Would More Biofuel Use Threaten Food Supplies?

President Bush promoted the benefits of ethanol during a recent Latin American tour. But the fuel has drawbacks, including the possibility that significant use of corn-based ethanol could mean higher costs for a food staple in many poor nations. Rob Routs, an executive director at Shell Oil, talks with Steve Inskeep.

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STEVE INSKEEP, host:

On his recent tour of Latin America, President Bush promoted the benefits of ethanol, and he announced a deal with the president of Brazil to promote the biofuel. An executive with a major oil company says his corporation is expanding its biofuels work but not just with fuel made from corn. Rob Routs of Royal Dutch Shell says the company is exploring fuel made from waste.

Mr. ROB ROUTS (Executive, Royal Dutch Shell): Waste materials could be straw, they could be wood and in some cases, for instance, old railroad ties, trees, what have you. Anything that has cellulose and that can by converted into ethanol.

INSKEEP: Ethanol distribution is still a tiny slice of Shell's business. But it is big enough to make Routs worry about a side effect.

Mr. ROUTS: The thing I'm personally concerned about and the company is concerned about is the impact on the food chain. So the competition between food and fuel. Today already we see that corn prices have doubled and that a lot of the corn is going into the fuel side. That, of course, drives the food chain for people and also cattle up by quite a bit and then it affects the economy. And we don't know where this is going to go. The same thing is happening on the sugar cane side, and sugar prices.

INSKEEP: And so you're looking for things that are not being used as food that you can turn to...

Mr. ROUTS: That's right.

INSKEEP: I presume that the average middle-class American, if the corn price doubles, they pay a few dollars more. It's probably something they can afford even if they don't like it. Is this a situation that could actually cause people to go hungry in other parts of the world.

Mr. ROUTS: Well, that's the issue. I mean, it doesn't only hit the United States, it's a global trade like anything else. And if the prices in Mexico - the tortillas in Mexico - double, then, of course, there is going to be an issue of affordability out there.

INSKEEP: Can you completely avoid that problem of taking food off the table literally, of competing for food. Do you have enough alternatives that that problem can be solved?

Mr. ROUTS: Well, the future will tell. I mean we've done studies where we see that there is enough waste material around for us to work with going into the future. The market will decide where that balance is going to be going forward.

INSKEEP: I would speculate that a number of people listening to you will assume - because you're from a large multinational oil company - that anything you're doing in this area is for public relations. What would you say to somebody to persuade them that you're not just in this area for a little PR?

Mr. ROUTS: It's never been really a matter of reputation. It's really an asset of market forces and to government mandates. It's clear to us and to me where the world wants to go. It wants to make ethanol and other biocomponents or biodiesels a major component of the fuel mix going forward. So if we want to stay in this business, then it's important that we find solutions and answers to those questions. I mean for us the debate about climate change is over. All right. We want to take action and the whole biofuels equation is one answer to that.

INSKEEP: Is it also a question of you're not sure that you'll always be able to get as much access to as much oil as you have in the past?

Mr. ROUTS: We tend to say to our investors that easy oil is over. Now we have to go to 10,000 feet of water to find oil, we have to go into oil sands, oil shales. So the battle to replace the oil that is there is not getting easier.

INSKEEP: Can you envision a time when Shell might not be primarily a petroleum company?

Mr. ROUTS: If that's going to happen, it's quite a long time away. Every three years we look ahead 30 years and we look at the total need or consumption of energy in the world as we see it at that point. We throw a couple of scenarios at it and see how we can survive as a company and make money as a company going forward. Those energy scenarios still tell us that by 2050, 50 percent of the world's energy comes out of hydrocarbons, out of oil. So we're still going to be an oil company for a while.

INSKEEP: Okay. Rob Routs is executive director of oil products and chemicals for Royal Dutch Shell. Thanks for coming by.

Mr. ROUTS: Thank you.

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