Say Anything Blog

Another moment of planning and economic competence brought to you by the federal government:

WASHINGTON — Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible.

To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuels into gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.

But nobody at the time counted on fuel demand falling in the United States, which is what has happened during the recession. And that decline could well continue, as cars become more efficient under other recent government mandates.

At the maximum allowable blend, in which gasoline at the pump contains 10 percent ethanol, updated projections suggest that the country is unlikely to be able to use all the ethanol that Congress has ordered up. So something has to give.

“The market is full,” said Jeff Broin, chief executive of Poet, a company in Sioux Falls, S.D., that produces ethanol.

So what solutions are being considered by the government as they seek to solve this problem they created in the first place?

One solution is to require that refiners blend even more ethanol into the fuels we buy.  But that poses safety and maintenance issues.  More ethanol makes catalytic converters burn hotter and diminishes their lifespan.  And ethanol diminishes fuel efficiency.  The more ethanol you blend into gasoline the fewer driving miles you’ll get out of each tank full.  Users of E85 fuel blends have been aware of this problem for years.  If the EPA ups the mandated ethanol blend, expect fuel efficiency to be hurt as well.

The other solution is to just stop subsidizing ethanol production and mandating its use.  But that would tick off all the rent-seekers who have gotten rich from the government manufacturing a market for their products.

So, which one do you think the government will choose?  The one where they stop forcing us to pay to subsidize the production of a fuel that we’re, collectively, so disinterested in we have to be forced to use it via mandates?  Or the one where they rent-seekers and their well-paid lobbyists that their government-created market is going away (at least partially)?

I know which one I’m putting my money on.