Why is Trump abandoning his blue-collar base for the ethanol cartel?

· October 10, 2018  
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Ethanol fuel pump
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What if I don’t want 15 percent ethanol fuel in my car or in my lawn mower? Do we still live in a free country?

I have nothing against someone earning a living producing and selling ethanol the same way I have nothing against someone trying to sell Obamacare-compliant medical insurance plans. There is, however, a grave problem when government forces us to purchase the product, manipulates the market on its behalf, and mandates that no other product can be sold in that industry. The same fundamental flaw ailing Obamacare is the same problem we face with our ethanol policy.

Unfortunately, rather than balancing the interests of blue-collar jobs in oil refineries that are being hurt by these coercive policies, Trump is for some reason so enamored with the ethanol lobby that he is putting the screws to these very workers. This is a betrayal not only of free market policies but of his core promise of keeping blue-collar jobs in states like Pennsylvania.

Last night, President Trump announced at a rally in Iowa that the EPA would be lifting restrictions on the sale of E15 – fuel blends of 15 percent ethanol – allowing their market use above 10 percent blends all year, including in the summer, when some are concerned it exacerbates smog.

In a vacuum, conservatives should support any effort to countermand any unnecessary regulation on production of any form of fuel. The problem here is that by expanding the leverage of the ethanol industry with more aggressive ethanol blends without concurrently unshackling the oil refineries from the mandate to purchase and blend ethanol at all – the Renewable Fuels Standard (RFS) – it further puts the refiners at a disadvantage. This comes at a time when a major independent refiner in Pennsylvania has filed for bankruptcy because of the out-of-control ethanol mandate.

Pennsylvania Republican Senator Pat Toomey lamented that this “legally dubious” plan is “not only imbalanced, but also risks worsening air quality and hurting consumers” and that the continued lack of reforms to the RFS “threatens thousands of jobs at Philadelphia Energy Solutions and Monroe Energy.”

In a sane world, it wouldn’t be too much to ask that we not force one industry to purchase the product of another industry, especially after years of subsidies and tariff protections for ethanol. But it’s worse than that. As I’ve written before, the EPA has invented a trading credit system out of thin air to further hurt refiners and empower the ethanol lobby by a government-created sub-market in the oil industry of speculators. Any refinery that cannot meet the Renewable Fuels Standard and dilute enough of its fuel with ethanol, which is practically any independent small to mid-sized refinery, must purchase RINs (renewable identification numbers) credits.

The mandate is set so impossibly high that refiners, who shouldn’t have to purchase any ethanol in a constitutional republic, couldn’t meet the standard even if they wanted to. There is simply not enough demand in the economy to support such a high target. Ironically, this is a case of one venture socialist mandate running into the tailwinds of another. Thanks to the corporate average fuel economy (CAFE) standards, another doozy from the Bush era, which requires that new cars achieve more miles per gallon of fuel, not nearly as much fuel is being used. While this mandate has raised the cost of producing automobiles, it has also succeeded in diminishing the overall demand for fuel. After all, new cars need less fuel to run. As such, refiners are struggling to keep up with the biofuels mandate because there is not enough demand in the economy for them to achieve the targeted 19.88 billion gallons in biofuels blends for 2019.

As such, they must purchase these RINs credits, which were never authorized by Congress. 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 Energy Solutions, out of business. The cost of RINs has gone from a few pennies to over $1 in just a few years. Consequently, much as with CAFE standards, the big players aren’t hurt by it but stand to benefit from manipulating the new artificial market created by the government. It’s the independent refiners and their blue-collar workers who get shellacked. Philadelphia Energy Solutions, for example, spent $300 million purchasing RINs in 2017, double the cost of its own payroll! And for what? All for a random, unconstitutional, nanny-state mandate to benefit wealthy cronies.

Which brings us to the critical question: Through all this discussion over the ethanol mandate, why is Trump giving in to the ethanol lobby, which wants to control other people and industries and is doing nothing for oil refiners who merely want to be left alone? Nobody is pushing to get rid of this odious mandate completely, but why is Trump not even willing to ease some of the RINs credits? This is a violation of free market conservatism and MAGA in a big way. It’s neither conservative nor populist. It’s bad policy and bad politics.

Republicans are getting slaughtered statewide in Pennsylvania in the senatorial and gubernatorial races and are at risk to lose three to five congressional seats. The entire purpose of the steel and aluminum tariffs was to benefit Pennsylvania workers, but that clearly has not helped in the election and it is, ironically, unpopular in Iowa with the farmers. Trump is willing to violate free market principles in order to help some Pennsylvania workers by taxing imports and hurting Iowa farmers but then bailing them out with subsidies to ameliorate the problem, yet he is not willing to follow free market principles by merely lifting ethanol fascism mandates on oil refineries in Pennsylvania in order to back the ethanol lobby in Iowa.

Corn is king, indeed.

The statist RFS policy of the Bush administration and its forerunners in the late 1970s was enacted before the great American oil miracle with shale and hydraulic fracking – at a time when they thought we would be on the ropes for energy dependence on foreign countries. Now the gas and oil revolution is so strong that it is being used as a potent diplomatic weapon against Iran and the Europeans who seek to circumvent our sanctions. Why would we sacrifice oil refineries for the ethanol lobby when our national security is being buttressed by free market energy policy?

It is truly staggering to ponder the cascading odious effects of this ludicrous mandate. The misallocation of farm land, water use, cattle feed, and energy production – all for a lobby that refuses to compete without its officious tentacles strangling consumers and fuel producers with the force of law. The corrosion of our engines by this product that doesn’t need to perfect itself in a free market. The lower fuel mileage from adulterated fuel with less energy content. The billions in extra costs to the restaurant industry because of the higher cost of beef, thanks to scarcity of cattle feed.

The mandate has distorted the reality of every market so much that 44 percent of all corn is grow for ethanol, dramatically expanding the corn market.

Mr. President, this is as swampy as it gets. This is the Swamp vs. consumers, producers, and common sense. Trump said at the Iowa rally that his ethanol policy is an example of “promises made, promises kept.” Yeah, tell that to those laid off at oil refineries.

Personally, I prefer to burn corn on my griddle, not in my engine. If their product is so good and it doesn’t cause harm to engines or dilute fuel economy, then why don’t we let an unvarnished free market test its effectiveness? Don’t we the people have a right to decide?


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Author: Daniel Horowitz

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.