FEDERAL renewable fuel mandates passed in 2005 and 2007 could create significant economic hardship, reducing citizens’ take-home pay without offsetting benefit.
A recent U.S. House subcommittee hearing chaired by Rep. James Lankford, R-Oklahoma City, made clear the abundant flaws of the mandate. The Renewable Fuel Standard requires that 35 billion gallons of ethanol-equivalent biofuels and 1 billion gallons of biomass-based diesel be refined by 2022. However, those mandates were imposed when officials assumed that U.S. fuel consumption would continue increasing and that domestic oil production would account for a declining share of supply. Both assumptions were wrong.
In 2007, U.S. gasoline consumption totaled around 145 billion gallons. Officials expected consumption to increase to 170 billion gallons, but recent estimates predict consumption in 2013 will instead total 120 billion gallons.
The latest report from the U.S. Energy Information Administration shows domestic production now totals 7.3 million barrels of oil per day while imports have fallen to 7.27 million. Since 2005, when the renewable fuels mandate was first enacted, oil imports have declined by more than 72 percent. The combination of reduced gasoline demand and a mandated increase in renewable fuels means refiners could soon be forced to boost the amount of ethanol in blended fuels from 10 percent to a 15 percent mix (know as E-15). That’s bad news for consumers for a host of reasons.
Lankford notes that his 2011 Ford truck has a written warning on the fuel door stating that the warranty will be voided if E-15 fuel is used. Yet the federal Environmental Protection Agency claims E-15 is safe for most cars made after 2001. At the hearing, Lankford asked Christopher Grundler, director of the EPA’s office of transportation and air quality, how many manufacturers disagree with the EPA’s conclusion. Grundler responded, “Most of them.”
Because of supply issues and associated impact on renewable credits, the move to E-15 blends is expected to significantly increase fuel prices. A study done by the economic consulting firm NERA found that mandating E-15 could increase the cost of gasoline by up to 30 percent and cause diesel prices to surge as much as 300 percent by 2015. This translates into a $580 million cut in take-home pay for American citizens.
The EPA has the authority to waive the renewable fuel requirement if it will cause severe harm to the economy. But when Grundler was asked how the agency defined “severe,” he admitted it has no established definition. If dramatic price increases and potential destruction of countless automobile engines isn’t “severe” economic harm, what qualifies?
A primary goal of the renewable fuel standard was to reduce dependence on foreign oil. This is no longer an issue. Supporters also argued the fuel standard generated environmental benefits. But Lankford noted that ethanol fuel fails that test because “corn-based ethanol may not be any cleaner than gasoline and has other negative environmental consequences, such as using more water for producing corn-based energy than refining gasoline.”
The Renewable Fuel Standard was a bad idea when first enacted under President George W. Bush. It remains so under President Barack Obama. Instead of demanding Americans pay higher prices for fuel that may damage or destroy their cars to “solve” problems that no longer exist, it’s time the EPA waived the mandate.
The world has changed. The EPA must change with it.