Consumers Paying for New Ethanol Surcharge

A recent Climate Change Sanity post discussed the gasoline cost  “spread”.  The Wall Street Journal (WSJ)  adds another item to the spread.  The WSJ points out that this year the EPA’s requires more ethanol to be mixed with gasoline than the refiners can use and still not have greater than 10% ethanol in the final fuel. The refiners fear that more than 10% has the potential to damage engines.
From the WSJ posting:
 “This year refiners and importers are required to blend 13.8 billion gallons of ethanol into the nation’s gasoline, rising to 14.4 billion next year. The EPA allocates a share of this mandate to oil and gas companies, and to monitor compliance each gallon of ethanol is assigned a 38 digit Renewable Identification Number, or RIN.”
Now isn’t this a great example of over regulation.  Each gallon is identified by a 38 digit  number!!!  13.8 billion gallons, all with their own name (or number).
The recession and better mpg use rates have lowered the demand for gasoline to an estimated 135 billion gallons.  Because of the EPA  blending requirement, the refiners must buy RIN credits from companies that have used more ethanol than required. The WSJ reports that the RIN credits that cost $0.07 per gallon at the beginning of the year, now cost $1.00 as the credits are becoming less available. And these costs are passed on to the public in the cost of gasoline at the pump.  Another reason for the “Spread.”
The EPA has the authority to change the required amount of ethanol blended into gasoline.  The WSJ estimates the price of gasoline would drop $0.05 to $0.10 per gallon if they did so.
But will they?  On one hand, if they cut the number to prevent the refiners from having to exceed 10%, such action would impact the manufacturers of ethanol.  Brazilian ethanol is currently purchased and used in our gasoline.  Its price would suggest that it would not be the source that is reduced but rather the domestic manufacturers of ethanol would see the loss.  Such action by the EPA to reduce the amount of required ethanol would also be counterproductive regarding their stated objective of increasing the amount of ethanol in gasoline from 10 to 15%.
The EPA sticker on the car that states the “miles per gallon” is based upon 100% gasoline. The higher heating BTU value for gasoline is about 125,000 and for ethanol it is about 84,000.  The mix of gasoline containing 10% ethanol has about 3.5% less energy than does straight gasoline.  It will be about 5% less if the 15% ethanol mix is mandated.  You have to buy more fuel to get the same driving range if gasoline is mixed with ethanol.
Costs you more and gives you less energy. Is that a good deal or what?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s