RFS 'A Christmas Story' for Big Ethanol

In a recent op-ed for The Hill, Ron Lamberty of the American Coalition for Ethanol likens the federal ethanol mandate to “A Christmas Story,” a classic American film about a boy who wants Santa to give him a Red Ryder BB gun for Christmas.

The analogy isn’t far from the truth. In 2005, Congress gifted Big Ethanol its version of Ralphie’s Red Ryder BB gun—a federal mandate that requires Americans to purchase their products.

Indeed, the Renewable Fuel Standard (RFS) has been a gift that keeps on giving for ethanol producers. The RFS requires oil refiners to blend increasing volumes of ethanol into gasoline, with the goal of blending 36 billion gallons by 2020. The mandate gives ethanol producers guaranteed, rising market share through repeat customers. Moreover, the RFS forces refiners to sell the ethanol industry’s products.

But just as Santa warned Ralphie, “you’ll shoot your eye out, kid” with a Red Ryder BB gun, the RFS has backfired on the American people. According to one estimate, the RFS could raise gas prices by as much as $1 per gallon next year due to the broken compliance system that forces refiners to purchase expensive ethanol credits, called Renewable Identification Numbers (RINs).

That’s just the beginning of story. The RFS makes corn more expensive—helping corn farmers, but harming people who buy large amounts of corn. In fact, corn prices are 70 percent higher since the RFS went into effect, causing feedlot operators, who fatten cattle for slaughter, to shutter operations at escalating rates. In 2012, about 2,000 of the nation’s 77,120 feedlots closed shop, up from just 20 the previous year.

Higher feed costs get passed on to American families in the form of higher grocery bills. The RFS diverts 40 percent of the nation’s corn supply to biofuel production. Burning more corn for fuel makes less available to feed the livestock needed to produce beef, milk, chicken, and eggs, among countless other products. That’s why groups like the National Chicken Council and the National Council of Chain Restaurants oppose the RFS.

Joining refiners and food producers, many human rights advocates also oppose the RFS for the impact it has on worldwide food prices. For example, a United Nations official has called the practice of using food to produce fuel “a crime against humanity.” Katja Winkler, a researcher for a nonprofit organization in Guatemala, has remarked, “The average Guatemalan is now hungrier because of biofuel development.”

When Congress passed the RFS, it gave Big Ethanol a gift that forces families to decide between putting food on the table and putting presents under the tree. When the ethanol industry claims that “the RFS is working,” so we should “leave it alone,” what they really mean is, “The RFS is working because it is making us richer even though it costs the rest of America.” Ralphie’s mother would have punished him for such insolence. It’s time Congress ended the preferential treatment for ethanol producers.

IER Policy Associate Alex Fitzsimmons authored this post.