Our own Martin Wolf has let fly with both barrels at the insanity of  US and EU support for biofuels, using for ammunition the devastating case made by  the Global Subsidies Initiative.

When Martin, green campaigner George Monbiot and blogging "Big Oil" engineer Robert Rapier are all on the attack against a policy, it is hard to imagine that it will stand. But the farm lobbies of the US and EU alike are redoubtable opponents.

John Maynard Keynes famously wrote at the end of the General Theory: "The power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas." But he never had to try to kill a farm subsidy programme in Congress.

US and Eurpean biofuel related demand of agriculture commodities will push farm products prices up to 50 per cent in the next ten years from their 1997-2007 average, a new UN / OECD study has warned.

The warning, coming after corn, wheat and soyabean prices have risen up to 60 per cent in the last twelve months, reignites the debate on food versus fuel, amid concerns that current first generation biofuel production is not sustainable.

Opec warned recently against biofuels; they may have ulterior motives, but several countries and international groups have expressed their concerns amid higher food prices.

The report, by the United Nation’s Food and Agriculture Organization and the Organisation for Economic Cooperation and Development, added that long-term prices would be up to 30 per cent higher than previously estimated.

"Growth in the use of agricultural commodities as feedstock to a rapidly increasing biofuel industry is one of the main … reasons for international commodity prices to attain a significantly higher plateau," the report said.

Loek Boonekamp, head of the agriculture division at OECD in Paris, told the Financial Times that "biofuel demand creates a fundamental new demand for agriculture commodities that was non existent only five years ago."

"In a context of generally lower global stocks in recent years, this additional demand is expected to underpin prices," the report said. In the last twelve months, corn had risen by 60 per cent, wheat by 53 per cent and soyabean by 40 per cent.

Research from Iowa State University has sounded a warning about the viability of the investment currently pouring into ethanol production in the US. "We think the expected returns to an ethanol plant are zero or negative in 2008," said Bruce Babcock, economist and director of the Center for Agricultural and Rural Development at Iowa State, in Ames, Iowa, quoted on the Inside Greentech blog. Robert Rapier of the R-Squared Energy Blog is also quoted in the article; he expounds on his biofuel scepticism here. One of the less compelling arguments against biofuels is in the Washington Post: it says the current support for ethanol and other biofuels would cost $140bn if extended over the next 15 years. On the scale of the US budget, that’s a rounding error.

All the same, it goes to support the warning raised by the International Energy Agency that we reported in last week’s FT: biofuels are not going to wean the world off oil any time soon.

What is going to keep US petrol prices - already at record levels - high in the future? Ethanol, according to oil industry pundits quoted in the New York Times. It is an elegant argument: targets to replace petroleum-based road fuels with biofuels cast doubt on the future profitability of oil refineries, which deters new investment, which keeps capacity tight and refining margins high. So if you think you are paying too much for your petrol in future, blame the environmenatlists and the farmers and the Bush administration, and every other supporter of ethanol, but not Big Oil.

It is a provocative thesis, which has attracted comment both negative and positive. But while ethanol may be part of the picture, it is far from being the only deterrent to investment in US refineries. Consumer journalist Christopher Platt suggests such investment just hasn’t been popular with shareholders. And there are plans for new investment by Marathon, for example, (full story requires subscription).

The clincher, though, is that refining margins are simply not the most important determinant of petrol prices: that is the price of crude, as this analysis at the Oil Drum blog makes clear. Other things being equal, the more biofuels the US can use to replace petroleum products, the lower the price of crude will be.