EDITORIAL: The ethanol bubble

Trading booms for a fuel that can’t actually be used

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When the price of a commodity rises to stratospheric heights for no apparent reason, it’s likely hysterical speculation. Only the government could come up with a bubble in a commodity that’s merely speculative. This week, the going price for a “renewable identification number” hit a high of $1.10, which is up 3,500 percent from the 3 cents it would have fetched just a few months ago.

Renewable identification numbers are ethanol production credits created by the Environmental Protection Agency to help companies meet federal quotas for the production of a fuel that doesn’t actually exist. In 2007, President George W. Bush signed a law declaring that 36 billion gallons of ethanol would be sold by the year 2022. Though spoken of in terms of the environment or boosting America’s energy independence, the real purpose of such ethanol sales promises has always been political. Anyone seeking the blessing of the Midwest in presidential primaries must pledge the rest of the country to wasting billions of dollars unnecessarily pumping corn into their gas tanks.

It would be bad enough if the story ended right there, but it doesn’t. Government nannies declared a separate quota for “renewable” fuels that must be blended into proper petroleum products. For example, the Environmental Protection Agency declared 14 million gallons of cellulosic biofuel must be produced for 2013. The problem is that this fantasy fuel exists only in a laboratory. It can’t actually be produced in any significant quantities. Maybe someday, but definitely not today.

Rather than admit defeat, environmentalist bureaucrats set up a system forcing companies to buy the renewable identification numbers to meet their targets — like forcing them to pay a fine for failing to perform an impossible act. This created an artificial trading market that’s ripe with green fraud.

Speculators have realized there’s no more room at America’s fuel pumps to accommodate additional ethanol. Currently, Americans are forced to dilute their gasoline with 10 percent corn, which is the maximum amount that can be added without ruining the engine of an automobile. The Obama administration backed off attempts to force acceptance of a 15 percent blend; fortunately for all of us, the automobile manufacturers refused to go along. The threat of warranty-related lawsuits has delayed the threat for at least a few more years.

This means the refiners are up against what they calls the “blend wall,” the point where no more corn fuel can be foisted on consumers, despite government mandates demanding ever more production and sales. The only remaining option to meet the goals under government regulations is the purchase of renewable identification numbers, which avoids actually blending real ethanol and gasoline.

Though a few green speculators might get rich from this artificial price spike, the rest of us will end up paying the cost. The creation of unnecessary fuel blends drives up the cost of gasoline, and the misuse of farm land for ethanol drives up the cost of food. Midwestern votes aren’t worth this much headache and cost.

The Environmental Protection Agency’s artificial trading market serves no legitimate purpose and only encourages scams. We’ve paid enough at the pump already. Congress must repeal this ethanol madness.

The Washington Times

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