Despite Big Ethanol’s claim that they seek to provide consumers with a choice in fuels, the latest battle over ethanol mandate waivers demonstrates that choices and free markets are the last thing the industry champions.
Ethanol producers already enjoy a wealth of support, thanks to federally guaranteed sales courtesy of the Renewable Fuel Standard — a biofuels policy that requires ever-increasing volumes of ethanol be blended into our gasoline supply. Now, they want Uncle Sam to also dictate how refiners and gas station owners run their private businesses so that they can force even more of their product into the market.
Refiners are right to push back against proposals to increase the RFS blending targets. These proposals could soon force the introduction of higher ethanol blends like E15 and E85 gasoline, containing 15 percent ethanol and 85 percent ethanol respectively.
Such blends cannot be handled safely by most existing storage tanks, pipelines, gas pumps and other equipment that refiners and gas station owners use to bring fuels to consumers. The cost to upgrade equipment for compatibility can reach as high as $250,000 per station. Considering that 99 percent of gas stations belong to independent business owners, rather than refiners or oil companies, that’s an unrealistic and unfair cost to impose.
And what incentive do gas station owners have to make such an investment? Consumers have not demonstrated an appetite for E15 or E85. In fact, only 5 percent of cars on the road today can run on E85, and the biofuels industry itself said that even those who drive these vehicles only consume about 16 gallons of E85 over the course of an entire year.
With such low demand, how can these independent retailers be expected to recover their upgrade costs?
For taxpayers, Big Ethanol’s attempt at manipulating the market is also economically damaging. The increased costs for equipment upgrades and compliance credits on fuel suppliers will contribute to higher gas prices. Just this year, the Congressional Budget Office found that the RFS will raise the price of regular E10 gasoline by as much as 26 cents per gallon. It’s no wonder consumers have demonstrated no interest in consuming any more ethanol than they already do.
Let’s be clear: the problem isn’t ethanol, the problem is ethanol mandates. The Renewable Fuels Standard picks winners and losers, punishing the “little guy,” in an economy that runs best on free market principles. That’s a recipe for disaster.
Refiners, retailers and taxpayers can find a middle ground with Big Ethanol in seeking to achieve energy independence and security — a stated goal of the RFS.
However, a long-term solution to this challenge must also be an economically viable one. So far, the RFS has only succeeded in distorting markets and propping up the ethanol industry at the expense of refiners, retailers, motorists and taxpayers. It’s time Big Ethanol gave up its special treatment and played fair.
Nan Swift is the federal government affairs manager at the National Taxpayers Union. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
