American Automobile Association

EIA: Not Bullish on Biofuel

by Marlo Lewis on January 28, 2013

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The U.S. Energy Information Administration (EIA) is not bullish on biofuel. That’s what I infer from “Biofuels in the United States: Context and Outlook,” a Power Point presentation given by the agency at a biofuels workshop in Washington, D.C. last week. I suspect many in attendance were not pleased. 

Three slides in particular are noteworthy.

Slide no. 19 projects that even in 2040, the quantity of biofuel in the U.S. motor fuel market will be about 10 billion gallons lower than the 36 billion gallons per year required by the Renewable Fuel Standard (RFS) by 2022.

Slides 8 and 9 may explain why. Simply put, although a gallon of ethanol is cheaper than a gallon of petroleum-based fuel, gasoline and diesel deliver more bang for buck than their ‘renewable’ counterparts. It is cheaper to drive one mile on gasoline or diesel than on ethanol or biodiesel fuel.

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Post image for If Al Gore Can Outgrow the Ethanol Fad, Why Can’t Conservatives?

The Senate is expected to vote on S. 520, a bill to repeal the 45 cents per gallon volumetric ethanol excise tax credit (VEETC). The bill is co-sponsored by Sens. Tom Coburn (R-Okla.) and Benjamin Cardin (D-Md.). Sens. Diane Feinstein (D-Calif.) and Jim Webb (D-Va.) have also introduced S. 530, which would limit the VEETC to “advanced biofuels,” thus ending the subsidy for conventional corn ethanol. S. 530 would also scale back the 54 cents per gallon ethanol import tariff commensurately with the reduction in the tax credit.

The VEETC adds about $6 billion annually to the federal deficit. Unlike many other tax credits that reduce a household’s or a business’s tax liability, the VEETC is a “refundable” tax credit. That means the VEETC is literally paid for out of the U.S. general fund with checks written by the Treasury Department. The protective tariff, for its part, prevents lower-priced Brazilian ethanol from competing in U.S. markets. It increases the price of motor fuel at the pump.

Now, you would think supporting S. 520 and S. 530 would be a no-brainer for conservative lawmakers. But some are reportedly getting cold feet. To remind them of their duty to put the general interest of consumers and taxpayers ahead of the special interest of King Corn, I offer the following observations. [click to continue…]