An Ethanol Defender Misses The Point

Marc: Robert implies that the oil industry has been consistently profitable; as if oil industry entities have been immune to financial downturns; as if the oil industry has not had to rely on a perpetual cycle of government largesse to survive.

Absolutely not. What is the government largesse of which Marc speaks? These oil companies that over-leverage and make bad decisions are allowed to go bankrupt. They aren’t lobbying the federal government for policies like “Ban oil imports, so we can sell all of our oil at better prices and stay in business.” That would be a perfect example of government largesse. The oil industry enjoys its tax breaks, as every industry does, but they are not lobbying for federal intervention in forcing consumers to use their product.

But again, to reiterate what I wrote above, the “oil industry” is not the refining industry. Refiners are middlemen. They couldn’t care less whether they are blending ethanol or selling refined oil. Heck, Valero bought a bunch of ethanol plants because they felt like they could make money selling ethanol. What refiners care about is being able to decide what to do given market economics, and not having to make long-term plans on the basis of a mandate that could disappear. If they can make more money selling ethanol, that’s what they will do. What I am arguing is for Midwest states to pass laws to make it easier for them to profit from selling ethanol.


This is really enough said on my part. In summary, I will say that the status quo — the federal government mandating ethanol blending — is exactly the reason we are in the present situation. My plan would address the status quo. The primary objections to my plan can be boiled down to “We just need more of the status quo.” That’s a position that is doomed to fail, and right now we can see the impact of relying on that status quo. You won’t always win the argument with the federal government. But you would always win it if you relied on Midwestern state governments to help drive demand.

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