Inflation desperation: Biden to order more ethanol for cars as grain shortages loom

AP Photo/Susan Walsh

The consumer-price index report must look pretty bad to make this move, and what’s more, every media outlet recognizes the desperation. Joe Biden will lift a summer restriction on E15 ethanol blends intended to keep pollution down in a desperate bid to keep gas prices from escalating even further.

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Say, weren’t we all just fretting over food shortages this summer?

President Biden will announce today that his administration will temporarily allow E15 gasoline — gasoline that uses a 15 percent ethanol blend that is typically banned from sale from June to September — to be sold this summer. …

Gas prices have risen dramatically in the last few months, reaching a national average price of $4.11 a gallon as of Monday, according to AAA. Though that’s down somewhat from last month’s high, it is still a considerable jump from this time last year when prices were just $2.86 a gallon.

Analysts attribute much of that increase to turbulent oil markets in the wake of Russia’s invasion of Ukraine. While the U.S. does not import much oil from Russia – and has now banned its import – it is a major global supplier.

“The President is committed to doing everything he can to address the pain Americans are feeling at the pump as a result of Putin’s Price Hike,” the White House said in a statement. “The Administration’s strategy to spur the development of homegrown biofuels is critical to expanding Americans’ options for affordable fuel in the short-term and to building real energy independence in the long-term by reducing our reliance on fossil fuels.”

The Washington Post isn’t fooled by the fuel switcheroo. It’s a bald attempt to pre-empt what everyone expects to be a brutal indicator on inflation that will drop in the next few minutes:

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The administration will do this by having the EPA issue an emergency waiver for the summer sale of E15. Typically, E15 cannot be sold in most of the country between June 1 and Sept. 15 because of air pollution rules. The White House has argued that the use of E15 can shave 10 cents off each gallon of gasoline. E15 is currently sold in 30 states at more than 2,300 gas stations, the Energy Department has said, but that is just a fraction of the more than 150,000 gas stations in the United States. …

The flurry of activity around gas prices will come just hours after the federal government is scheduled to release an inflation report that could show prices rising by as much as 8 percent relative to last year, despite the Biden administration’s months-long efforts to bring inflation down. High prices have emerged as a nettlesome political problem for the White House, lowering Biden’s popularity even as the United States sees a boom in job growth and economic output.

White House press secretary Jen Psaki attempted to preempt criticism over the new inflation report on Monday by blaming “Putin’s price hike.” Russia’s invasion of Ukraine ordered by President Vladimir Putin came at a time when many economists were optimistic that prices would begin to moderate, but energy and food prices have moved higher since the February invasion, given Russia’s centrality in providing those global commodities.

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Ah yes, food prices. Ukraine and Russia grow a significant amount of the world’s grain, mainly wheat, and the impact of the war will likely lead to shortages in Europe and around the world. The US produces enough wheat for self-sufficiency, but the prices are commoditized globally, so we can expect higher prices too. Plus we will have lots of pressure to fill the gap left over by Russia’s war, which means that we will have enough but not exactly plenty.

And so Biden’s plan on inflation and high gas prices is to literally stick more of our food into gas tanks rather than on dinner plates. In fact, it’s counterproductive on its face as ethanol has less efficiency than gasoline for internal-combustion engines, which is one reason why the Clean Air Act prohibition on summer sales exists in the first place. (There are all sorts of issues with ozone and evaporation, too.) People will have to go to the pump more often on E15 than they would on regular gasoline. That increased demand will force prices up, likely eliminating any cost benefit to consumers sooner rather than later.

It’s yet another example of Biden being the most reactive and least strategic president we’ve seen in our lifetimes. Biden and his team have no solutions, but only a series of gimmicks that fail right out of the chute. Why not just drill for more oil and expand our refining capabilities to actually solve the supply issues for gasoline and lower prices organically? This White House is willing to try anything except what actually works when it comes to any crisis.

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Update: My comments got some pushback on social media, with at least one person noting that “human corn” makes up a small percentage of our crop. That’s not actually true; the biggest use of corn in the US is for livestock feed, and livestock are a major source of “human” food. More goes into food additives, especially high fructose corn syrup also found in a variety of “human” food. As the USDA notes, corn demand is already so high (based on “human” demand) that it squeezes out other crops that might be more beneficial in the long run, like soybeans. Using more of it for gas tanks will make that situation even worse, drive up food costs, and make shortages of other grains more acutely felt.

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