Imagine if I grow a product in my backyard and lobby enough federal officials to force all energy suppliers to buy my product and mix it in with theirs to sell to consumers. Now imagine the whole sub-bureaucracy that springs up to allow some suppliers to corruptly pay ransom to get out of this corrupt arrangement. And lastly, my product isn’t really good for fuel anyway – it’s actually food, and the more that goes into fuel, the less there is for food, which artificially raises the price of food.
That, folks, is the ethanol mandate in a nutshell. It’s a national disgrace that violates every tenet of free enterprise, hurts consumers and job creators, and disrupts the lifeblood of the economy where it hurts the most – the flow of the oil supply to market.
After Sen. Ted Cruz warned last year that the ethanol mandate and its unholy offspring – RINs (renewable identification numbers) credits – would force independent refiners to close, a Pennsylvania refinery did declare bankruptcy. Philadelphia Energy Solutions, responsible for more than one-quarter of the fuel refining capacity on the East Coast, according to the WSJ, filed for Chapter 11 in January after the $218 million cost of compliance with the ethanol mandate put it out of business. These are the types of blue-collar jobs President Trump promised to preserve, yet anti-market policies are shutting them down. Ted Cruz placed a hold on Bill Northey, an Iowan nominated by Trump to be undersecretary for farm production and conservation at the Department of Agriculture, until there is an agreement to at least reform the RINs credits compliance.
As we explained last year, any refinery that cannot meet the Renewable Fuels Standard (RFS) and dilute enough of its fuel with ethanol, which is practically any independent refinery, must purchase RINs credits. These credits to begin with were never written into any statute and were fabricated by the EPA to allow refiners to pay a ransom for not blending an impossible amount of ethanol into their supply. Now the big oil industry has an entire commodities market based on this socialist policy to trade credits. The bidding up of credits by speculators has put independent refiners, such as Philadelphia Solutions, out of business.
As conservatives, we are all for free market commodities trading, but this is the worst example of venture socialism, wherein government mandates are creating a sub-market that benefits bio-fuel cartels and big oil companies that have the capacity to blend ethanol, while independent refiners are left out in the cold. You gotta love American capitalism: We find a way to make money off socialist mandates and market distortions. Now big ethanol senators, such as Chuck Grassley and Joni Ernst, are accusing Cruz of trying to distort their market – a market that was only created by an unconstitutional market distortion and infringement upon basic liberties.
The media has couched this battle as a war between agriculture states and oil-producing states, but big oil has already co-opted the ethanol cartel. It’s the small companies that get hurt by these draconian regulations, as we see with similar regulations in the health care field and other industries. Moreover, this is not an equal fight. Ethanol lobbyists have no constitutional right to force other industries to use their odious and inefficient product. How dare they force refiners to blend and consumers to purchase a product that doesn’t belong in our tanks? They are free to produce whatever they want, independent of interference from the oil industry, whereas the oil industry is forced to use their product simply because of an unconstitutional mandate.
And we now have speculators making a killing off bidding up credits that were created outside the law by an unelected agency in order to enforce an unconstitutional mandate designed to benefit one industry over another. At a rally outside the bankrupt oil refinery in Philadelphia, Cruz noted how this program has grown so many unintended legs that those benefiting the most from the mandate aren’t even corn farmers, but speculators who earn money off an artificial EPA credit program.
“Of that $218 million you all paid for RINs, you know how much of that ended up in the pockets of Iowa corn farmers? None. The money doesn’t go to the corn farmer, and it doesn’t go to the ethanol producer. Instead, billions are being made by Wall Street speculators and giant integrated companies that are earning a windfall on this broken regulatory system.”
Cruz’s main focus for now is not the RFS itself but to cap the price of RINs credits. But make no mistake, even without the commodity speculators, the underlying problem is the RFS itself. The RFS is literally the poster child for how government shafts the producing men and women of this country and is anathema to Trumps’ entire populist message. In the irony of all ironies, Cruz beat Trump in Iowa, the state most favorable to the RFS. In most other states, consumers neither want nor need ethanol.
So strong is the stranglehold of the ethanol cartel on Congress and the president that they refused to even modestly reduce the target blending goal for this year. Now big ethanol is using profits they’ve earned by leveraging the boot of government against the consumers and other industries to place ads on Fox & Friends as a way of stroking Trump’s ego.
Senator Cruz promised to lift the hold on Northey once the ethanol guardians agreed to meet with him at the White House together with President Trump on Tuesday. Following that meeting, he agreed to lift the hold, but it doesn’t appear that there is any agreement to loosen the grip of the ethanol cartel.
Ethanol lobbyists have the impertinence to demand that oil refiners blend more ethanol if they are having trouble paying the RINs ransom. But who are they to demand that we purchase their product? In addition, the GOP budget betrayal act of 2018 provided for an additional $2.6 billion in tax subsidies to the biofuels industry. Yet this industry is empowered to impose a hidden tax on our gasoline. According to Robert Bryce of the Manhattan Institute, ethanol is proportionally 2.4 times less efficient than unblended gasoline.
If ethanol is such an effective product, why does it need the boot of a mandate and the grease of a subsidy to keep the dough rolling?
The time is now for fuel freedom in America.
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.