Fuels America trotted out a series of stale, debunked talking points in a recent advertising campaign extolling the virtues of the Renewable Fuel Standard (RFS). This is one of the latest attempts by the ethanol lobby to conceal the truth about ethanol as Congress considers changing or repealing the federal ethanol mandate, which requires refiners to blend greater and greater amounts of ethanol into gasoline. The Institute for Energy Research (IER) has compiled a list of claims and corresponding facts to set the record straight.
CLAIM: “We’ve been dependent on oil for more than a century, and our environment is paying the price…Renewable fuel is clean and innovative, and can ensure a healthier future for our planet.”
FACT: Let’s unpack both parts of this claim. America has, indeed, used oil for more than a century—just like we have used ethanol for more than a century. Some of the earliest internal combustion engines, dating back to the early 1800s, were designed to run on biofuel. Henry Ford designed the first Model T to run on either gasoline or ethanol. Even cellulosic ethanol is not new, as Robert Rapier explains:
Almost 200 years ago, in 1819, French chemist Henri Braconnot first discovered how to unlock the sugars from cellulose by treating biomass with sulfuric acid (Braconnot 1819). The technique was later used by the Germans who were the first to commercialize cellulosic ethanol from wood in 1898 (EERE 2009).
So the world’s first commercialization of cellulosic ethanol took place 114 years ago. First commercialization in the U.S. took place in 1910 — 102 years ago. The Standard Alcohol Company built a cellulosic ethanol plant in Georgetown, South Carolina to process waste wood from a lumber mill (PDA 1910). Standard Alcohol later built a second plant in Fullteron, Louisiana. Each plant produced 5,000 to 7,000 gallons of cellulosic ethanol per day from wood waste, and both were in production for several years (Sherrard 1945). So actual production 100 years ago was up to about 2.5 million gallons of cellulosic ethanol per year. [emphasis added]
The last part is important. Cellulosic ethanol production was higher a century ago than it is today. That’s because over time, affordable oil displaced expensive ethanol, a trend that continues to this day. Despite the RFS requiring refiners to blend 5 million gallons of cellulosic ethanol in 2010, not a single drop was produced for commercial use. EPA raised the mandate to 6.6 million gallons in 2011, but again no cellulosic ethanol was produced. In 2012, despite an even higher 8.65 million gallon mandate, ethanol producers managed to eke out just 20,069 gallons. Cellulosic ethanol is not only not new, but it’s also not here.
Fuels America’s claim about the environmental impact of oil is also misleading. A study out of Stanford University finds that burning ethanol adds 22 percent more hydrocarbons to the atmosphere than gasoline, according to Scientific American.
The environmental benefits of ethanol are so questionable that the Union of Concerned Scientists, an environmental group, cautions, “If done wrong, the production of biomass for biofuels like ethanol could destroy habitats, worsen water or air quality, limit food production and even jeopardize the long-term viability of the biomass resource itself.” That does not sound like the “healthier future for our planet” that Fuels America claims.
CLAIM: “Oil companies control 90% of our fuel supply. That’s dangerous for our national security and for our economy. But thanks to the Renewable Fuel Standard, we have a choice: a safe, domestic alternative in renewable fuel.”
FACT: This is a truly puzzling statement. We suppose Fuels America is trying to say that 90 percent of transportation fuel is petroleum and 10 percent is ethanol. While that’s an accurate statement, it isn’t what Fuels America wrote.
The statement that “thanks to the Renewable Fuel Standard, we have a choice” is simply not true. As noted above, Americans have been able to choose ethanol for more than a century. Ethanol was used in the first internal combustion engines in the early 1800s. To suggest that ethanol could not exist without the RFS ignores history and reality.
It’s also important to note that U.S. oil imports are dramatically falling. Since 2005, oil imports have fallen from 60 percent to 40 percent of our total oil supply. Net oil imports are falling primarily because domestic oil production is increasing, U.S. oil consumption is holding steady, and America is exporting greater amounts of petroleum.
