German biofuel thirst pours out higher beer prices

Beer and oil may not mix, but in Germany there’s a direct link between hefty increases in the cost of a barrel of each.

Just as the price of oil approaches the milestone $100-per-barrel mark, the beer industry in Germany is bracing for a 10 to 15 percent price increase early next year and as much as 40 percent over the next five years. The reason for price boost at the beer taps: biofuels.
To reduce Europe’s dependency on oil, the European Union is paying generous subsidies to farmers who grow crops used in the production of biofuels. As a result, many farmers have switched from growing barley — used to make malt, the main ingredient in beer — to crops such as rapeseed and corn. This has driven up the cost of barley to more than $410 from $190 a ton last year.

Germans have deep feelings for their national beverage. Consumers keep close watch on the price of beer much the way Americans are acutely sensitive to fluctuations in the price of gasoline.

“Of course I’m not happy about a price increase, but it won’t stop me from drinking my daily after-work beer. Or two,’’ said Stefan Haase, 44, an advertising executive in Berlin.

“But there are many unemployed in Germany, and for them the evening beer in the neighborhood pub is their only social contact. A price increase would be traumatic for these people,’’ he said.

Beer drinking may be deeply ingrained in German culture, but the biofuel juggernaut appears to be unstoppable. Of Germany’s 30 million acres of agricultural land, 5 million are now dedicated to growing biofuel crops. Barley production fell 5.5 percent in 2007.

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