End the Ethanol Mandate: Our View
(USA Today) … Apart from Sen. Ted Cruz of Texas, they all supported the mandate, including Gov. Scott Walker of Wisconsin, the latest conservative darling, who arrived at his pro-ethanol position thanks to a 180 degree reverse back flip that would have impressed a platform diver.
The parade of supplicants suggests that ending the mandate, which dates to a 2005 law, will not happen any time soon.
Nevertheless, there is some reason for modest optimism. Several bills to phase out ethanol have significant support. The original rationale for the mandate, energy independence, is less of an issue now. And a number of recent events — the surge in domestic energy production, the fall in oil prices and the advent of more efficient cars — have conspired to make the mandate’s demands laughable. READ MORE /MORE and MORE / MORE (Minnesota Bio-Fuels Association)
Excerpts from Minnesota Bio-Fuels Association: For example, it says a “gallon of ethanol is more expensive than a gallon of gasoline ($2.37 vs $1.73 wholesale).”
While the USA Today’s editorial board is separate from its newsroom, they could have at least asked their colleagues in the business section how the commodities market works, especially when theChicago Merchantile Exchange (CME), where all commodities are traded, is publically accessible. Wholesale and spot prices for gasoline and ethanol are dictated by future prices on the exchange.
But we’re prepared to help USA Today’s editorial board out. Today, gasoline futures for delivery in March are being traded at $1.76 per gallon while ethanol is being traded at $1.44 per gallon. Furthermore, D6 RINs for ethanol are 43 cents which means the actual price of ethanol is $1.01 per gallon.
As the Energy Information Administration (EIA) explains, the RIN value reduces the effective price of ethanol. In fact, during the two months when ethanol prices were higher than gasoline, the EIA said RIN values rose in tandem thus keeping ethanol prices lower than gasoline.
Amazingly, USA Today also paints ethanol exports negatively.
“In fact, ethanol makers who once wrapped themselves in the flag are now shipping their product overseas.”
First of all, how is this a bad thing? If more countries use renewable fuels, it means there’s less burning of harmful fossil fuels. But let’s be clear on the ratio of exports to domestic consumption. Last year, production was 14.3 billion gallons of which 13.4 billion gallons was consumed domestically. In fact, if the EPA had stuck to the original renewable volume obligation for 2014 of 14.4 billion gallons, there would have probably have been fewer gallons exported.
Another bit of fiction spouted by USA Today was this : “While a gallon of ethanol emits fewer greenhouse gases than a gallon of gasoline, it is far dirtier after accounting for the energy used to till and fertilize the land used to produce it.”
USA Today doesn’t cite any scientific study to back this claim probably because they would have found that leading scientists such as those from the Argonne National Laboratory have said that greenhouse gas emissions (GHG) from ethanol is, on average, 44 percent lower than gasoline. And this is based on a lifecycle analysis which takes into account emissions from farming all the way to its consumption as a motor fuel.
Even by incorporating land use changes, Argonne National Laboratory said GHG emissions from ethanol is 34 percent lower than gasoline.
USA Today also claims that increasing the ethanol blend in gasoline above 10 percent is something “Detroit says its cars can’t handle.” That’s funny because an analysis done by the RFA last year shows that both GM and Ford approved the use of E15 in all its new vehicles. READ MORE