Ethanol Lobby May End Up Hurting Ethanol Industry

ethanol-plantIt wasn’t long ago that the alternative fuel media was abuzz with the potential of ethanol, but out-of-date mandates threaten to add to gas prices and dismantle the government’s ethanol policy. Now the whole industry could be at risk.

Very quietly in November of 2013, the Environmental Protection Agency (EPA) proposed scaling back the amount of corn ethanol in gasoline from 14.4 to 13 billion gallons. To the ethanol industry this was a massive blow – because frankly the U.S. is not really using corn ethanol for anything else other than  blending with gasoline. Now due to political push back, the EPA seems to be standing down, and the results could be even worse.

Ethanol has been added to gasoline for decades now, with the so called “blend wall” being at 10%. The purpose of adding ethanol to gasoline was to sell gasoline at the lowest volumetric price and to meet mandates set by the government for alternative fuel use. Of course this meant some nice subsidies for corn growers, and soon a lot of that corn being grown in the U.S. was not going to the dinner table, but rather into the gas tank.

In 2007 the Bush Administration took ethanol to new heights by setting a series of annual mandates that would increase the amount of ethanol blended into gas. These mandates were based on the, at the time, steady demand for gas. As many of us remember though, gas prices shot through the roof, the economy bottomed out in 2008, and suddenly people were paying closer attention to their their wallets rather than the low fuel light on the dash.

But the mandates stayed in place. So while demand for gas dropped by around 6%, the EPA still had to increase the amount of available ethanol based on old data set by the mandates. Some analysts claim this action has actually added cost to the gallon of gas at the pump by as much as 15 cents, and could add even more.

So in November the EPA was going to tweak the outdated mandates. But it sounds like that’s not going to happen thanks to political pressure from the ethanol lobby, which may have shot itself in the foot with this move.  By keep the mandates in place, gas prices could go up as much as 50 cents per gallon. The Renewable Fuels Association takes a different view,claiming that the more ethanol in fuel, the less the fuel costs.

Here’s the thing though; if gas prices do indeed go back up (as they seem to be doing), the ethanol industry could find itself as the scapegoat. There could be calls to scrape the ethanol mandate completely, and there have been calls to cut corn subsidies as well. What happens to the ethanol industry then?

Consumers have fallen out of love with ethanol, and with gas prices once again rising in anticipation of the summer season, this could be the final blow for the fledgling industry.

Source: Forbes | Image: Sweeter Alternative

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor’s Degree in Government and International Relations from Clark University and a Master’s Degree in Political Science from Northeastern University. Being an Eagle Scout, Andrew has a passion for all things environmental. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail.

 

Andrew Meggison

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor's Degree in Government and International Relations from Clark University and a Master's Degree in Political Science from Northeastern University. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail. You can follow Andrew on Twitter @AndrewMeggison