Rich Guebert, Jr., president, Illinois Farm Bureau, joins us today to discuss the merits of ethanol production, as well as what could happen if the EPA succeeds in trimming ethanol production in 2014.
Last fall, the U.S. Environmental Protection Agency (EPA) proposed a reduction in the Renewable Fuels Standard (RFS) requirement from 14.4 billion gallons to 13.01 billion gallons in 2014.
According to big oil companies, this reduction is a victory for consumers and the environment. But if we look at the facts, it’s easy to see that ethanol production is an environmentally safe and beneficial industry for both farmer and consumers alike. And the EPA’s proposal to cut ethanol production could put all of that in jeopardy.
In fact, if the EPA’s proposal to cut 1.39 billion gallons of ethanol production is finalized, it could have severe economic and environmental consequences.
A cut in ethanol production will increase demand for gasoline by nearly 950 million gallons. According to Louisiana State University, that bump in demand for gasoline will increase gas prices by 5.7 cents per gallon across the board. As a result, American drivers will spend $7.6 billion more on gasoline purchases in 2014.
What’s more, oil refiners will keep $2.5 billion in their pockets through avoided purchases of ethanol, while also saving roughly $300 million on infrastructure investments. It all equals a windfall for big oil companies and an added cost for consumers at the pump.
Additionally, a reduction in ethanol production could lead to increased greenhouse gas emissions. According to studies by Argonne National Laboratory, Purdue University, University of Nebraska, Michigan State University, Oak Ridge National Laboratory at Duke University and the University of Illinois at Chicago, ethanol significantly reduces greenhouse gas emissions when compared to gasoline.
Conservatively, increased gasoline use and decreased ethanol production would increase greenhouse gas emission from the transportation fuels sector by 5.1 million metric tons. To put it into perspective, that’s like adding 1 million cars to U.S. roadways overnight.
Following the 2012 drought, during which corn prices were high due to corn shortages, corn prices have dropped and stabilized once again. But cutting ethanol production will drop prices further. According to Iowa State University, 2014 corn prices will fall by $0.19 per bushel to around $4.35 per bushel if the EPA proposal is accepted.
In fact, according to the University of Illinois, that reduction in ethanol production would send corn prices below the 2013-2014 cost of production.
And dropping corn prices won’t affect only the farmers growing corn — it would affect rural communities and consumers at large. Farmers don’t only live in rural communities, they also spend money in rural communities. They buy machinery and seed from local dealers, buy tires at local shops and equipment at the local hardware store.
And that doesn’t even factor in the ethanol industry itself. In fact, the ethanol industry has consistently performed well and has helped fuel the economies of rural communities across the nation.
Rural employment and income have risen as ethanol production expanded under the RFS. More than 70,000 Americans are directly employed by the production of ethanol with more than 1,000 of those jobs residing in Illinois.
When you tally it up, ethanol adds up to a fatter wallet at the pump, a cleaner environment and stable corn prices for America’s farmers. That sounds like a win-win-win to me.