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ETHANOL SET TO RAISE THE COST OF GASOLINE

May 31, 2012

When the ethanol lobby testified for the mandatory E10 law here in Oregon, they told the legislators that we had to have a mandatory statute because ethanol would improve air quality and “… reduce the price of gasoline.”  After Oregon passed its mandatory E10 law, the federal government passed EISA 2007 with an RFS quota table embedded in stone in the act, which requires gasoline producers to put more ethanol in gasoline every year through 2022. The law was supposed to spur the production and consumption of E85 and flex-fuel vehicles.  That never happened and now the gasoline producers meet their ethanol quotas by making E10.

However, there is a limit to how much ethanol you can use making E10 before you have turned every drop of gasoline in the country into E10.  We are hitting that “blending wall” this year and next year the ethanol quotas will rise for the gasoline producers, yet they will have nowhere to put the ethanol.

The EPA is solely mandated with overseeing the RFS in EISA 2007. Part of the RFS includes an ever increasing blending quota for advanced bio-fuels, which means primarily cellulosic ethanol.  In fact corn ethanol quotas are capped in 2015 and all of the huge increases in ethanol blending quotas must be made up of an ever increasing production of cellulosic ethanol through 2022. There is one big problem though, nobody makes commercial quantities of cellulosic ethanol, despite your tax dollars being thrown at the problem for the past three decades. Even though there are about 30 companies trying to make cellulosic ethanol today, they can’t even produce 6 million gallons of the stuff this year, when the gasoline producers are supposed to be blending about 500 million gallons of the stuff into gasoline. What is ironic is that the EPA gave the ethanol industry a waiver on the production, but did NOT give the gasoline producers a waiver on consumption, they must pay a penalty to the EPA for not blending cellulosic ethanol in our gasoline, http://www.dtnprogressivefarmer.com/dtnag/common/link.do?symbolicName=/free/news/template1&product=/ag/news/renewablefuels/news&vendorReference=0702BAC7&paneContentId=35&paneParentId=0

So this should be the clue about how future ethanol quotas will be handled by the EPA.  Every year the quota will rise and gasoline producers will have to pay ever increasing penalties for not being able to blend the ethanol into our gasoline supply.  Gasoline producers will simply pass along the costs to the consumer, just as they are now passing along the $7.5 million costs of the phantom cellulosic ethanol that they can’t get.

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