Sunday, September 15, 2013

When biofuels are FUN!

You have to love it when the best laid plans of bureaucrats gang agley, as the Gaels would have us say.

The latest example to have come my way is the tale of ethanol in the US fuel pool.

The US EPA introduced a Renewable Fuel Standard, which required refiners and importers to add a predetermined quantity of ethanol to every gallon of gasoline. 

When they mix ethanol into gasoline, or import fuel already blended with ethanol, the refiners/importers get a credit from the government. That credit can be sold to other companies that don’t blend ethanol. To monitor compliance, each gallon of ethanol is assigned a 38-digit Renewable Identification Number, or RIN. Six billion of them were generated in the first six months of this year.

RINs started in 2005, when the Bush administration passed an energy bill setting out renewable fuel standards. The law was broadened in 2007, creating a requirement for the amount of biofuel to be blended annually. In 2013, refiners and importers are required to blend 13.8 billion gallons of ethanol, up from 13.2 billion last year. For 2014, the figure is 14.4 billion.

But there is a problem - the quantity of gasoline sold has been falling in recent years.  Cars have become more fuel efficient, and Americans are driving less.  You can only stand so much ethanol in the fuel.  Too much, and fuel systems gum up, both at the pump and in your car.  So the poor gasoline blenders have to put more ethanol into the fuel than necessary, or buy a credit for not blending ethanol. They have been buying credits like crazy, to avoid gumming up the works.

But this is America, right? They aren't all like George Bush.  Someone saw it coming.  They bought up credits.  Now they are selling them into a buyers' market, and making a big fortune.  Who is "they"? The banks, of course, and a few Mafia guys, and anyone who could think faster than the Government.

The net result is that fuel prices are rising even as shale gas and shale oil bring down input costs.  The US EPA is appalled. The official responsible is reported as saying “The last thing we wanted in implementing this program was to get price increases for the consumer.”[New York Times]

Yet another Green Dream bites the dust of reality!


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