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When Gas Prices Rise, Blame Obama and the EPA

Gas Can Man * 1.85 GasolineThe renewable fuel standard has proven to be a fool’s errand.

by Peter Roff

It did not exactly come as a surprise when the Obama administration announced that it was pushing the decision regarding whether or not to go ahead with the Keystone XL pipeline off again. Politically, it’s a difficult issue, one that splits the left-liberal coalition that put him in the White House.

On one side are the so-called environmental groups who are opposed to keeping fossil fuels in the American energy mix. They think the completion of the pipeline, which will take oil from the Canadian tar sands south to the refineries located on the American Gulf Coast, will only add to the problems they have already imagined the productivity of mankind has created. On the other are congressional Democrats, private sector unions and energy company executives who also helped Obama come to power and who want the oil and the jobs the pipeline will bring.

The decision is going to have repercussions throughout the U.S. economy but won’t, says Charlie Drevna, president of the American Fuel and Petrochemical Manufacturers Association, have much of an impact on the price of gasoline. In his view, the oil being produced in the tar sands, just like all the new oil coming from the Bakken shale in North Dakota, will get refined and into the energy mix. It will just have to travel on the rails, which is a more expensive and less efficient way to do it – but it will still get there.

Nevertheless, the pipeline is, he says, key to America’s energy future and “key to America’s energy policy,” which he suggests still languishes in the shadows of the scarcity the nation experienced during the 1970s when the Arab states making up OPEC cut off exports to the United States, driving prices through the roof virtually overnight.

Scarcity was seen as the problem then, as it was in the first decade of the current century when an overheating global economy rapidly consumed every barrel of oil that could be produced, driving prices up once again. But that was then, before the discovery of fracking created entire new oil and natural gas fields and made America a net energy exporter.

The environmental fervor of the moment led both Democrats and Republicans to support green energy proposals that looked like they would eventually produce “free energy,” but have in fact proven quite costly. One of them, the renewable fuels standard, is continually changed by the Environmental Protection Agency and, in combination with the different blends of gasoline required in different parts of the country because of air quality concerns, is what may really lead to a spike in the price at the pump over the upcoming months.

It wasn’t that long ago, during the second half of the last decade and flush with the promise that a market-ready second generation of biofuels lay “just around the corner,” that Congress attempted to cap the nation’s reliance on crude oil by imposing a volume-based renewable fuel standard, which has turned out to be a mistake.

“Let’s go back and look at the snapshot of the energy situation in the United States and in North America six, seven years ago and look at the snapshot today,” Drevna says. “The renewable fuel standard was put into place because people thought we were running out of oil, people thought we were running out of gas, we were literally and figuratively held over a barrel by OPEC and the economy was really booming. We were increasing gasoline use year by year by year so those renowned economists and those wizards on Capitol Hill just drew a straight line and said ‘Well, we’re going to keep on increasing gasoline demand, we’re going to keep on increasing diesel demand, we have to put something else into the pot to make this last longer, to get us off of, or not be as reliant on imports of energy, specifically crude oil coming from some geopolitically and unsavory regions of the world.”

That premise has been turned upside down, Drevna says, with America now finding “new sources of energy that we didn’t know we were going to be able to get when Congress passed the [renewable fuel standard],” meaning it not only no longer makes sense but is actually harmful to the nation’s continued productivity.

Part of the blame lies with the EPA, which monitors the renewable fuel standard and is responsible for determining what the ratio of crude to renewables in the gasoline mix will be each year. The figures for 2014 have not been finalized and are, in fact late. The proposal currently on the table would require 15.21 billion gallons be blended in 2014, considerably less than the 16.55 billion gallons blended in 2013. This first ever cut in the required amount was lauded as a step in the right direction by industry leaders, including Drevna, when it was first announced but, he told reporters Tuesday, it was worrisome that EPA Administrator Gina McCarthy “has been remarking that the volumetric requirements for the finalized [standard] may be different than the proposed rule.” The powerful pro-ethanol lobby would benefit if the number was revised upwards in the final rule, requiring more corn-based ethanol be produced and sugar-based ethanol be imported from Brazil to meet the standards, but at the expense of American consumers who, because the promise of cellulosic ethanol has not yet been realized, are putting part of their food money in their fuel tank every time they fill up.

As the Associated Press reported Monday, biofuels made from the leftovers of harvested corn plants may be environmentally harmful. A new $500 million university study paid for by the federal government challenges the Obama administration’s contention they help in the fight against climate change. Released in the peer-reviewed journal Nature Climate Change, it found biofuels made with corn residue release 7 percent more greenhouse gases in the early years compared with conventional gasoline. It may be the whole business was a fool’s errand from the start.

“Corn ethanol was supposed to be a bridge. It was only supposed to be a bridge to the new and advanced and the non-crude kinds of renewables such as cellulosic ethanol — they didn’t buy diesel and things like that,” Drevna observes. “Well, those things still aren’t commercially available. The secretary of energy himself said most of that stuff won’t be even thought about being commercially available until 2022. Meanwhile we’re supposed to keep on putting more and more corn into the system” in order to meet the requirements of the renewable fuel standard year after year.

“The law itself is wrong. First of all, the law was based upon assumptions that didn’t come to fruition; second of all, we can only safely and efficiently put so much ethanol into the fuel tank, into the gasoline, because the engines won’t run on it” otherwise vehicle owners void their warranties, he says.

If things continue to progress as they have, the refiners he represents are only going to be left with a couple of choices. “They can export more if you’re in the export market because this law doesn’t apply to exports or they could cut runs, neither of which is good for the American consumer,” he said. The only way out of the mess Congress has created, it seems, is to repeal the renewable fuel standard, once and for all.

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Peter Roff is a contributing editor at U.S. News & World Report.  Formerly a senior political writer for United Press International, he’s now affiliated with Frontiers of Freedom. Follow him on Twitter @PeterRoff.