There is nothing more contrary to the agenda Trump ran on during the campaign than his embrace of the ethanol lobby. Now, a number of GOP senators and the ethanol lobby have bullied EPA Administrator Scott Pruitt into keeping the full force of the Renewable Fuel Standard (RFS), a move that will directly kill jobs at oil refining states. It’s time for the president to hear the other side of this debate — the side of his own voters.
The ethanol mandate is the Obamacare of energy and one of the most preposterous and insidious schemes ever devised by government. A small lobby of farmers used the boot of government to mandate the blending of their product into the nation’s gasoline supply, a product that could never have appealed to a free market driven by consumer choice and satisfaction. Oil refiners must purchase credits, called renewable identification numbers (RINs), as ransom money for not meeting the impossibly high centrally planned targets of the RFS. Then, in a classic case of venture socialism, an entire market of trading and speculating has been created from the big oil industry RINs.
And by the way, RINs were never even written into the ethanol law of 2007; it was an administrative fabrication of the EPA as a means of enforcing compliance with the RFS. Thus, we have an entire sub-market built off a socialist law to benefit cronies that is not even written into the actual law.
If all this wasn’t outrageous enough, we have another government mandate that contradicts the RFS, making the lives of car producers and oil refiners even more miserable. The corporate average fuel economy (CAFE) standards, another doozy from the Bush era, requires that new cars achieve more miles per gallon of fuel. 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 19.24 billion in biofuels blends.
Consumers and refiners are now caught in a catch-22 made by the parasitic ethanol lobby. This is particularly bad for small, independent refiners who lack the capability to blend ethanol and must purchase the unlawful RINs credits from the EPA-ethanol mafia. Prices are controlled by speculators and large oil companies, which in turn extort independent refiners. As the WSJ reported last month, Philadelphia Energy Solutions, a small, independent refiner in Pennsylvania, which provides the very blue-collar Pennsylvania jobs Trump championed during the campaign, is cutting jobs because the cost of the ethanol socialism is more than its entire payroll.
Moreover, under the current ethanol credit scheme, oil companies can fulfill their mandate by importing blended fuels but cannot fulfill the mandate by exporting them. This flies in the face of Trump’s entire trade agenda.
Here's the irony. Ethanol is bad for consumers, is bad for producers, is the worst form of venture socialism, and hurts blue-collar jobs throughout the country. The only ones who benefit are a few farmers in the Midwest, but they should not be entitled to force the country to use their product. On the other hand, independent refiners have the right to exist and engage in commerce and simply be left alone without being extorted by a socialist scheme that was never even passed into law. Yet Trump is listening to the ethanol lobby and ignoring his base. And guess what? Iowa was the only early state Trump lost, even though he ran on promoting the ethanol scheme. Who won Iowa? None other than the man who promised to phase out the mandate — Ted Cruz!
Trump should learn have learned a thing or two from that.
Now Sens. Ted Cruz, Pat Toomey, and several others are demanding that this administration listen to the voices of job creators and consumers. America is not at the beck and call of the ethanol lobby. The ethanol lobby has gotten Sens. Grassley, Fischer, Ernst, and many others to hold up EPA nominees in order to maximize the lobby’s mandate on the American people. Yesterday, these senators berated another EPA nominee, Kathleen Hartnett White, who has been an amazing free-market conservative thinker, for not being sufficiently supportive of ethanol socialism. Now Cruz is firing back by holding up the nomination of Bill Northey for Under Secretary of Agriculture for Farm and Foreign Agricultural Services. Northey is the current agriculture commissioner in Iowa and is a shill for ethanol. The conservative senators are holding up his nomination until the president at least hears the other side of the debate and allows Scott Pruitt to judiciously factor in the job and price concerns of the ethanol mandate.
Ethanol is not an entitlement. Free enterprise, on the other hand, is guaranteed by our founding documents. It’s time for the president to look the lobbyists in the eye and ask them the obvious question: If their product is so beneficial, why do they need the boot of a government mandate to coerce job creators and consumers into using it?
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