Large, centralized government perpetuates stupidity in a manner that defies reason. The framers of the Constitution understood this well, as reflected in the decentralization of power to the individual states. Each state, with its varied interests, was to individually be an incubator of better ideas. The union was to be a competitive relationship as well as a collective one.
But today, with the very best of intentions and far removed from their constituents, our representatives in Washington enact gigantic solutions. Solutions devoid of reality.
The Renewable Fuel Mandate is one such gigantic solution to the perceived problem of Peak Oil and dependence on imported oil. Now that we know all of our oil needs are well satisfied by crude oil production in the Americas, prudence would dictate that Congress end the mandate (in other words, farm subsidies).
But alas, no.
There is a loud sucking sound in the corn-producing states. Interests big and small depend on the federal mandate, one way or another. From tractor sales, farmland sales, petroleum fertilizer sales, and ethanol distillation, a relatively small number of people profit from the general public thanks to a silly solution to a non-existent problem.
Had the ethanol mandate solution been left to individual states, it would be easier to correct. As it is being answered on a federal level, the bureaucratic momentum appears unstoppable.
An illustrative example is the reluctance of even Iowa farming communities to use ethanol-laced gasoline. They know what damage it causes to expensive engines. Then there’s the fertilizer-caused dead zone in the Gulf of Mexico, the high water consumption, the high energy use to produce ethanol, the willingness of using food for fuel, the early caucus in Iowa, and the revolving door between Wall Street and Washington, D.C.
Even Europeans are waking up to the stupidity of renewable fuels. They see that vast areas of rain forest are being cleared to produce “green” diesel; that ethanol burns dirty in engines designed to burn gasoline, polluting the air; and that the lower energy content in ethanol reduces gas mileage in engines designed to burn gasoline. For all these reasons and more, the E.U. is proposing to limit the renewable content in their diesel and gasoline to 6 percent.
The increasing mandate in the U.S. is forcing gasoline refiners to purchase Renewable Identification Numbers (RINs) or ethanol credits because they have hit the 10 percent blend wall. Wall Street gamblers (such as JP Morgan Chase, recently fined $920 million for their business practices) saw this coming and purchased all the federal credits they could get their hands on.
The unattainable mandate paired with the forced purchase of RIN credits has caused the price of the credits to climb 2,000 percent. This huge Environmental Protection Agency (EPA) expense will be forced upon the consumer in the form of big gasoline price increases. Yet one more federally mandated wealth transfer from the average guy to the gamblers with the cozy relationships with legislators.
But as long as the EPA continues to say, “Who cares about reality,” the Renewable Fuel Mandate will continue. As gasoline consumption continues to decline, the percentage of ethanol will have to increase to meet the increasing mandate. Therefore, our well-intended but dumb solution will get even dumber.
What we need to ask is whether the Renewable Fuel Mandate makes sense. Economically? Environmentally? Would each of the corn producing states individually impose the same mandate within their state borders?
The answer to each is a resounding no.
Any views and/or opinions expressed in “The Know-It-All” are solely those of the author and do not necessarily represent those of B2B Omaha magazine, or its parent company, and/or its affiliates.