Ag Policy Blog

Ethanol, Capitol Hill and Big Oil

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The fight over the future of the Renewable Fuels Standard shouldn't be held on Capitol Hill.

The fight also shouldn't be dictated by a trade association representing companies with profits such as $11.6 billion in 2012 for BP or $44.9 billion for Exxon Mobil, (just shy of its 2008 record or $45.2 billion). I feel like this is a good place to insert some lyric from the Pink Floyd song, "Money."

"Money, get back. I'm alright Jack. Keep your hands off my stack."

The fate of the RFS shouldn't be in the hands of people who took about $35 million in campaign contributions from the oil and gas industry during the last election cycle, or an industry that spends more than that each year lobbying those same members of Congress.

Nonetheless, arguments over ethanol, the Renewable Fuels Standard and RIN credits are heating up in Washington while most of the region that built the ethanol industry seems largely left out of the fight.

Petroleum and refinery executives testified to senators on Tuesday about the challenges that have hit the refinery industry. Crude prices remain high but demand refined gasoline is down about 10% compared to pre-recession levels.

That 10% figure is notable because that's just about how much market the ethanol industry has taken from the petroleum industry. The petroleum industry fought against the 2005 and 2007 Renewable Fuel Standards but it was modeled out that the growth U.S. oil demand would continue to outpace ethanol production. The recession hit, but the biofuels industry expanded. At the same time, automobiles also became more efficient.

So because biofuels have hit 10% share of the market, the petroleum industry is screaming bloody murder and rejected EPA's approval of the 15% blend, E15. Jack Gerard, president of the American Petroleum Institute, spoke to FOX Business News on the topic.

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"Now we are at a point where the law requires us to blend more than 10% and the auto manufacturers are saying, 'Wait, wait, wait a minute. If you use more than 10%, we're not going to warranty our cars.' "

The Hill reported on a Capitol Hill event Thursday in which the Obama administration continued to support the Renewable Fuels Standard, or as the Hill put it, the administration "doubled down on its support." Heather Zichal, a White House advisor, said in the Hill article that "Calls to repeal the renewable fuel standard are nothing but short-sighted.” The RFS remains the backbone of the administration's work to reduce oil imports and help lower emissions.

Besides the Senate hearing, the House Energy and Commerce Committee has continued to examine the Renewable Fuels Standard and now has set another hearing for next week.

Questions do remain about why oil prices are so high when supply of oil is up and demand is down. There are all of these arguments about why. One rationale is we live in a global market. Of course it didn't help earlier this year when several refineries all happened to shut down around the same time. Our oil the U.S. produces apparently is better being exported and refined overseas.

The petroleum industry blames today's high prices on a spike in the cost of RINs as refiners search for cellulosic and advanced biofuels.

Geoff Cooper, vice president of research and analysis for the Renewable Fuels Association, argues ethanol is helping keep prices from being even higher. After all, U.S. ethanol provides more than 13 billion gallons of fuel as well and is now cheaper than oil on the wholesale level. Cooper cites in that over the past week ethanol was 67 cents per gallon cheaper than wholesale gasoline, and has consistently been cheaper over the past five years.

In that same article, Cooper also rejected the RIN argument. He said the 10% blend wall comes from the refiners refusing to go to E15. He argues it would only take a slight increase in 15% blends to satisfy the requirements.

To make its case to repeal the RFS, API now has a new advertising campaign, "" to highlight how everyone's automobiles would break down and all that fuel efficiency would collapse if the oil industry doesn't save us all from higher ethanol blends. But it's merely an education campaign to explain how unworkable the current Renewable Fuels Standard is for an industry with expectations of profits in the 11-digit range. A mechanic declares, "It's bad news for drivers, because higher ethanol means lower gas mileage and AAA says too much ethanol causes engine damage, which isn't covered under warranty, and that's good news for me," the man in the ad said.

AAA has come out with a statement saying the API ad distorts the group's position. AAA supports further development of biofuels.

As we repeatedly hear about the trials and tribulations of corporate executives whose oil refinery companies make billions in annual profits, it would be nice to hear from someone in Nebraska, Iowa, South Dakota or Minnesota about what has driven their economy over the past five years.

