Drought Causing Ethanol Fuel Law Requirement Concerns
A severe drought affecting corn crops this year has the White House reconsidering ethanol usage requirements. Will we see a politically difficult decision to reduce ethanol fuel requirements or will we all pay more for gas?
As of Friday, August 10, 2012, the White House said it hasn’t decided whether or not to waive the ethanol fuel requirements for the 250 million vehicles nationwide that use it.
The energy law passed in 2007 puts mandates the U.S. rapidly increase the amount of ethanol in vehicle fuel. Currently, it is slated to rise to 15.2 billion gallons this year, up 5 billion in 2007. The energy law states that in 2022, the U.S. must use 36 billion gallons of biofuel. However, this doesn’t need to come strictly from corn rather it could come from the advanced cellulosic ethanol. The hope has always been that by using more ethanol in fuel, the U.S. could restrict its need for foreign oil and keep fuel prices from rising to levels seen in Europe.
According to a story in the Detroit News, White House spokesman Jay Carney said, “The EPA has made clear that they’re working closely with the Department of Agriculture to keep an eye on yields, and they will evaluate all the relevant information when assessing that situation.”
“The president is committed to ensuring that his administration is taking every step possible to help farmers and ranchers who have been affected by this disaster,” Carney said. “The administration has already taken several steps from opening up lands for haying and grazing, to providing emergency loans, to helping get more truck drivers on the roads delivering much-needed supplies.”
Also on Friday, the USDA downgraded its estimate of total corn production down to the lowest level in 17 years. The drop is down 17 percent from its last forecast (13 percent less than last year). With lower crops, come increased demand with prices above $8 a bushel and trending toward $10. Overall, corn prices have risen more than 400 percent in the last seven years due to ethanol production. On the flip side, this is good news for farmers and is good news for the economy since the U.S. grows about 40 percent of the world’s corn (exporting corn could decrease our trade deficit). The growth in profitable farms makes the law a big winner in corn-producing states. These states will make it very politically difficult to waive the requirement.
This news ties into the recently released E15 fuel that the EPA finally approved. The idea is that by adding 5 percent more ethanol, the U.S. will meet the requirements of the 2007 energy law.
It is true that ethanol certainly has its critics who suggest it causes sluggish performance and decreased fuel economy. Yet, it is a boon for the American farmer. The 2007 energy law, like many things in politics, seems to have caused an unintended consquence of creating more expensive fuel during drought conditions. Perhaps, the law needs to be amended to include a drought clause.
What do you think? Should we scrap the law completely, quit using ethanol completely or add a drought clause to keep price fluctuations moderate?
Filed Under: Auto News