Monday, October 15, 2007

Big Oil Rips Off Ethanol Subsidies

Bloggers Unite - Blog Action Day

Talk about biting the hand that feeds you. Big Oil is using Ethanol subsidies, corporate welfare, to fight Ethanol blending. The U.S. taxpayer is subsidizing big oils fight against Ethanol another good reason NOT to have corporate welfare for Ethanol.

For some industries, the prospect of $3.5 billion in federal subsidies now, and double that in three years, might be a powerful incentive. But not, apparently, for the oil industry, which is seeing crude oil prices soar to record highs. Despite collecting billions for blending small amounts of ethanol with gas, oil companies seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas. Congress has set a target of displacing 15% of projected annual gasoline use with alternative fuels by 2017. Right now, wider availability of E85 is the likeliest way to get there.

At the same time the industry is collecting a 51 cents-per-gallon federal subsidy for each gallon of ethanol it mixes with gas and sells as E10 (10% ethanol and 90% gas), it's working against the E85 blend with tactics both overt and stealthy. Efforts range from funding studies that bash the spread of ethanol for driving up the price of corn, and therefore some food, to not supporting E85 pumps at gas stations. The tactics infuriate a growing chorus of critics, from the usual suspects—pro-ethanol consumer groups—to the unexpected: the oil industry's oft-time ally, the auto industry.

The industry collects the subsidies, but didn't lobby for them—Congress created them to encourage a larger ethanol market. While oil reps say they aren't anti-ethanol, they are candid about disliking E85. Says Al Mannato of the American Petroleum Institute (API), the chief trade group for oil and natural-gas companies: "We think [ethanol] makes an effective additive to gasoline but that it doesn't work well as an alternative fuel. And we don't think the marketplace wants E85."

One prong in the oil industry's strategy is an anti-ethanol information campaign. In June the API released a study it commissioned from research firm Global Insight Inc. The report concludes that consumers will be "losers" in the runup to Congress' target of 35 billion gallons of biofuel by 2017 because, it forecasts, they'll pay $12 billion-plus a year more for food as corn prices rise to meet ethanol demand. The conclusions are far from universally accepted, but they have been picked up and promoted by anti-ethanol groups like the Coalition for Balanced Food & Fuel Policy, made up of the major beef, dairy, and poultry lobbies. Global Insight spokesman Jim Dorsey says the funding didn't influence the findings: "We don't have a dog in this hunt."

Bio-Fuel B.S.

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