WASHINGTON, December 6, 2013—The petroleum industry’s renewed campaign against Congressionally mandated increasing levels of ethanol in gasoline appears to be working. The result, however—EPA’s proposal to reduce ethanol requirements for 2014—could cost taxpayers and secure petroleum’s hold on the U.S. economy.
“Fuel for Thought,” a campaign sponsored by the American Petroleum Institute (API), the U.S.’s leading petroleum association, is calling for a repeal of the Renewable Fuel Standard (RFS). Television and print ads warn that higher levels of ethanol in transportation fuel could void car warranties, lead to car damage and even trigger higher food costs.
While the renewable fuel industry, environmentalists and others have criticized the campaign as misleading, it seems to be working in Washington.
Developed in 2005 by the Environmental Protection Agency (EPA) with the collaboration of renewable fuel producers, refineries, and other stakeholders, the RFS program requires transportation fuel sold in the U.S to contain minimum volume of renewable fuel that increases every year.
RFS aims to reduce petroleum imports, increase use of homegrown renewable fuels, reduce foreign oil dependency and encourage the development of the national renewable fuels industry.
Most gasoline currently sold in the U.S. already contains some ethanol, but the exact percentage varies by region, according to the U.S. Energy Information Administration (EIA). Generally, gasoline does not have more than 10 percent ethanol. Gasoline with 10 percent ethanol is known as E10 and according to EIA, E10 is safe to use in all gasoline vehicles.
As part of the RFS, in 2011 EPA approved E15 gasoline (gasoline with 15 percent ethanol) for use in passenger vehicles model year 2001 and newer and flex fuel vehicles, subject to a few conditions.
“AAA says this E15 ethanol blend could damage our engines,” states one ad sponsored by API, responsible for the “Fuel for Thought” campaign. The ad goes on to warn that the RFS could raise food prices because ethanol diverts corn from food production. Another ad features a mechanic saying the RFS is great for his business.
The ad suggests that all gasoline is going to change to E15 and people are going to be forced to use it or use it without knowing. “Fuel for Thought” fails to clarify that the use of E15 optional and not mandatory.
E15 is already available to those who want to purchase it instead of regular gasoline at certain certified gas stations. It is clearly labeled as E15 gasoline at the pump and the label warns that it should only be used in flex fuel vehicles and passenger vehicles model year 2001 and later. Consumers with older cars and even those with new cars are not forced to use E15, and E15 is and will continue to be clearly labeled and sold at the pump as a separate product.
EPA based its approval of E15 on extensive tests of 86 different engines totaling over six million miles. According to Bob Dinneen, president and CEO of Renewable Fuels Association, “as E15 approaches its one-year anniversary, over 40 million miles have been driven on it, and there have been no reports of engine trouble.”
Not everyone agrees with EPA’s assessment. Even though AAA was not consulted in making the API commercial, Lon Anderson, spokesperson for AAA Midwest told Communities that the organization thinks more research is needed to determine E15’s impact on older engines and engines not especially designed to handle ethanol, including cars built after 2001.
“Unless your vehicle’s owners’ manual clearly states that it is safe to use E15,” said Anderson, “I would not use it.”
Jeff Sandborn, former president of the Michigan corn Growers Association, disagrees. “Ethanol is the most extensively tested fuel ever brought to market,” he writes in a guest column in the Ann Arbor News.
However, the fact that E15 may ruin your engine is not the point because nobody is forced to use it. RFS just makes E15 available to those who have flex cars and those who want to use it in their model year 2001 and later vehicles.
“API is intentionally confusing a debate about E15 with the renewable fuel standard, an important policy that is reducing our dependence on imported oil while saving consumers money at the pump,” said Bob Dinneen, president and CEO of Renewable Fuels Association. “E15 is not mandated. E15 is a cost-saving, environment-protecting, oil addiction-breaking fuel alternative. E15 is a choice and American consumers are in the driver’s seat. Give them an option and let them decide. That’s the way competitive markets work.”
That currently mandated ethanol levels in gasoline will lead to higher corn prices and therefore higher food prices, as the commercial asserts, is highly unlikely. In fact analysts are now warning that a decrease in the ethanol mandate could reduce corn prices and trigger subsidies for corn growers, all at a higher cost to taxpayers.
In the summer of 2012, as corn prices hit record highs due to scorching heat and drought, farmers, food producers, governors in grain-producing states, and the petroleum industry urged EPA to waive the RFS. These groups claimed that higher corn prices would result in higher prices for meat, egg, milk, and other corn and soy-dependent products.
EPA did not agree and did not waive the RFS. Citing data and analysis by the U.S. Department of Agriculture (USDA) and DOE. EPA explained that the one percent rise in corn prices that would be produced by a waiver of the RFS would have no impact on food or household energy costs.
Lower ethanol helps big oil, hurts taxpayers
However, the petroleum lobby was able to recently sway at least some decision makers in Washington. Last month, EPA proposed lower ethanol levels than currently required by the RFS for 2014. The proposal was published in the Federal Registry, opening a 60-day comment period running until January 28, 2014.
While meeting RFS fuel mandates is not likely to raise food prices, the FDA’s recent proposal to use less ethanol is predicted to lower corn prices to the point that corn will once again have to be subsidized by the government.
The proposed reduction significantly lowers the amount of renewable fuels blended into the country’s fuel supply to a proposed target of 15.21 billion gallons (down from 18.15 billion).
Analysts expect this decreased demand for corn to make ethanol to drive corn prices down in the near future. Along with the expected changes to the farm bill, this will drive up subsidies for corn framers, an expense the government has not had in recent years of record high corn prices.
“The [farm] bill is expected to abolish a direct subsidy payment made to farmers, which costs about $2 billion a year, in favor of a system that guarantees crop revenue and offsets falling prices,” writes Charles Abbott in an article for Reuters. “And if prices fall too far, those revenue support payments could spike.”
Some experts estimate future corn subsidies, should the EPA reduce the ethanol mandate for 2014, between $2 billion and $3 billion per year.
“It is unfortunate that the Obama administration has caved in to Big Oil rather than stand up for rural America and the environment,” said Iowa Secretary of Agriculture Bill Northey at a Protect the RFS rally on November 22, 2013. “The renewable fuels standard needs to be protected as it has helped hold down prices at the pump, created thousands of jobs in rural Iowa, and benefited the environment. The President should be focused on jobs and the economy rather than looking for ways to hurt rural America.”
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