This Standard Is One Reason the Price of Gas Will Increase

Photo Credit: Daily SIgnal Not thinking things through is a chronic problem with policy-makers in Washington. Superficial and easily sound-bite-able policies dominate the thoughtful-but-complex ones. For instance mandates for biofuel use would seem to be driven by basic supply and demand—more domestic fuel would lead to lower fuel prices for consumers. But the reality is more complex.

On June 26, the Congressional Budget Office released a study on the impacts of the Renewable Fuels Standard and found that, if unchanged, the RFS will increase gasoline prices by 13 to 26 cents per gallon and increase the price of diesel fuel by 30 to 51 cents per gallon by 2017. Part of the popular, bi-partisan and totally misguided Energy Independence and Security Act, the RFS promoted increased production of various forms of ethanol and biodiesel with a host of mandates and subsidies.

The failure of advanced biofuels—especially cellulosic ethanol—to meet targets,along with the constraints of blend walls and consumer rejection of E85 gasohol, would force the oil industry to pay fines for producing fuels consumers do want and take huge losses on forced production of fuels consumers don’t want.

The chart below, from the CBO report, illustrates how miserably the mandate-it-and-they-will-make-it energy policy is failing. Proponents assured Congress and the president that commercially viable production of cellulosic ethanol made from non-edible plant material was just around the corner. Not only were they wrong, but as we see from the chart, there is no end of the tunnel in sight.

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