King Corn is pushing a bogus ethanol "demand destruction" story. Don't buy it

There’s been something of an underreported war going on between the ethanol lobby (King Corn) and the EPA for the past year. While President Trump has failed to entirely kill off the Renewable Fuel Standard, or even cut back on the amounts of ethanol that the government forces the energy industry to blend into the gasoline supply, the EPA has offered at least some small measure of relief in the form of waivers for smaller refineries of older design. But even that limited measure has enraged those profiting from this scheme. Now they’ve concocted a study which claims to show “demand destruction” in the ethanol market as a result of those waivers. One of their biggest lobbying groups has been pushing it out on Twitter this week.

The actual numbers for ethanol sales tell a very different story and industry experts were quick to take them to task.

AFPM (American Fuel & Petrochemical Manufacturers) keeps track of all this data and they jumped in with a bit of fact checking regarding the study.

The corn lobby has falsely claimed recently that waivers granted by the EPA to small refiners—relieving them from the onerous costs of complying with the Renewable Fuel Standard (RFS)—have destroyed demand for ethanol.

Nothing could be further from the truth…

A comparison of EIA data in the graph above clearly shows the amount of ethanol that petroleum refiners have blended into the gasoline supply has consistently risen over the last three years in absolute terms. The average ethanol blend rate for the first quarter of 2018 (with EPA waivers in effect) was 9.85% of U.S. gasoline, at least as high or higher than in 2016 and 2017.

So the numbers don’t add up. But let’s just say for the sake of argument that they did and demand was down as King Corn’s advocates say. Here’s the important thing to keep in mind: it’s not really “demand” if the government is forcing refineries to buy it. This is the sweetest deal in the world for the corn lobby because the federal government is creating an artificial demand and distorting the free market. Plenty of people are getting quite wealthy off not only the production and sale of ethanol in this rigged system but from the horse trading of Renewable Identification Numbers (RINs). These imaginary credits which were invented out of whole cloth by the federal government only have value because the government forces refineries to purchase them. And the cost has been bankrupting some of the smaller refineries.

This “study” being pushed around on social media is flawed on a number of levels. But it’s also a good reminder of just how powerful the ethanol lobby is and how rigged the entire system has become. Waivers are not enough. Congress should act and scrap the entire RFS.

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