Joe Biden’s gift to the ethanol lobby keeps gas (and food) prices high
The Biden administration and others in official Washington want to make it clear they are serious about fighting inflation.
Except in certain instances. You know, like mandates that raise the price of gas (which is a major driver of inflation in the public’s mind). How is the administration making gas more expensive? The old fashioned way: propping-up the ethanol lobby and – funny enough – Big Oil….
EPA also proposes to raise mandates next year for cellulosic ethanol, biodiesel and advanced biofuels that—irony alert—have drawn enormous investments from Big Oil. Each gallon of pure biodiesel costs between $0.50 and $1 more than the petroleum diesel it displaces. Renewable diesel costs even more. These costs are passed onto drivers.
Oil giants invest in renewable and biodiesel because they can make more money than they can refining conventional gasoline or producing crude thanks to regulatory and tax credits. S&P Global Platts last fall estimated that the value of government credits for renewable diesel including from California’s low-carbon fuel standard was about $3.90 a gallon.
Due to EPA’s revisions, regulatory credits will become more valuable, which could bring a windfall to Big Oil and Big Ethanol, plus hedge funds that trade the credits. After EPA’s announcement last week, conventional ethanol regulatory credits jumped nearly 20 cents to $1.10 per gallon—the highest single-day jump since 2015.
Big Ethanol denies that the mandate raises gas prices. But compliance alone is adding about 14 cents to refiners’ cost per gallon of gasoline and diesel. Ethanol is currently trading at a premium to gasoline.
Remember that the next time you have to fill up. And don’t forget this, either:
…the ethanol mandate also contributes to higher food prices. About 40% of the U.S. corn crop is now used to produce ethanol, which increases corn prices, which raises meat prices. The Biden Administration’s energy policies are full of contradictions, and the renewable fuel standard is one more.
Big Government at its finest.