America’s Ethanol Industry Shows Why it Needs Subsidies

[Valin]

Via Meadia:

Mar. 28 2016

 

There’s a growing glut of ethanol here in the United States, and that’s proving to be very bad news for the various producers who have taken advantage of the 2007 law that mandated refiners blend increasing amounts of the fuel additive into gasoline supplies. But lately the EPA has relaxed those quotas, and as a result the market demand for ethanol—which was being driven entirely by government intervention—has fallen well below supply. Bloomberg reports:

 

(Snip)

 

This is what happens when an industry is entirely reliant on government support for its survival. And lest you think the EPA is playing the villain here, the agency had a very real reason to walk back those mandates: refiners can’t realistically blend more than 10 percent ethanol by volume into fuel for fear of ruining older car engines (a limit colloquially called the “blend wall”). That puts a fairly hard cap on things, and the fact that newer cars are being made with higher fuel economy isn’t helping ethanol producers’ cause.

 

That’s not the only problem with biofuel mandates, of course. They raise global food prices, starving the world’s poor, they cost drivers billions of dollars at the pump every year, and they’re actually bad for the environment. What a mess.