Drought and ethanol: How Congress’ mandates and the EPA’s new policy are hurting Americans.

The Government’s Ethanol Mandates Have Reached New Heights of Insanity, Thanks to the Drought

The Government’s Ethanol Mandates Have Reached New Heights of Insanity, Thanks to the Drought

What to eat. What not to eat.
July 31 2012 7:01 PM

Food as Fuel

This summer’s drought highlights the madness of the government’s ethanol mandates.

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But what makes the ethanol charade even more perverse is that the entire rationale for ethanol has evaporated. For decades, the bogeyman of foreign oil has provided a handy canard that the ethanol industry could use to justify its subsidies and mandates. No longer. Foreign energy is becoming increasingly irrelevant to the United States.

Thanks to the shale revolution, U.S. natural gas production now exceeds the previous record levels that were hit back in the 1970s. Oil production from shale and other tight rock deposits has resulted in a glut of oil in some parts of the country. U.S. oil exports—which hit 2.8 million barrels per day the week of July 20—are soaring. Analysts at Citigroup are now predicting that U.S. oil production could increase by more than a third by 2015. If that happens, America could surpass both Russia and Saudi Arabia and become the world’s biggest oil producer.

Despite all this, the EPA is bending over backward to accommodate the ethanol industry, which is now producing too much fuel. Years of federal subsidies (which finally ended at the end of 2011) have resulted in a glut of ethanol production capacity, so much so that a number of ethanol plants have been idled. In addition, the United States is exporting record quantities of the fuel. Last year, the United States exported an average of 78,000 barrels of ethanol per day: nearly 9 percent of domestic production.


The primary destination for that ethanol, Brazil, is the country which has been repeatedly held up to Americans as the biofuel model we are supposed to copy. For instance, back in 2006, venture capitalist Vinod Khosla and former Senate minority leader Tom Daschle wrote an op-ed for the New York Times touting Brazil’s “energy independence miracle.” They said that Brazil proves that “an aggressive strategy of investing in petroleum substitutes like ethanol can end dependence on imported oil.”

It gets even more ironic. Last week, Smithfield Foods, the world’s biggest producer of pork, said that due to high domestic corn prices, it would start importing corn from Brazil! Thus, the U.S. ethanol industry is using domestic corn to make ethanol and shipping that fuel to Brazil while domestic livestock producers are importing Brazilian corn so they can produce bacon in America.

The upshot of this craziness? Frying bacon is about to get more expensive. But thanks to the EPA’s new rules allowing retailers to sell gasoline containing 15 percent ethanol, you may soon be frying the engines in your boat, car, and chainsaw, too.

Gasoline containing 10 percent ethanol, or E10, has been sold for many years. But with too much ethanol on its hands, the ethanol industry launched an intensive lobby campaign at the EPA to convince the agency to increase the permissible blend to 15 percent, or E15. The agency gave final approval to the move to E15 last month even though only about 4 percent of all the motor vehicles in the United States are designed to burn fuel containing that much ethanol.

The EPA approved the move to E15 despite strident objections from groups like the Outdoor Power Equipment Institute, which says the higher-ethanol blend fuel is “dangerous” and could damage or ruin motors used in generators, lawn mowers, and other devices. Numerous other trade groups, including the Alliance of Automobile Manufacturers and American Petroleum Institute, have also been fighting the move to E15. Toyota Motor Corporation has taken the unusual step of adding a label to the fuel caps on the new cars it sells in America. The label warns “Up to E10 gasoline only.”

Last year, Peter Brabeck-Letmathe, chairman of the Swiss food giant Nestle, declared that using food crops to make biofuels was “absolute madness.” He’s right. And sooner or later, if it cares one iota about consumers, Congress is going to have stop the madness.

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