Just when you might think policies in Washington D.C. couldn’t possibly become more comically awful, something happens that serves as a reminder that it not only can get a lot dumber, it almost certainly will.
In a bid to offset the negative economic impact of its own tariffs on farmers—those in Iowa in particular—the Administration announced that it was going to instruct the Environmental Protection Agency to expand the ethanol fuel waiver to allow the sale of gasoline with E15 (fuel containing fifteen percent ethanol) year-round.
This is inspired insanity. It’s almost a work of art.
The Renewable Fuel Standard, commonly known as the ethanol mandate, essentially requires ten percent of every gallon of motor gasoline used for consumption by the public to contain blended ethanol (E10).
The practical impact of this decision is that it will flood supply to a market that lacks demand and a market that lacks capacity. Most vehicles don’t even have the flex fuel capability to process E-15 blends on a year-round basis. And domestic refiners will be seriously impacted. They simply do not have the capacity to deal with a year-round supply of high-blend ethanol.
This is largely because the EPA uses a fake market scheme that requires refiners to purchase renewable identification number (RIN) credits whenever they fail to dilute enough of their fuel with ethanol. These credits are generated whenever biofuel is produced. However, the point of obligation for their collection is squarely on the refiners.
The current price of RINs is highly inflated as one would expect from such a fake government-devised scheme. Large gasoline marketers, who also collect RINs but aren’t subject to the ethanol mandate because they’re not refiners, sell RINs to independent refiners at inflated prices.
Thus, these refineries will be essentially forced to buy up RIN credits to meet the new year-round blend requirements that the Administration wants to impose, which will lead to heavy losses in revenue if not a permanent shuttering.
Senator Pat Toomey (R-PA) has been spearheading efforts for months to push back on the Administration’s proposal. Pennsylvania refineries are already strained—some to the point of shutting down—and this will only exacerbate that problem. The end result of this cronyism will be lost jobs, a minimal impact on reducing fuel prices, and further taxpayer coercion to subsidize an industry simply because government picked it as a winner.
And it’s not clear that the Administration even has the authority to propose this new rule. As the Institute for Energy Research has pointed out, the statute in the Clean Air Act is pretty clear in defining what constitutes the “high ozone season” in which E15 blends can be sold.
This means an act of Congress is required to move forward with this bad idea because it would require a change in statute.
On one level, such a terrible decision requires some admiration for the total lack of self-awareness.
The very people trying to offset the problems caused by tariffs also created this problem in the first place. And the tariff problem itself stems from the very same micromanaging, crony mindset that is leading people to create an entirely new set of problems via ethanol to offset the original problems from the tariffs.
For those paying attention, that’s a veritable web of problems.
And it could be undone by simply ceasing this ill-advised tariff scheme. It would save taxpayers at least $12 billion in direct payments to farmers that even Congress had the good sense to eliminate back in 2014. It would offset the damage to consumers, which will come in the form of increased car problems due to a lack of capability to process E15 fuels year-round. And it would stave off the high likelihood that refinery jobs will be lost due to the inability to meet the capacity demands and offset the cost of increased RIN credits.
In many ways, this decision mirrors the previous move from this past summer wherein the Administration thought it wise to just transfer billions of dollars directly from American taxpayers into the hands of farmers to mitigate the damage being inflicted from tariffs.
Except this go around, this policy not only layers one bad decision on top of the original bad decision, it harms the very political base that the President won over in the last election. This will likely cost manufacturing jobs in states like Pennsylvania.
And that’s the lesson staring the Administration right in the face.
The tariffs were ostensibly implemented to fight back against countries “taking advantage” of the United States when it comes to trade. These tariffs were pitched as a way to help domestic manufacturers and blue-collar workers who have seen many of their jobs shift overseas in the past few decades.
But it turns out that centrally-planned cronyism that picks one industry as a winner and another as a loser tends to only create more problems than it solves. And the very people you were intending to help are now going to be hurt.
Whether it’s healthcare, education, or in this instance trade and environmental policy, the more power concentrated in the swamp town on the east coast, the worse our problems become.
Problems that millennials and future generations will be tasked with fixing whether they want to or not. And the solutions are bound to be more painful than they otherwise would have been had this current generation simply done the right thing, made the right arguments, and stopped ducking their responsibilities at every turn.
And maybe, just maybe, the federal government should stop trying to help.
This is an old idea to be sure. Some may even view it as a bit anachronistic or corny.
Then again, we’re seeing cornier.
