"With the collapse in global oil
prices, members of Congress are once again pushing to raise the federal
gasoline tax, with the proceeds going to new roads, bridges and other
infrastructure projects. While some in Congress might be averse to a tax
increase of any kind, they might find it more palatable if it came
packaged with a tax cut.
Fortunately,
there is a perfect option, a hidden levy that has benefited a small
group of farmers and manufacturers in a handful of states: the corn
ethanol tax
.
The
tax is hidden because, on paper, it appears as a clean-energy mandate.
Federal law currently requires fuel retailers to blend about 13 billion
gallons of corn ethanol per year into the gasoline they sell to the
public, making the gas more expensive. This year, that mandate, known as
the Renewable Fuel Standard, will impose about $10 billion in
additional fuel costs on motorists.
Congress created the Renewable Fuel Standard
in 2005 with several goals in mind: energy security, rural economic
development and environmental protection. But the indirect environmental
costs involved, including growing, harvesting and processing corn into
fuel, are significant. Ethanol diverts corn from the food supply,
driving up food costs; it promotes inefficient and harmful land-use
strategies; and it can damage small engines. But a more fundamental
problem is its high cost when compared with conventional gasoline. And
that higher cost is directly related to its lower energy density.
Ethanol
contains about 76,000 B.T.U.s per gallon. Gasoline contains about
114,000 B.T.U.s per gallon. Therefore, to get the same amount of energy
contained in a gallon of gasoline, a motorist must buy about 1.5 gallons
of ethanol.
Fueleconomy.gov,
a site run by the federal government, advises that vehicles running on
the most common form of ethanol-blended fuel, E10 (which contains 10
percent ethanol and 90 percent gasoline), will typically get “3 percent
to 4 percent fewer miles per gallon” than they would if they were
running on pure gasoline. That mileage penalty — in essence, a tax —
must be paid at the pump through the purchase of additional fuel.
And
that takes us to the cost issue. Since 1982, officials in Nebraska
(which is the second-largest ethanol producer, behind Iowa) have been
monitoring monthly and annual wholesale, or “rack,” prices for ethanol
and gasoline at fuel depots in Omaha. In December 2014, the rack price
of a gallon of ethanol was $2.40, while a gallon of unleaded gasoline
was $1.73. But recall that we need 1.5 gallons of ethanol to match the
energy contained in a gallon of gasoline. That means you would need to
pay about $3.60 to get the same amount of energy as from a gallon of
gasoline, making ethanol about twice as expensive.
That’s
not unusual. Since 1982, the price of an energy-equivalent amount of
ethanol has, on average, been about 2.4 times the price of gasoline.
Furthermore, for eight full years between 1986 and 1998, ethanol cost at
least three times more than an energy-equivalent amount of gasoline. In
fact, since 1982, ethanol has always been more expensive than gasoline.
.
.
The
same energy-equivalent prices allow us to estimate the annual cost of
the ethanol tax. Between 2007 and 2014, about 92.5 billion gallons of
ethanol were mixed into domestic gasoline supplies. Over that eight-year
period, the energy-equivalent cost of ethanol averaged about 90 cents
per gallon more than gasoline.
Motorists
thus incurred about $83 billion--roughly $10 billion annually--in
additional fuel costs over and above what they would have paid for
gasoline alone.
The
United States now has about 212 million licensed drivers. That means
that the ethanol tax is soaking the average driver for an additional $47
per year in excess fuel costs.
In
the last session of Congress, 169 members of the House of
Representatives sent a letter to Gina McCarthy, the administrator of the
Environmental Protection Agency, urging her to reduce the amount of
ethanol blended into gasoline supplies because the mandates could cause
“economic and environmental harm.” Nothing came of it
.
The
push to end the ethanol tax has continued with the new Congress. Three
senators — Dianne Feinstein, a Democrat from California, along with two
Republicans, Patrick J. Toomey from Pennsylvania and Jeff Flake from
Arizona — have introduced legislation to repeal the ethanol mandate.
Their bill is supported by three dozen groups, ranging from industry
groups like the American Petroleum Institute and the National Marine
Manufacturers Association to environmental organizations like the Clean
Air Task Force and Friends of the Earth.
Similar
moves are afoot in the House, where Representative Bob Goodlatte, a
Virginia Republican, and three co-sponsors — Steve Womack, a Republican
from Arkansas, and two Democrats, Peter Welch of Vermont and Jim Costa
of California — are pushing a similar bill. In a statement, Mr.
Goodlatte implored his colleagues “to stop this boondoggle.”
Given the high cost of the ethanol tax, the word “boondoggle” seems too polite. Let’s call it what it is: a rip-off."
"Robert Bryce
is a senior fellow at the Manhattan Institute and the author of a new
report from the institute, “The Hidden Corn-Ethanol Tax.”" via Hockey Schtick
.
.
No comments:
Post a Comment