We can hold down gas prices by requiring fuel to contain renewables such as ethanol
The Renewable Fuel Standard has reduced costs and our dependence on foreign sources of oil
July 23, 2014 12:00 AM
By BOB DINNEEN
As Americans hop in their cars this summer, gasoline prices are at a six-year high. Thanks to surging demand and continued turmoil in Iraq and elsewhere in the Middle East, gas is quickly approaching $4 per gallon.
With prices rising so fast, there’s never been a more important time for America to invest in alternative sources of energy. The longer we’re dependent on oil, the longer we’re at the mercy of foreign political turmoil.
One of the most promising alternative energy sources is ethanol, a renewable fuel derived from common agricultural goods like corn, wood chips and grasses. Ramping up America’s ethanol production would drive down demand for oil and wean this country off the volatility and sudden price swings that come along with it.
And yet, despite the profound promise of ethanol, some politicians are pushing to stamp it out. They’re lobbying to repeal the Renewable Fuel Standard, which requires the use of ethanol in the national fuel supply to promote greater energy independence and a cleaner environment.
This doesn’t make sense.
The modern energy market was borne out of the substantial industrial shifts stimulated by World War I. The ramp up of industry generated planes, submarines and tanks that all relied on the internal combustion engine. After the conflict ceased, the commercial thirst for oil remained strong.
It’s grown steadily since. And America has leaned heavily on oil-rich Persian Gulf nations to feed its demand.
Oil is what’s known as a “global commodity,” meaning it costs the same price regardless of where it is produced. Hence the sad irony that, while the United States is domestically producing more oil than at any time in the past 28 years, oil prices have continued to rise.
However, because so much oil comes from the Middle East, it has an outsized influence on global gas prices. Producers in that region have banded together to form a cartel, allowing them to artificially restrict supply and drive up world prices at will.
What’s more, many of the top oil-producing countries in the Gulf are exceptionally unstable and conflict-prone. That turmoil also disrupts supply, leading to price increases that ripple throughout the globe.
The price of ethanol, on the other hand, isn’t set by a monopolistic cartel on the world stage. Ethanol producers are based right here in the states. They’re reliable in a way foreign producers have never been.
That’s why ethanol offers the best hope for America to finally break this dangerous dependence.
It’s estimated that since 2000, U.S. foreign oil imports have dropped by 35 percent because of increased ethanol use. In 2013, ethanol production displaced the amount of oil America imports from Iraq and Venezuela combined — 462 million barrels of crude oil.
According to a study from Iowa State University, increased ethanol use saved the average American family $1,200 at the pump in 2011. Likewise, energy economist Philip Verleger recently concluded that the Renewable Fuel Standard has saved consumers about a $1 per gallon on average for gasoline.
Ethanol production is also a huge job creator. A typical U.S. ethanol plant produces 1 million gallons annually and supports nearly 3,000 jobs. All in, the RFS supports more than 400,000 jobs in sectors ranging from farming to manufacturing.
Special interests have regularly encouraged members of Congress to jettison the Renewable Fuel Standard. Congress has wisely resisted. Now is the time to intensify our commitment to domestic renewables so more Americans can hit the road.
Bob Dinneen is the president and CEO of the Renewable Fuels Association.
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