Bloomberg Editors: Less Corn for Oil

by Greg Pollowitz

The editors write:

Big Oil has squared off against Big Agriculture in the dispute over the federal mandate to mix corn-based ethanol into the nation’s fuel supply. Both sides are powerful and self-interested, but Big Oil has the edge in this case for being right.

The ethanol mandate should be cut because it is a misguided policy. It forces the public to use and subsidize a product that is both uneconomical and environmentally destructive, given the land, fuel and fertilizer needed to grow, harvest and transport all the corn.

So it was good news last week when the Environmental Protection Agency for the first time proposed to trim the ethanol mandate.

Congress should go further and revise the law that requires increasing amounts of ethanol in gasoline — a law conceived during the post-Sept. 11 attacks anxiety over the nation’s then-growing reliance on Middle Eastern crude oil and before the consequences of mass ethanol production were well understood. Better yet, it should eliminate the law altogether.

The reduction the EPA has proposed is modest: U.S. fuel companies would be allowed to use about 6 percent less ethanol in 2014 than this year. The rationale is that U.S. gasoline use is falling, mainly because cars are becoming more fuel-efficient.

Without such a change, fuel companies might have to break through the so-called blend wall, producing gasoline with more than 10 percent ethanol — even though many U.S. cars and trucks aren’t designed to run on mixes with higher amounts of ethanol. The alternative would be to buy credits granting exemptions from adding ethanol. A bidding war for these credits earlier this year helped drive up the price of gas to almost $4 a gallon.

The rest here.

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