Japan, Mexico, South Korea, Taiwan and Egypt. 19% Export 10% Other 47% Feed 10% of the corn (1.4 billion bushels) goes to other food, seed and industrial uses. Field corn is a source of corn cereal, corn starch, corn oil and corn syrup. Hundreds of other products are also derived from corn, such as certain plastic packaging and even fabrics. In addition, about 9% of the total corn supply (currently 1.3 billion bushels) is carried over as a surplus for the next year. 24% Ethanol * This and subsequent figures are from the U.S. Department of Agriculture, April A metric ton is 1,000 kilograms, approximately 2,206 pounds. May 1, 2008

8 Using Technology to Feed, Fuel the World Meeting the food and energy needs of a growing world population requires cutting-edge technology and innovation. Today, corn producers are being called upon to provide not only feed for livestock and food for humans, but also the raw material for producing renewable fuels like ethanol. New technologies are allowing U.S. corn farmers to produce substantially more corn per acre of land in a sustainable way, thus helping to meet growing demand for food and fuel. From computer-equipped combines to biotechnology-derived seeds to web-based grain marketing systems, technology is revolutionizing the corn industry. From seed development to harvest sales, growers across the country are using new equipment, devices and information systems to enhance the production process, improve efficiency and increase profits. Today s corn seeds are produced using the latest advances in plant biotechnology and plant breeding. The best traits from one corn variety are combined with complementary traits from other varieties to produce more productive and stronger corn plants. Last year, corn farmers produced an average of bushels of corn per acre. Consider that 10 years ago in 1998, the average production per acre was 134.4, and 20 years ago in 1988, the average it was 84.6 bushels per acre. Corn productivity per acre is increasing at an accelerated rate because of new advances in biotechnology and improved farming practices. Increased yield per acre allow growers to harvest considerably more corn without significantly increasing acreage. Based on past performance, average production per acre is projected to hit 173 bushels per acre by However, if productivity gains continue to increase at the rate of the last 10 years, average yield per acre could reach 178 bushels per acre by Seed technology providers have stated corn production could reach 250 to 300 bushels per acre by Each year, the National Corn Growers Association holds a national corn yield contest that receives thousands of entries from growers all over the country and these growers are achieving tomorrow s yields today. The winning yield in 2007 s contest was more than 385 bushels per acre more than double the national average U.S. Average Corn Yield Corn Yield Contest U.S. Average ,932 Entries State Winners National Winners Farmers are also embracing advanced technologies like GPS, onboard computerized yield monitors, and satellite imagery to take some of the guesswork out of the farming business and ensure the most efficient use of fertilizers and chemicals. And today s tractors and combines use state-of-the-art propulsion systems that more efficiently use diesel fuel. While many aspects of corn growing have not changed over the centuries, U.S. corn growers know that embracing technology is an important element to reaching the production demanded by the world s consumers. May 1, 2008