The EPA Doesn't Want To Get It

If we need more proof that Washington DC doesn't get it then all we have to do is look at the latest bit of bureaucratic BS from the so-called Environmental Protection Agency.

They are still pushing the idea of increasing the amount of ethanol in gasoline despite pushback from refiners, automakers, the public, and mathematics. The law mandating the amount of ethanol that must be used every year has major flaws, the biggest being that it assumed gasoline demand would keep growing. However demand has fallen and is lower than it's been since the late 1990's and it isn't likely to increase in any great amount for some time. Yet the millions of gallons of ethanol that must be used far exceeds the demand. This apparently has gotten the watermelon environmentalists in the rogue EPA to push the idea of increasing the percentage of ethanol in gasoline from 10% to 15%, hence the pushback.

The EPA recently issued it's new annual quota for renewable fuels. Needless to say there are a lot of people not happy with it.

That mandate tells the nation's refineries how much renewable fuel (ethanol) must be blended annually into gasoline, a quota that is becoming a pernicious driver of gas prices.

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This matters because for refineries to stuff ballooning amounts of ethanol into a static gas pool, they must blend it at levels of more than 10%. Since the nation's auto makers have declared they will void the warranties of cars using gas with more than 10% ethanol, refineries face lawsuits. Most have instead turned to buying federal renewable "credits" to make up for the ethanol they don't blend.

As demand for these credits skyrockets, so has the price—jumping from a few pennies a gallon last year to close to $1 a gallon today. Oil refiner Valero has said the credits could raise its cost by a stunning $750 million this year, a hit that will be passed on to consumers. PBF Energy just told investors that its disappointing second-quarter earnings were rooted in the mandate, noting that the $200 million it expects to fork over for ethanol credits this year will exceed the salaries and wages that it pays to operate all three of its refineries.

Some refineries are lowering production simply to mitigate the credit costs. Others are beginning to export products to avoid the mandate. Both moves could tighten U.S. supplies and lead to higher prices at the pump.

The original intent on the biofuels mandate may have been a good one, but it was based on ignorance and has come under the sway of rent-seeking ethanol producers and a rogue EPA that doesn't care that many of its other actions are illegal (or so say a number of federal courts). But ethanol is not the “fuel of the future” so many have promised, at least not the type derived from corn. The energy input to produce a gallon of ethanol is greater than the energy contained in that gallon of ethanol. While ethanol is considered carbon neutral by some, it reality it generates more carbon dioxide to produce using fertilizer and water to grow it and diesel fuel to plant and harvest it. It's a net negative in return for both energy and its carbon footprint. So we have a mandate that does not meet one of its original intents, costs the consumer even more at the pump because refiners cannot use the amount of ethanol being thrust upon them by EPA quotas, thereby forcing many refiners to either dial back production to lessen their burden or shipping refined products overseas in order to escape the nonsense being thrust upon them.

Another promise made for ethanol – it would wean us off of the need to import foreign oil – now seems laughable. Over the past few years we have found we have more oil and gas under our feet than the rest of the world's proven reserves combined. If fully developed we wouldn't have to import a single drop of oil for the next 200 years, and in fact, would be a net exporter of oil.

So why are we even bothering with ethanol any more?

Because the aforementioned rent-seekers see their government mandated riches disappearing if we abandon it. It doesn't matter to them that ethanol causes more problems than it solves, including mechanical problems and fuel system difficulties with cars, trucks, boats, and any other gasoline powered engines. It doesn't matter to them that it's a scam and that it doesn't fulfill the promises made for it a decade ago. All they know is that if we do the right thing they won't be able to count on their government guaranteed riches to keep flowing into their bank accounts. It's crony capitalism and it stinks.

It's time to stop the madness.