By ALEX EPSTEIN
Excerpt: The “Nationwide Consumer and Fuel Retailer Choice Act” expands the ethanol mandate by 1) loosening air quality rules and 2) imposing the mandate on small refineries. This will raise fuel costs.
The corn lobby, joined by many oil lobbyists, is pushing a bill to expand the ethanol mandate by 1) loosening air quality rules and 2) imposing the mandate on small refineries. This will raise fuel costs.
Stop corn + oil lobbyists from permanently expanding the ethanol mandate!
Congress is voting tomorrow on whether to expand the ethanol mandate
Tomorrow, Congress is voting on the absurdly-named “Nationwide Consumer and Fuel Retailer Choice Act,” which expands the government’s immoral and costly mandate that we consume billions more gallons of corn ethanol than we would freely choose to.
The new bill permanently expands the ethanol mandate by
- Congressionally loosening the air quality rules that currently serve as a check on how much ethanol can be forcibly injected into our cars
- forcing more small refiners to comply with the mandate by significantly reducing their “small refinery exemptions.”
Advocates of expanding the ethanol mandate not only have the gall to pretend they are increasing freedom when they are reducing it, they are also pretending they will lower fuel prices when in fact expanding the ethanol mandate can only raise prices.
Here’s why the ethanol mandate increases fuel costs while providing no benefits (except to corn farmers and lobbyists), and why expanding it will only make fuel costs worse.
Note: I use “the ethanol mandate” as shorthand for the Renewable Fuel Standard, which mandates the use of ethanol as well as certain other biofuels.
The ethanol mandate directly increases the price of fuel by forcing us to buy ethanol when it’s more expensive
The ethanol mandate forces around 7.5 billion gallons of ethanol into gasoline each year that would likely not be used in a free market (assuming most gasoline would be E5 in a free market). Thus, when ethanol is more expensive than gasoline, the mandate raises costs by 7.5 billion times the price differential of ethanol and gasoline.1
In 2025, when ethanol was roughly 40-50 cents per gallon more expensive than wholesale gasoline (after accounting for ethanol’s lower energy density), the ethanol mandate could be estimated to add replacement costs of over $3 billion, or over 2 cents per gallon.2
Supporters of the ethanol mandate like to point out that ethanol can be cheaper than gasoline when oil prices are high—as is the case right now.
But any modest benefit from cheaper ethanol would occur in a free market in fuel with no mandate—because retailers and consumers could freely choose higher ethanol blends when they were cheaper. Yet the corn lobby has repeatedly rejected fuel freedom proposals.
A new E15 law would make no difference to prices this year, since current law already lets the federal government allow year-round E15 on a case-by-case basis—and it has already done so this year.
Ethanol lobbyists don’t want Congressional year-round E15 for any other reason than to permanently expand the ethanol mandate so we always have to pay for a lot of ethanol—no matter how expensive it is.
The ethanol mandate increases the price of gasoline by up to $0.30/gallon by forcing refiners to buy expensive biofuel credits whose costs get passed onto us
The ethanol mandate has demanded significant investments from refiners into ethanol transport systems and ethanol blending equipment, on the order of billions of dollars so far. To accommodate E15, some gas stations would be required to make upgrades ranging anywhere from $13,000 to $71,000.3
Smaller refiners, who often can’t afford the expensive infrastructure to blend ethanol, are forced to buy biofuel credits called RINs from refiners that blended extra ethanol. These biofuel credits become a compliance cost, much of which is passed on to consumers through higher fuel prices.
A small refinery producing 60,000 barrels/day (920 million gallons/year) might be required to “retire” roughly 140 million biofuel credits. At recent biofuel credit prices of $2, that would cost $280 million. The refinery might only have a $200–400 million net income, forcing it to pass a significant portion of the cost on to consumers.4
A recent study found that attaching biofuel credits to a biofuel increased its price by almost the same cost as the credits. At today’s biofuel credit prices, this implies the ethanol mandate may add up to 30 cents per gallon to gasoline.5
