An Ethanol Defender Misses The Point

Last month’s series on U.S. ethanol policy continues to draw reactions. Today, I will address one of those reactions.

To recap, the articles in last month’s series were:

Marc Rauch of The Auto Channel has long been one of the most consistent ethanol defenders you will find anywhere. We have engaged in a number of cordial exchanges over the years regarding our respective views on ethanol. However, Marc took exception to my recent ethanol series, and wrote this response: Never Bring A Rapier To A Gun Fight.

As I replied to him — and as I will show today — a rapier’s point can be highly effective if the other person is shooting blanks. That’s mostly the case with Marc’s response.

My Proposal for Fixing the Ethanol Industry

Allow me to briefly summarize my argument before I address the blanks Marc shot at them:

  1. The Renewable Fuel Standard (RFS), which was passed in 2005 and expanded in 2007, has created an ethanol market utterly dependent upon the federal government. It pits powerful interests against each other, which means ethanol interests must constantly lobby to keep mandated ethanol usage at a high level. This also puts them in a situation where their destiny is controlled by the federal government. It provides great job security for ethanol lobbyists, as they must constantly lobby for continued federal support of ethanol.
  2. The RFS has failed to bring long-lasting prosperity to farmers or the ethanol industry, and it has failed to create a sustainable ethanol industry (i.e., one that doesn’t require continued mandates). At the same time, it maintains the perpetual risk of being abolished or weakened (as it is being done now — which I warned would happen two days after President Trump was inaugurated). You can look at the stock prices of ethanol companies over the past two years to see the impact.
  3. If Midwest states were to band together, they could make the RFS irrelevant. They could pass their own legislation that would incentivize E85 (or E30 for that matter) to become the default fuel across an entire Midwest corridor, where potential demand for E85 is five times current ethanol production volumes. This would put ethanol interests in charge of their own destiny. This is critical, because ethanol support may swing back and forth on a national level, but will always be consistent in the Midwest.

I have gotten numerous responses to these articles, but many of them have completely missed the mark.

For example, if your response to my articles is to complain about wars in the Middle East over oil, you have missed the mark.

If you respond that oil is toxic and ethanol is wonderful, you missed the mark.

If you argue in response that the oil industry gets subsidies, you missed the mark.