By Marjorie Haun | Watchdog Arena
The Environmental Protection Agency is moving forward with new Renewable Fuel Standards (RFS) that will force companies to increase the percentage of “biofuels” in their gasoline formulations.
The new rules are being implemented in spite of studies that prove E85—the most common form of ethanol—decreases greenhouse gas emissions by a mere 0.5 percent in comparison to regular unleaded gasoline. Various forms of ethanol are addressed by the increased EPA standards, including cellulosic biofuel which comes from biomass materials such as grasses and wood, Biomass-based diesel, which typically comes from seeds or fat and is chemically identical to conventional diesel fuel, and the more familiar corn-based ethanol.
The drop in U.S. gasoline prices in late 2014 was due to a large increase in domestic oil production as well as a modest decrease in demand. The lower cost of gas was viewed as an economic boon to many who believed Americans would apply those dollars saved in a tank of gas to other economic activities.
To a degree that was true, but the impact of falling gas prices on Colorado’s oil and gas industry was swift and painful, with large companies such as Halliburton, laying off thousands of employees, and smaller companies such as WPX, closing operations completely in parts of Colorado.
Oil and gas companies, and the Coloradans whose jobs depend on robust gasoline prices, have been hoping to find relief from the economic harm of dropping gas prices. It is likely that, with the updated RFS, the price of gas will increase, but Colorado’s flagging oil and gas industry will see little or no benefit.
Corn growers, specifically those who produce their crops for the ethanol market, support the new RFS which call for a 9 percent expansion in the volume of corn ethanol available to consumers. But ethanol and regular unleaded gasoline are not the same, and ethanol blends give consumers fewer miles to the gallon of fuel. The familiar E85 blend offers anywhere from 15 to 30 percent fewer miles per gallon (MPG) than regular gasoline.
Decreased MPG efficiency is not the only potential cost to consumers. Refitting existing pumps and creating new signage to comply with the new renewable standards are expenses the gas industry is sure to pass on to consumers. One cost likely to catch consumers by surprise may be a spike in food costs.
When the EPA first implemented the RFS in 2005, U.S. corn prices jumped from $1.96 per bushel to $7.50 in some areas. Livestock corn-based feed is also likely see another price spike, which will naturally increase the price of meat and poultry for Americans. Increased gasoline and food prices and decreased fuel efficiency will to hit low-income families the hardest.
The Congressional Budget Office also predicts that the new renewable standards will drive the overall price of gas up from 13 to 26 cents per gallon by 2017. With consumer costs sure to rise and no tangible benefit to a dwindling economy, the EPA may unwittingly be pitting corn growers against oil and gas companies in an arena where consumers are the only sure losers.
This article was written by a contributor of Watchdog Arena, Franklin Center’s network of writers, bloggers, and citizen journalists.