U.S. liquid fuels production rose 39 percent from 2005 to 2012, according to data from the Energy Information Administration (EIA). Biofuels accounted for 32 percent of the increase, while petroleum contributed about 68 percent. Meanwhile, U.S. petroleum exports almost tripled over the same period. Increased domestic petroleum production, not the RFS and ethanol, is the driving force behind America’s growing energy security.
Fuels America is on weak ground complaining about America’s reliance on foreign oil, since we are producing more oil now than we have in almost 24 years. Their real issue is that their products do not have more market share. Even with the federal mandate requiring refiners to purchase their products, ethanol accounts for just 10 percent of the domestic motor fuel supply. Fuels America’s purported concern for national security is nothing more than narrow self-interest.
The RFS, Not Domestic Oil, Is “Dangerous” to the Economy
Despite Fuels America’s claim, what is truly “dangerous” to the U.S. economy is the Renewable Fuel Standard. The RFS increases food costs by diverting about 40 percent of the U.S. corn supply, America’s most abundant crop, to ethanol production. Before the RFS became law, corn prices averaged less than $2.50 a bushel. Due mainly to growing demand by the ethanol industry, corn prices surged in 2008, around $7 a bushel. Although the recession lowered those prices, they rebounded strongly hitting over $8 a bushel last year, remaining above $6 a bushel for the past 2 years. Prices have begun to fall due to the approaching blend wall and a very strong crop this year. The record crop is expected to bring corn prices down to around $4.25 a bushel, which is still 70 percent higher than before the ethanol mandate.
But these lower prices are coming too late for some. Feedlot operators, who fatten cattle for slaughter, are closing operations at escalating rates. Last year, about 2,000 of the nation’s 77,120 feedlots exited their business, up from 20 the preceding year. The number of feedlot operators has dropped 20 percent during the past decade with the biggest impact on small operators with less than 1,000 cattle. Feedlot operators have been squeezed by rising prices for young cattle and high feed costs that have outstripped prices paid to them by meatpackers.
In addition to increasing food costs, the RFS also makes fuel more expensive. A recent study by the Energy Policy Research Foundation Inc (EPRINC) finds that failure to reform the RFS will cause E10 prices to spike as high as 50 cents to $1.00 per gallon in 2014. EPRINC attributes the increase to “constraints in cost effective opportunities to blend larger volumes of renewable fuels into the U.S. gasoline pool,” otherwise known as the blend wall. Another study by NERA Economic Consulting finds that by 2015 the RFS could raise diesel costs by 300 percent, gasoline prices by 30 percent, and reduce take-home pay for American workers by $580 billion.
The fact is that ethanol is consistently more expensive than gasoline. This is primarily because ethanol is less energy dense than gasoline. A gallon of ethanol contains about 33 percent less energy than a gallon of conventional gasoline. Indeed, last year E85 (ethanol that contains up to 85 percent ethanol) was 70 cents higher than regular gasoline on a miles-per-gallon basis, according to AAA’s Daily Fuel Gauge Report. Even with a record corn harvest driving corn prices down this year, E85 still costs about 20 cents more than regular gasoline.
If Fuels America were truly concerned about “dangers” to the economy—as opposed to their personal economic fortunes—they would oppose the federal ethanol mandate.
Conclusion
Fuels America’s ad campaign is just another push by the ethanol lobby to mislead Americans about the Renewable Fuel Standard. As Growth Energy’s “You’re No Dummy” campaign reveals, the ethanol industry is getting increasingly desperate and offensive in their attempts to preserve their cherished handouts. The RFS amounts to a massive subsidy for ethanol producers; it creates guaranteed demand through repeat customers. But as IER has explained numerous times, the RFS raises energy costs, damages vehicle engines, and burns food to produce fuel—all of which harm the American people. It is time to repeal the RFS.
IER Policy Associate Alex Fitzsimmons authored this post.