Government mandates are set to cost consumers billions in 2014, and not just in health care, according to Bloomberg News. The Renewable Fuel Standard requires refiners to mix ethanol into gasoline for consumers' cars and trucks. First passed in 2005 as part of the Energy Policy Act, then expanded in the 2007 Energy Independence Security Act, the RFS orders refineries to use at least 15 billion gallons of corn-based ethanol a year by 2022.
The refineries dislike the RFS because it forces them to buy the ethanol, then invest in and maintain the facilities necessary to mix it into gasoline. That drives up consumer prices. Ethanol hurts consumers even more because the RFS mandate makes cars and trucks less efficient. The reason is that equal measures of ethanol and gasoline produce unequal amounts of energy. The gasoline produces more energy per unit consumed. Add ethanol to the gasoline and consumers have to buy more at a higher price. Consumers also lose since every kernel of corn used for ethanol is one less kernel for food. The National Council of Chain Restaurants has estimated that the RFS boosted chicken prices 7.7 percent last year, beef prices by 7.5 percent and potatoes 13 percent.
The RFS is bad for the environment because the process of growing corn, transporting it, converting it into ethanol and blending it into gasoline emits more carbon than does the process for refining an equal amount of gasoline. Some might call that cutting off the nose to spite the face. The only people who benefit from ethanol mandates are corn farmers who get a government-guaranteed market and corn lobbyists schmoozing Washington politicians.
There’s another, more technical, problem with the ethanol mandate because it requires that the total of all gasoline sold in the country in a given year must contain a certain percentage of ethanol, not each individual gallon. So if gasoline sales go down in America, as is happening now, then the percentage of ethanol must be increased. This has created what refiners call a “blend wall” where the percentage of ethanol in every gallon of gas sold will creep past the RFS maximum of 10 percent if refineries are forced to satisfy the current mandate.
Ten percent may seem like an arbitrary line, but the automakers insist that the majority of cars currently on the road can’t function properly using gasoline with more than 10 percent ethanol unless they are specifically equipped to do so. The ethanol attracts water, which hastens the process of gumming critical internal parts of the engines, decreasing their fuel efficiency and eventually requiring expensive repairs.
On Aug. 6, the Environmental Protection Agency acknowledged the “blend wall” problem and issued new regulations relaxing the RFS for 2014. But this is not enough. The American people should not have to go pleading before the EPA every year to be spared from higher gas and food prices. Congress should act now and repeal the RFS entirely.