Ethanol driving up cost of gas

Fuel Fix:

A fight between oil giants and corn farmers reached a fever pitch on Wednesday, as the oil industry used a new study to argue that increasing ethanol use in fuel will hurt consumers and the economy.

Groups representing ethanol producers fired back, saying the oil industry was trying to undermine government efforts to reduce reliance on oil-based fuels. Because most U.S. ethanol is made with corn, producers are allied with corn farmers, who enjoy an expanded market and higher prices for their crops because of ethanol demand.

The report’s predictions were dire, concluding that the federal Renewable Fuel Standard will fail because it is increasing costs for fuel makers, eventually leading to higher consumer prices and $770 billion in lost gross domestic product by 2015.

The oil industry study, commissioned by the American Petroleum Institute and produced by NERA Economic Consulting, added that government mandates requiring energy companies to buy more ethanol have created a “death spiral impact.”

Ethanol charge: Drivers risk $13 billion gasoline price hike

By 2015, the report said, compliance with the Renewable Fuel Standard “will likely be infeasible, which would result in significant damage to the economy.”

The “death spiral” described in the analysis involves fuel producers cutting back on the products they sell in the United States because of the high additional cost of complying with mandates to buy alternative fuels. Instead, refineries would ship more of their products overseas, slashing domestic supplies and pushing U.S. fuel prices higher, the report said.

“The Renewable Fuel Standard program is irretrievably broken,” said Bob Greco, director of the API’s downstream group, speaking on a conference call with reporters.

He called on Congress to repeal the law.

Both the API and ethanol backers said they would support a congressional hearing on the mandate.

Groups representing ethanol producers and corn farmers argued that there is plenty of room for growth in alternative fuel consumption, but that refiners are refusing to broaden their offering of the fuel in gasoline blends.

The API said the oil industry’s efforts to meet government mandates could lead to a 30 percent jump in gasoline costs by 2015.

The higher gasoline costs effectively would reduce American workers’ take-home pay by almost $580 billion, according to an API statement on the report.

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Ethanol is a bad idea whose time has passed.  It was created at a time of perceived scarcity of oil and that is no longer the case.  If there were a case for ethanol, it would make more sense to create it from natural gas which is cheaper and abundant and would not effect food prices.  Ethanol makes the gas less efficient reducing mileage and further driving up the operational cost of transportation.  That maybe the objective of the anti energy left, but it should not be the objective of government policy.  We should immediately scrape the mandate and thereby lower the price of fuel and food.  It would immediately raise the standared of living of nearly everyone in the country.