Gas prices will climb, and you can blame corn

By Paul Brennan | Iowa Watchdog

JOHNSTON, Iowa — Most of what Tim Maher knew about the renewable fuel standard came from TV commercials.

“They all talk about how it’s good for the environment and good for the country because we won’t have to import so much oil from the Middle East,” Maher said as he was filling up his car with super-unleaded at a Casey’s General Store in Johnston.

“But they sure never said anything about it making the price of gas go up,” Maher added.

That’s what will happen if no changes are made to the RFS, according to a new report from the Congressional Budget Office.

The RFS mandates the amount of plant-based ethanol that gasoline refiners must purchase to mix into the nation’s gas supply. Because the mandated amount automatically increases each year, the CBO projects the RFS will begin to drive up prices, because refiners will have to buy more ethanol than they can sell.

The report predicts prices for blends that are 10 percent ethanol, like Casey’s super-unleaded, will go up by 13 to 26 cents per gallon by 2017 because of the RFS.

Petroleum-based diesel is predicted to jump by 30 to 51 cents per gallon.

Only drivers of flex-fuel vehicles who fill up with the blend containing the highest amount of ethanol will see prices drop. The CBO predicts the price of E-85 will decrease by 91 cents per gallon by 2017.

Last fall the Environmental Protection Agency, which administers the RFS, proposed cutting the mandate. The RFS mandate and its increases were set by Congress in 2007. Since then, the amount of gasoline used in the United States has declined.

The proposed cut is designed to bring the mandate more in line with current gas usage. If the EPA makes the cut, the CBO predicts the RFA “would probably not have a significant effect on the prices of transportation fuels.”

The commercials Maher remembers were a response to the EPA proposal. Sponsored by pro-ethanol groups, they were designed to convince viewers to support the RFS and oppose any change to it.

Iowa politicians needed no such convincing.

The state is the country’s leading producer of both ethanol and the corn used to make it. Politicians of both parties were united in their opposition to the EPA’s proposed change.

They still are.

Iowa Watchdog contacted Gov. Terry Branstad‘s office to get the governor’s comment on the CBO report. In response, the governor’s spokesman issued the same boilerplate statement that’s been used since last fall.

“Governor Branstad is hopeful the Environmental Protection Agency will reconsider their proposed rule that would weaken the Renewable Fuel Standard. The ill-advised proposed rule would cost hard-working Iowans their jobs, hurt the Iowa economy, decrease consumer choice at the pump and increase our nation’s dependence on foreign oil.”

The CBO report may not have impressed the governor, but after Iowa Watchdog described its findings to Maher, the gas pumper said it made him look at the RFS differently.

“I get why it’s a good deal to have a law that makes people buy what you’re selling, but I don’t see it really helping anybody who isn’t selling that stuff,” Maher said.

Another Casey’s customer, who only gave his name as Leon, agreed.

“It’s typical,” Leon said. “Politicians do something they say is going to help, but it only ends up making things cost more.”

Contact Paul Brennan at pbrennan@watchdog.org