Last week, the U.S. Environmental Protection Agency (EPA) approved the first applications for making gasoline containing up to 15 percent ethanol – known as E15. For better or for worse, here we go again.
Ethanol proponents promptly hailed the EPA announcement saying that the United States is one step closer to being free from the whims of unstable Mideast oil-producing countries and farther down the road to energy independence. They also say that consumers are better off with more ethanol in their tanks.
What the proponents fail to mention is the potential contribution to U.S. energy independence offered by aggressive development of domestic oil projects, such as the Keystone pipeline, which could get us much farther down that road to energy independence. The U.S. ethanol industry need not worry about those issues, however. After all, they are protected by the 800-pound gorilla in the room known as the federal Renewable Fuel Standard (RFS).
To enable widespread use of E15, the Obama Administration has set a goal to help fuel station owners install 10,000 blender pumps over the next five years. Gas pumps dispensing E15 will be clearly labeled so consumers can make the “right choice” according to the EPA. But oh, by the way, they are not requiring the use or sale of E15. But just in case there is a rush to purchase E15 they do require that 13.2 billion gallons of ethanol be produced in 2012.
The rapidly increasing production of corn-based ethanol in the United States is viewed by many as a primary factor in escalating grain prices seen over the past five years. U.S. corn inventory is expected to be the smallest in 16 years by this summer, largely a result of ethanol production which now consumes around 5 billion bushels, or 40 percent, of U.S. corn. The RFS mandate is proving that disastrous results follow when government mandates are put into place and market forces are suspended.
For example, the poultry and livestock industries have to compete against the ethanol industry for the corn they feed to their animals yet there is no mandate for beef or pork consumption. It is no wonder beef and pork prices are also near record high prices.
The failed RFS mandate essentially says that fuel is more important to the country than food. Yet, even with the RFS mandate and all the federal support for ethanol production U.S. consumers continue to face near-record prices at the pump as well as at the grocery store check out.
It is essential that we pass a contingency plan which would suspend mandated ethanol production levels in the case of a short corn crop. Anything less would be disastrous for the nation’s livestock and poultry producers who are already paying double the price for corn they did five years ago.
It is also time to pick up the pace of cellulosic ethanol production instead of relying almost exclusively on corn. Meanwhile, put the RFS mandate on hold and allow the market to determine how much corn is used for fuel and how much is used for food.