Congress mandated the amount of biofuels that must be included in gasoline and diesel fuel.
“Refiners, blenders, and importers can meet their obligations by either selling required biofuel volumes or purchasing RINs from parties that exceed their requirements.”
This year, 15 billion gallons of ethanol from corn must be included in gasoline. See chart.
In addition, during 2015, about 3 billion gallons of cellulosic ethanol must also be included.
This has created two problems. Three, if you include the huge bureaucracy that has been created to account for whether the prescribed amounts of biofuels have been included in gasoline and diesel fuel, and also account for the number of RINs created and sold.
The first problem is that cellulosic ethanol doesn’t exist in anything more than tiny quantities, since it’s essentially still experimental. Therefore, refiners are required to buy a product that doesn’t exist.
Looking at the chart, it’s alarmingly obvious that refiners are required to add huge quantities of cellulosic ethanol in 2022, specifically 16 billion gallons of an imaginary product.
The second problem? Not enough gasoline is always being sold to use all the ethanol being produced.
This has led to the EPA’s bizarre proposal to increase the concentration of ethanol in gasoline from 10% to 15%.
Cars built before 2004 will be damaged if ethanol requirements exceed 10%.
Whether newer cars can use gasoline with 15% is debatable.
Car manufacturers have said their warranties will be cancelled if gasoline, used in other than E85 vehicles, contains more than 10% ethanol. Prudent car owners will by-pass any gasoline pump that says 15% ethanol.
RINs have created an ancillary problem affecting the price of gasoline.
Over the past few years, we have seen where the price of RINs has been as high as $1.46 per gallon, increasing the cost of gasoline at the pump, or where, as has been the case this year, it’s below the cost of producing ethanol.
- Bloomberg recently reported that refiners are buying less expensive RINs to avoid buying ethanol from ethanol producers. Two years ago the high price of RINs was increasing the price of gasoline at the pump. See High Gasoline Prices and RINs.
A major reason for using ethanol was to cut CO2 emissions, but it’s subsequently been determined that ethanol won’t cut CO2 emissions.
Ethanol was also supposed to cut oil imports, but with oil production increasing in the United States, there is no need to use ethanol.
It’s obvious that the entire process is quixotic, expensive and, probably, immoral. Specifically:
- Mandating the use of a product that doesn’t exist, i.e., cellulosic ethanol, is absurd.
- Requiring ethanol concentrations to increase to 15%, from 10%, which can damage cars, is definitely not in the interest of consumers.
- Increased volatility in the price of RINs affects the price of gasoline at the pump.
- Increased bureaucracy to oversee the production and use of ethanol and RINs is costly.
- Using food to create a fuel to be burned in a car has been called immoral.
- Using tax payer money to subsidize the development and production of unneeded biofuels places a burden on tax payers.
Eliminating the biofuel mandates, i.e., cellulosic ethanol, biodiesel and other such biofuels, other than corn-based ethanol, should be one of the first priorities of Congress when addressing energy issues.
While it may not be fair to farmers to suddenly and drastically cut the use of corn-based ethanol, it should be possible to establish gradual cuts in ethanol produced from corn.
Senators Feinstein and Toomey have proposed legislation to eliminate the mandate to use ethanol. How this proposal evolves will be interesting watch.
We don’t need ethanol, of any variety, to reduce oil imports, and we certainly don’t need ethanol to cut CO2 emissions.
The ethanol mandates have been another example of bad legislation that’s not in America’s interest.
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