The Obama administration should heed the calls of livestock producers and suspend the federal mandate that gasoline contain ethanol. Congress should then move to end the mandate permanently.
The mandate that gasoline include a specified minimum amount of ethanol began in 2006 and was aimed at reducing our nation’s dependence on foreign oil and helping farmers – two worthy goals. But the ongoing drought has helped pushed corn prices to more than $8 a bushel, which is taking a toll on the livestock and poultry industries.
Not only are feed prices higher, so is the cost of fuel, as most ethanol is made from corn. These high costs are causing some ranchers to sell off livestock.
But the mandate didn’t make much economic sense even before the drought.
It costs $1.78 in subsidies for each gallon of gasoline that corn-based ethanol replaces, according to a 2010 study by the Congressional Budget Office. For cellulosic ethanol, the subsidy is $3 per gallon of gasoline replaced.
This and other ethanol mandates also contribute to higher food prices, as about 40 percent of corn is diverted to fuel production. Though ethanol supporters say this has minimal impact on food costs, Texas A&M University estimated that the diversion cost Americans about $40 billion in higher food prices over the past four years.
And producing ethanol isn’t efficient. About as much or more energy is expended to plant, fertilize, harvest, transport and convert corn into ethanol as it replaces.
But eliminating ethanol mandates and subsidies has been politically difficult. Presidential candidates from both parties tend to promise to protect the subsidies while campaigning in Iowa. And many Republican lawmakers, who normally are against government interference, support ethanol because it is good for corn farmers in their home states.
Still, last year Congress let expire a credit of 45 cents per gallon that refiners got for blending ethanol, so the politics may be changing.
And the Environment Protection Agency announced Monday that it had begun weighing requests from some state governors to suspend the ethanol mandate. It is seeking public comment and has until Nov. 13 to make a decision on the waivers.
Rep. Mike Pompeo, R-Wichita, raised a valid concern about temporarily ending the mandate. Pompeo, who opposes all energy subsidies, noted that energy markets are complex and that turning government mandates on and off could roil the markets and hurt market participants.
But it doesn’t make sense to stay on this path, especially when it is harming livestock producers. A suspension of the blending mandate might finally give Congress the political courage to do what it should have done years ago: End the mandate.