The results of the political battle over ethanol and gasoline
prices are not yet final, but it doesn’t look like much of a fight.
California and a few other coastal states are losing. The Midwest
is the big winner.
The results of the political battle over ethanol and gasoline prices are not yet final, but it doesn’t look like much of a fight. California and a few other coastal states are losing. The Midwest is the big winner.
If that’s the final outcome, it will guarantee that California gasoline – now about 35 cents per gallon higher than in most other states – will soon average about 20 cents per gallon more than today’s unprecedented levels.
That’s because of congressional votes mandating that use of ethanol in gasoline double within the next nine years from the current 2.5 billion gallons per year. Ethanol is made from corn, explaining in full why a bipartisan coalition of senators and Congress members from Midwestern and Plains states pushed the mandate.
This also explains why President Bush so far has backed it without reservation, even though the staff of the Environmental Protection Agency concluded it was a bad idea. During his 2000 campaign, Bush promised there would be an ethanol mandate. Now there will be, regardless of the merits.
The mandate, of course, will achieve little other than to fatten the wallets of corn farmers and Archer Daniels Midland Corp, the largest maker of ethanol. In part, ethanol replaces the disgraced fuel additive MTBE as an oxygenate making gasoline burn more efficiently and with less pollution. Even though most of them now blend ethanol into their gas, every California oil refiner has said pollution-free gasoline can be produced more cheaply with no oxygenate at all.
Only Hawaii, Alaska and New Hampshire are exempt from the ethanol mandate, and not because their cities’ air is so much cleaner than in the lower 48 states, but – in the case of Alaska and Hawaii – because of the prohibitive cost of getting ethanol there.
The transportation cost is high here, too, one reason for rare bipartisan votes against the mandate by California’s congressional delegation. Only a couple of San Diego area members voted for the mandate last year, with Democrat Bob Filner explaining his yes vote by noting that ethanol can also be produced from sugar cane and other crops besides corn, making the mandate a potential bonanza for growers in the Imperial Valley of southeast California.
Filner’s vote, then, was about money. So were most others. That’s the only explanation for the 60-35 Senate vote to kill an amendment by California Democrat Dianne Feinstein which would have required using ethanol only in places where federal clean air standards can’t otherwise be met.
The mandate, said Republican Sen. Jim Talent of Missouri, “is a good thing for America. It will mean more jobs for Americans. It will mean a greater measure of energy independence for our country.”
Those words were pure sophistry. Here’s why: Only about 5,800 persons are now employed in making ethanol. Doubling production will probably not increase the production workforce by more than a few hundred. Not much of a dent in unemployment, compared with the jobs lost when businesses cut back to make up for their added gasoline expense.
What’s more, 2.5 billion more gallons of ethanol in gasoline works out to saving less than the equivalent of 200,000 barrels of foreign oil. Simply lowering the average fuel consumption of cars sold in America by two miles per gallon would save more than 10 times as much oil, but Talent voted against forcing automakers to do that. So did most others who voted to quash the Feinstein amendment.
Which establishes that this mandate exists solely for the sake of Midwestern corn farmers and leading ethanol producer Archer Daniels Midland Corp. This mandate so far has not been good for many Californians. While substituting ethanol for MTBE lessens the degree to which ground water is fouled, ethanol makes cars and trucks emit more oxides of nitrogen. These chemicals are a pernicious part of California smog contributing to some lung diseases. Mandating ethanol merely substitutes one kind of pollution for another.
Then there’s the matter of price. As Feinstein told her Senate colleagues, moisture causes ethanol to separate from gasoline, so gas with the additive can’t be shipped through inter-state pipelines. It must be shipped by truck, sea or rail and blended into gasoline locally.
That helps explain why the current level of ethanol use has already added between 6 cents and 10 cents to the price of each California gallon. This is now a base cost like gasoline station rent or gas taxes. It will permanently make gasoline here cost more than in most other places.
Feinstein called this a “transfer of wealth from one part of the nation (California and the West) to another (the Midwest).” And it’s all because of a Bush campaign promise and the robust political clout of the corn belt.
Tom Elias appears every Wednesday in the Free Lance. He can be reached at [email protected].
