Ethanol loses Big Oil, big advocates and maybe big subsidies

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Dipka Bhambhani
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      Dipka Bhambhani

      Dipka Bhambhani is an energy/media consultant for Mitchell Communications and the Dentsu Global Network. She is a journalist with more than a decade of reporting and editing experience in Washington.

If you’re wondering why your grocery bill is so high, one place to look is your car.

It’s probably running on gasoline blended with corn-based ethanol.

Demand for the corn-based biofuel, because of government mandates and federal subsidies to the ethanol industry, has contributed to a tripling of the price of corn over the past decade, to about $7.00 per bushel.

That commodity spike is being blamed in part for rising food prices, which in turn have helped spark riots and political unrest around the globe, and even political wrangling here at home.

Even though the ethanol industry stands by what it says are the positive results of subsidizing ethanol — providing 400,000 U.S. jobs, lowering greenhouse gas emissions, and replacing 364 million gallons of foreign oil with 10.6 billion gallons of ethanol in 2009 — it admits it is shaken by recent events.

Washington, D.C.-based Growth Energy is one of the country’s largest groups of ethanol producers.

Its president and chief executive, Tom Buis, said the industry is fighting battles on several fronts. It’s being blamed, at least in part, for rising corn prices and thus rising food prices. It’s fighting relentlessly on Capitol Hill to avoid losing long-time subsidies, and the ethanol industry is slowly losing support of an old ally — the oil industry.

“We’ve weathered many storms, but [all of] this is currently a huge threat,” Buis said.

The House recently passed a spending bill that includes two provisions that hamstring the ethanol industry for the first time in nearly two decades.

One provision, by Oklahoma Republican Rep. John Sullivan, prevents the Environmental Protection Agency from allowing the industry to increase the amount of ethanol per gallon of gasoline from 10 percent, called e10, to 15 percent, e15.

“It was purely political and obviously supported by [the oil industry],” Buis said. Sullivan, he said, is just supporting the oil interests of his state to the detriment of the ethanol industry.

Another provision by Arizona Republican Rep. Jeff Flake stops federal funding to install new blender pumps at filling stations. Blender pumps blend ethanol with gasoline from underground drums at the filling stations.

The reverberating shock through the ethanol industry came, however, from Iowa Republican Sen. Chuck Grassley, who has been traditionally one of the strongest supporters of federal ethanol programs.

Grassley announced that he might vote against ethanol subsidies and from moving the country from e10 to e15 in an upcoming Senate spending bill, in an effort to reduce the federal deficit.

According to the senator’s forthcoming newsletter, he says he will vote against ethanol subsidies if the Senate holds “an up-or-down vote on a significant deficit reduction package that targets a variety of programs and policies, including anti-ethanol provisions.”

Grassley adds, however, that “Ethanol is good for national security. It’s the only domestically produced renewable energy source that’s substantially reducing America’s reliance on foreign oil.”

Buis said he is confident the ethanol industry still has Grassley’s support, but knows what ethanol is up against — particularly, the oil lobby.

“Oil doesn’t want to lose market share,” Buis said. “The oil industry is not going to lobby [for ethanol].”

It wasn’t always this way, however.

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  • libertyatstake

    Jack Wiley Dithers holds in his investigative journalism audio archives precisely who it was who said “hey, I know, let’s take a perfectly good food product and turn it into a crappy fuel.” JWD is holding back because it’s a Skull and Bones classmate.

    “Because the Only Good Progressive is a Failed Progressive”

  • mike7762

    I have a novel solution to our oil problem.
    1. Get rid of the environmental wackos.
    2. Get rid of most of the enviro laws.
    3. Start drilling for oil in the US including Alaska.
    4. Get rid of ethanol.
    5. Oh, and get rid of Obama. Sorry, I mean vote out of office.

  • http://www.facebook.com/people/Robin-Smith/535826027 Robin Smith

    Ethanol as a fuel source is an ethical, moral, environmental, and practical disaster. Apparently even Big Al Gore is now against it (convenient that he made the switch after he made his millions.)

  • pad

    This seems such a classic failure to recognize the full costs and benefits of a “solution” to environmental concerns. Even at its most well-intentioned, the subsidization of ethanol from corn ignores the fact that the resources wasted producing this inefficient fuel source are no better for the sustainability of our planet than the use of pure petroleum-based fuel. And the fact that an industry creates jobs should never be sufficient incentive to bolster the industry. Free markets may not always work well, but they appear likely to provide greater efficiency of outcome in the case of ethanol.