Friday Rant: Ethanol Creep – Can We Please First Run the Numbers

Who isn't in favor of reducing consumption of fossil fuels and U.S. dependency on foreign oil? Well, maybe a few major oil producing countries, but that's it. The U.S. mandated mixing corn based ethanol with gasoline 30 years ago with a 10% cap to win favor domestically and reduce oil consumption even though it's production and burning is, in fact, not environmentally friendly -- and now it's use is about to be augmented. When ethanol was introduced at the pump it wreaked havoc with most older cars; clogging fuel lines, filters, injectors and carburetors. The negative economic externality of which went largely undocumented but cost lower income consumers, driving older cars, a bundle (check with any gray haired auto mechanic if you don't believe me). And the impact on more affluent boat owners was even worse (the EPA still refuses to make an exception for marine fuels), destroying fuel tanks and causing engines to seize because of it's detergent effect.

Yesterday's New York Times reported "The Obama administration made a gesture of support for the ethanol industry on Wednesday, with a declaration by the Environmental Protection Agency that gasoline retailers can sell fuel blends containing up to 15 percent ethanol for use in late-model cars" in an article titled "A Bit More Ethanol in The Gas Tank". I don't call a 50% increase "a bit" but I digress. The Times also stated "automakers and other critics say that a higher blend of ethanol could corrode engines." But don't worry about that because the EPA is doing their own testing: "The agency said Wednesday that government testing found the blend would not damage the engines in cars with a model year of 2007 or later -- about one in seven cars on the road -- and would not cause unacceptable increases in air pollution. The agency is still testing cars for the 2001 to 2006 model years and expects to issue a ruling on those as soon as next month."

The U.S. government is taking responsibility for the safety and potential cost of repairs to millions of cars that have been designed and manufactured to run on 10% ethanol. Makes you wish you went to law school and became a class action law suit attorney doesn't it? And if this rush to judgment isn't silly enough, "John Eichberger, a spokesman for the National Association of Convenience Stores, which represents 115,000 of the about 160,000 locations in the United States that sell gasoline, said that some gas stations might sell E15 by giving up selling diesel fuel ....[and] we don't have a retail infrastructure that can handle the product, we don't have consumers ready to buy it, and we don't have the auto industry ready to approve the use in their cars."

So why is this happening now? Kevin Book, an analyst at ClearView Energy Partners, a research firm, nailed it by saying that "in the midterm Congressional elections in three weeks, there are nine at-risk Democrats from the top 10 ethanol producer states. If you're fighting for every seat in a midterm election, you can't afford to wait until the rule is finished."

The EPA has clearly abdicated it's due diligence responsibility and is being a pawn of political maneuvering. The U.S. economy cannot afford the short nor long term implications of such short sighted rulings that transfer their ultimate costs to U.S. consumers and may, once again, result in a negative cost/benefit outcome.

William Busch

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