Thomas Gallatin / May 18, 2021

Ethanol Boondoggle Raises Gas Prices

Thanks to the mandate, spiking corn prices have directly impacted the cost of gasoline.

Following the Energy Independence and Security Act of 2007, ethanol was mandated to be blended in gasoline as a source of “renewable” fuel, under the guise of combating pollution and ostensibly to secure energy independence. In practice, ethanol has done little to rein in pollution and nothing to bring about energy independence. Instead, that has been achieved thanks to technological developments in the fossil fuel industry, such as fracking. Ethanol, meanwhile, is arguably the nation’s biggest boondoggle.

Besides serving as a plague on older gasoline engines (especially lawn equipment), ethanol has resulted in increasing the cost of food as well as raising prices at the pump.

As the nation recovers from the recent cyberattack on the Colonial Pipeline, Americans’ attention quickly focused on the price of gas, which jumped to its highest levels in six years. Now, it’s easy to blame the pipeline attack for the price hike, and there’s no question the ensuing run on gas that resulted in stations with no fuel played a role. But it was also a limited event that has been resolved with little lasting impact. In other words, the gas price increases can’t legitimately be blamed solely on that event.

The answer for the rising fuel prices — prices that were already on an upward trajectory prior to last week’s pipeline attack — can be blamed on other factors, one of which is ethanol.

Going back to Congress’s Energy Independence and Security Act, the Environmental Protection Agency assigned oil refineries annual ethanol quotas. Refiners would receive tradable renewable identification numbers (RINs) per gallon of renewable fuel produced. Companies that failed to meet the EPA’s ethanol quotas could purchase RINs from other companies in order to meet compliance, or they could apply for a waiver.

The Wall Street Journal notes, “Congress’s ethanol requirements were never realistic, though its real goal was to boost corn farmers in the Midwest and the nascent ‘advanced’ biofuels, which are still nascent. The blending mandates have become increasingly unattainable as fuel economy has improved, which is harming smaller refiners and pushing up gas prices.”

In a nutshell, as the price of corn has spiked 125% in the past year, it has served to directly raise the price at the pump by an estimated 30 cents per gallon. That’s an additional 30 cents that Americans would not be paying if not for the ethanol boondoggle.

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