Economy, Regs, & Taxes

Just Keep on Pumping Ethanol

Lewis Morris · Dec. 2, 2015

The EPA announced updated renewable fuel standards this week, choosing to perpetuate the travesty that is ethanol rather than let the overhyped fuel additive die the death it so richly deserves. The new standards, though lower than originally mandated in 2007, are still high enough to place undue pressure on energy producers and consumers, which will ultimately pay the price in higher gas prices.

The new EPA regulations mandate that companies will have to blend 18.11 billion gallons of corn-based ethanol into gasoline in 2016. This is up from the 17.4-billion-gallon mark proposed in May, but down from the 22.25 billion gallons the 2007 guidelines required. As a consequence, nearly everyone is upset.

Ethanol producers and farmers claim the numbers represent a shift away from renewable fuels. Bob Stallman of the American Farm Bureau Federation, told The Wall Street Journal he was disappointed to see the EPA “move forward with a decision that will stall growth and progress in renewable fuels.”

Jeff Broin, head of Poet LLC, an ethanol producer, said, “[T]hese numbers fall well short of our capacity to provide clean, domestic ethanol to America’s drivers.”

On the other side, gasoline refiners expressed optimism about the lower standards, but remain concerned that the mandate still exists at all. “Today’s rule is further proof that the [renewable-fuel standard] program is irreparably broken and that the only solution is for Congress to repeal it outright,” said Chet Thompson, president of the American Fuel & Petrochemical Manufacturers, an industry trade group.

Fully 10% of gasoline consumption in the U.S. comes from biofuels, and nearly all of that is corn-based ethanol. The latest numbers mandated by the EPA push the ethanol quota to the “blend wall,” the point at which the oil industry believes the amount mandated exceeds the amount that can realistically and safely be blended into the gasoline supply.

There is also concern that the vast quantity of ethanol being added to gasoline will have an adverse effect on the vehicles and small equipment that is running on the fuel additive. Environmentalists and corn-based ethanol producers have brushed off these concerns as overblown. Tell that to the consumers making trips to the repair shop because of ethanol-damaged engines.

The mandates may also be tied to the gas-price bubble that is costing consumers billions. Gas prices routinely rise and fall based on the price of oil, but, while the price of crude oil has fallen close to 50% in the past year, the price of a gallon of gas has only fallen 28%. This amounts to a pricing disparity in which drivers are paying $1 billion more for gas than they would have if the typical market pattern was in place.

Refiners have been keeping a larger chunk of profits by spending less for oil, but federal taxes and the additional manufacturing cost of adding ethanol to gasoline are also part of the problem. “The gap is higher than it has been since the 1970s,” according to Tom Kloza of the Oil Price Information Service. “There is no question: gasoline should be cheaper.”

It is for no other reason than political posturing that we are still dealing with the ethanol issue. It has been well documented that ethanol production is actually a boondoggle causing more harm to the environment than good. It uses billions of gallons of water that would otherwise be left alone. It is responsible for soil erosion due to the increased production of corn, not to mention the pollution of water tables by the added use of fertilizers.

Furthermore, there has been no substantive proof that ethanol is leading to lower CO2 emissions or that it is linked to the slightly lower overall CO2 levels in the atmosphere over the past several years. The supposed need for ethanol is further negated by the fact that global surface temperatures have been stagnant for 18 years without any rise. This comes as bad news to the group now gathered in Paris to hamstrung American manufacturing in the name of the planet.

While Republicans frequently battle with the EPA and the ecofascists over their plans to remake the economy for their own purposes, few politicians left or right are willing to go against the farm lobby, which stands to lose big if ethanol standards are repealed.

Ted Cruz is the only GOP presidential candidate who had the backbone to tell Iowans that he was against renewable-fuel standards. None of the other candidates, even the bombastic Donald Trump, have delivered a full-throated refusal to the continued adherence to the ethanol mandate. Until more politicians open their eyes to the truth about ethanol, we’ll continue to be stuck with this loser.

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