Ethanol Mandate Is Making Our Gasoline and Food More Expensive
We all would like to pay less for our groceries and gasoline, that's a no-brainer. What's not so easy to understand is why those products are priced the way they are.
An individual cannot fully know all of the factors that determine a price (that's why it's called the "invisible hand" of the market), but we do understand how certain factors like government mandates makes products more expensive. A perfect example is the way that government ethanol mandates cause gas and grocery prices to be higher than they should be.
Washington Examiner columnist Tim Carney explains how the Renewable Fuel Standard (RFS), which requires refiners to blend corn-made ethanol into gasoline, causes consumers to pay more for basic necessities.
This drives up prices at the pump but also at the grocery store because it diverts cropland from food production to fuel production. Ranchers complain about the effect on feed prices. Environmentalists object to ethanol's effect on groundwater in greenhouse gas emissions.
The mandate has a clear economic impact in the form of higher prices, so why is it still in place? The answer is pretty simple.
The ethanol industry is politically strong thanks to the clout of farmers in Iowa's first-in-the-nation caucuses. In early 2018, a refiner in Philadelphia filed for bankruptcy blaming the ethanol mandate. The ethanol industry has pushed back on the Trump administration's plans to weaken the RFS.
So is there any way out, and an opportunity for lower prices?
Congress could end it and force ethanol to compete in the free market by passing legislation to wind down the RFS over five years, and some lawmakers have proposed a bill to do just that. If this passed it would mean cleaner groundwater, cheaper gasoline, and cheaper food.
What do you think of the mandate to use ethanol in gasoline?