Expanded use of ethanol — enabled by President Biden’s lifting a summertime ban on fuels with a 15 percent blend — is a poor answer to high gasoline prices and a refusal to recognize the failures of the corn-based fuel additive. Reuters described the president’s action as a win for the corn lobby, but all others appear to be losers.
Shortcomings of ethanol as an alternative to gasoline have been reported continually since at least 2007 when the U.S. government expanded its requirement that distributors blend ethanol with fuels to reduce dependence on foreign oil. The additive also has been touted as a way to reduce emissions of carbon dioxide.
“There is a great danger for the right to food by the development of biofuels,” U.N. human rights advocate Jean Ziegler said at the time. “It (the price) will be paid perhaps by hundreds of thousands of people who will die from hunger.” A year later he called the diversion of food crops to fuel production a “crime against humanity.”
In 2011, Dr. Indur Goklany wrote that the “iron law of supply and demand dictates” that ethanol production “would almost unavoidably increase global food prices” and exacerbate poverty. He calculated 192,000 excess deaths had resulted from the food-to-fuel switch in 2010.
More recently, a YouTube video declared in its title,”America Was Wrong about Ethanol." The narrator announces, “We’re going to explain why corn-based ethanol is a dumb idea.”
The video is based on a University of Wisconsin study, which states: “We find that the RFS (Renewable Fuel Standard requiring ethanol blending) increased corn prices by 30 percent and the prices of other crops by 20 percent, which, in turn, expanded U.S. corn cultivation by 2.8 million hectares (8.7 percent) and total cropland by 2.1 million hectares (2.4 percent) in the years following policy enactment (2008 to 2016).”
The National Wildlife Federation opposes the RFS because expansion of croplands infringes on natural habitat. Trade organizations of the dairy industry and bakeries have objected to RFS’s pressures on corn prices and supplies. Scores of organizations representing millions of people have written in support of RFS reform.
As would be expected, increased farm acreage has led to more agricultural pollution. The Wisconsin study — published in February by the National Academy of Sciences — reports an increase of three to eight percent in water pollutants.
An expansion of the RFS only promises more of the same, according to the Wisconsin researchers: “Our estimates imply that for every billion gallons per year expansion of ethanol demand, we would expect a 5.6 percent increase in corn prices; 1.6 and 0.4 percent increases in the areas of U.S. corn and cropland, respectively; and attendant increases in (greenhouse gas) emissions, nutrient pollution, and soil erosion.”
And however many pennies President Biden’s ethanol expansion shaves off current pump prices — if any — the overall effect of the RFS is to increase fuel costs by nearly 30 cents a gallon, according to testimony presented in February to the Senate Committee on Environment and Public Works by Lucian Pugliaresi, President, Energy Policy Research Foundation, Inc.
Contributing to higher fuel-production costs have been increases in the price of credits that refiners have to purchase if they don’t add ethanol to their product. Since buying the Trainer Refinery near Philadelphia in 2012, Monroe Energy has spent more than $1 billion on RFS compliance — multiples more than the refinery’s purchase price and more annually than nearly all other operating costs combined.
Credits that once cost a few cents each are expected to increase this year to more than $2, a difference of hundreds of millions of dollars annually for refiners like Monroe. Some smaller refiners have closed because of the economic pressures of the RFS.
A perversity of the program is that third parties, including Wall Street banks and investment funds, are permitted to buy and sell the credits on speculation, increasing demand for them. Speculators, in short, make money off the backs of producers and consumers.
“We have raised concerns about this practice – and about many other problematic aspects of the RFS program design – but to this point, our calls to reform the program have fallen on deaf ears,” said Matt McGlaughin, a Monroe Energy spokesman.
The intended result of this move is to lower prices at the pump, yet just 2,300 of the nation’s 150,000 gas stations — or roughly 1.5% — sell E15 gasoline, according to a White House fact sheet. In addition, ethanol is less efficient than gasoline, reducing gas mileage and so it costs consumers more than conventional gasoline on a per mile basis.
In his testimony, Mr. Pugliaresi said, “We are heading into a largely uncharted world full of enormous price and energy security risks… Expect failures, cost over-runs and the unexpected.” He recommended the RFS be shaped to “withstand a wide range of future challenges.”
Given the program’s record, better that it be ended.