How Is Mandated Ethanol A Victory For Consumers?


According to the Associated Press, E15 (a fuel blend with 15% ethanol) “is currently sold in fewer than two dozen stations in the Midwest, but could spread to other regions as the Obama administration considers whether to require more ethanol in gasoline.” The oil industry has been resisting that expanded mandate, but was today dealt a loss by the Supreme Court.

Big Ethanol is now gloating, touting the SCOTUS ruling as a victory for consumers and market choice (emphasis mine):

On Monday, the Supreme Court rejected a challenge by the American Petroleum Institute, the oil industry’s chief lobbying group, to block sales of E15. The justices left in place a federal appeals court ruling that dismissed challenges by the oil industry group and trade associations representing food producers, restaurants and others.

Tom Buis, CEO of Growth Energy, an ethanol industry group, hailed the decision as victory for U.S. consumers, who will now have greater choice at the pump.

“Now that the final word has been issued, I hope that oil companies will begin to work with biofuel producers to help bring new blends into the marketplace that allow for consumer choice and savings,” Buis said.

What the Supreme Court did was uphold a federal mandate which forces oil refiners to produce ethanol blends, flooding the market with a fuel that the market clearly doesn’t want.

After all, if there were demand for E15, wouldn’t refiners be producing it and fuel retailers be selling it? Oil companies, after all, love making money. If they could make a buck selling E15, why wouldn’t they?

They aren’t because ethanol buying ethanol isn’t about helping fuel consumers. It’s about helping corn farmers and ethanol producers. It’s about mandating a market for their products. Yet, somehow we’re supposed to believe this is about more choice in the marketplace.

The ethanol lobby is living in some alternate universe, I guess, where white is black and up is down.

What’s really troubling, as I’ve pointed out before, is that these mandates are creating a bubble in crop prices and land values. The ethanol mandates drive up corn prices, and as farmers rush to take advantage of those prices corn crowds out other crops driving up those prices.

And as crop values inflate, so does the value of farm land.

Ethanol is the worst possible thing that could be happening to farmers and fuel consumers right now, but the corn/ethanol lobbies are powerful and for now the government is going to keep doing it to us.