Perhaps API could get behind the ad campaign of another API member company, Chevron ($26.2 billion in net income in 2012). Chevron has this ad campaign "The World Needs More Than Oil," and "It's Time Oil Companies Get Behind the Development of Renewable Energy."

The Hill:……

I can be found on Twitter @ChrisClaytonDTN

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Jay Mcginnis
7/23/2013 | 7:49 AM CDT
Melvin,,, John can be a farmer and a right wing propagandist!!! I know plenty of farmers that are both and they would be happy to give all their earnings to the corporate clowns as long as their ideology was served!
John Olson
7/23/2013 | 7:26 AM CDT
Wrong again Melvin. I have farmed and ranched for decades.
melvin meister
7/23/2013 | 7:09 AM CDT
Sorry John .Your attacks on Ethanol are unfounded and quite silly but you do your job of confusing the issue that Chris is trying to make.The Farmer has a large stake in this fight.It is quite clear that you are not a farmer but a right wing propagandist as were all the info you asked me to read .
Bonnie Dukowitz
7/21/2013 | 9:41 PM CDT
C,mon John, You know better. The expense is the future taxpayer.
John Olson
7/21/2013 | 5:54 PM CDT
Melvin - I will drive a long ways out of the way to avoid ethanol. See and
John Olson
7/21/2013 | 1:48 PM CDT
The same corrupt entitlement mentality that has permeated Detroit for decades is what we see prominently featured with the ethanol corn income protection racket as well as the crop insurance income protection racket promoted by the rinos in congress. For farmers and politicians to use government to guarantee multimillion dollar investments, profits, and multimillion dollar subsidies is criminal. These schemes make no more sense than the government guaranteeing the investments and profits of Walmart or the oil companies. For farmers and politicians to whine about the profits of oil companies is hypocritical considering the thievery from taxpayers with these farm programs schemes. See
Bonnie Dukowitz
7/21/2013 | 7:41 AM CDT
As long as the American public continues the blind, negligent waste of energy, the source is immaterial. Burn up the energy to create more artificial jobs in order to re or elect more artificial government officials, then call it developement. Without the waste of low thermostats in Summer and high settings in Winter, the excessive speeds on the highway, etc., light bulbs left on, the discussion would be much less intense.
melvin meister
7/20/2013 | 6:45 PM CDT
Read your articles John .I think it was a waste of time since most of Big Oils claims are mostly lies or just plain rigged false statements .John just put E-30 in your car or pickup and be glad you bought fuel from your fellow farmer .Nothing awful will happen to the motor.My pickups and car still run just fine.
John Olson
7/19/2013 | 7:12 AM CDT
For you info Melvin - See See See
Jay Mcginnis
7/19/2013 | 6:20 AM CDT
Any bill that makes big oil cry cant be that bad but first lets eliminate the oil subsidies including war ships to protect the shipping lanes around the mid east or make the oil companies PAY for that protection. GOP is the party for corporate welfare at the expense of starving poor people! Just think how much that extra 10% of gasoline would raise not only the demand for their product BUT raise the commodity price itself the same if we needed 10% more corn for the market! As for gasoline and ethanol ruining engines that too is a collaboration of big oil and car manufactures as it always has been. I now have 13,600 miles on my car which doesn't need either ethanol or oil and zero greenhouse gas emissions, its fuel is electricity made from my solar panels but the GOP really HATES that!!!!
melvin meister
7/18/2013 | 11:10 PM CDT
Mr. OLson get your facts straigt Ethanol is not about food stamps period. This fe ul has created more prosperity in the midwest than any farm bill since 1952 when the republicans passed the sliding scale of parity .By 1956 the price of hogs was 10 cents a pound , cattle 16 cents a pound and corn at 85 cents a bu. The exodus from ag. has not let up since.The NE.senators at the time was Sen. Curtis andHurska both very inept as is todays SEnators Johans and Fischer not to say the three Reps who voted to repeal the 1949 permenant farm law. With help like this the RFS could be in jepordy.Mr Olson you may get your wish another farm depression.
John Olson
7/18/2013 | 5:59 PM CDT
Ethanol is working out great for democrats. Skyrocketing food prices drives more people on food stamps which works out to more dependent voters than liberals can manipulate for more votes. 140% increase in food stamp use since 1990.