The Ethanol Papers - Paperturn manuscript - Flipbook - Page 367
Ms. Carlson tries to take another swipe at ethanol's impact on gasoline prices
by writing that "since mid-December, ethanol prices have risen above reformulated gasoline prices because of the sharp drop in crude-oil and gas prices,
along with a rise in corn prices. As of 26 January, Chicago Board of Trade ethanol futures were holding around $1.448 a gallon, whereas New York Mercantile Exchange reformulated gasoline futures prices were at $1.3167, giving the
renewable fuel a 13-cent premium."
There are two problems with this statement and its implication. She's assuming
the current surprisingly low price of crude oil will remain surprisingly low, and
she fails to calculate in all the other marketing and distribution costs associated
with the retail price of gasoline. There are no public filling stations in America
regularly offering gasoline at $1.31 to their retail customers. Moreover, in a
check around my neighborhood, at those stations where E85 is available, it is
available at about 40 cents less than regular E10 and 50 or 60 cents less than
premium E10.
Therefore, with the above real at-the-pump prices in mind, her entire explanation of how the Renewable Fuel Standard may be causing higher ethanol prices
is rendered immaterial, if not outright incorrect.
Other comments made by Ms. Carlson such as the "2012 drought decimating
corn supplies" are untrue or misinterpretations. Even with the drought conditions in 2012, American had a corn surplus that year.
If ethanol producers are struggling to make a profit it's primarily because they
are limited to how much ethanol they can sell, not because (or solely because)
of oil's current low price. There is no reason whatsoever why the majority of
passenger vehicles on the road today should not be using E15, E20, E30, E40,
or any other blend that the individual owners would like to put in their vehicles.
Not only would these increased blends be a boon for domestic ethanol producers and farmers, without having to raise the price of ethanol, but it would also
keep billions and billions of dollars from leaving our country and going to support
terrorist regimes and anti-American incidents.
As always, I'm happy to hear any criticisms, objections, or clarifications that
someone deems necessary. I did write to Ms. Carlson directly and submitted
this article to her for comment. I never received any reply from Ms. Carlson.
*Studies released in 2009 and 2012 by Professors Xiaodong Du and Dermot
J. Hayes
