by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Jumping Jimmy Carter! With a crucial mid-term election in 2014, the last thing that President Obama and his Democratic Party would wish for is long car lines at gasoline stations or substantially higher prices at the pump. That is what the oil industry is forecasting if the Environmental Protection Agency doesn’t roll back mandates for renewable-fuel use.
Although it’s Obama’s problem now, President Bush and the Congress passed a measure in 2007 that tried to address worries about domestic oil supplies and the country’s energy independence. Their solution was to boost the required amount of renewable energy sources like biofuels that refiners and wholesalers blended into traditional fuel supplies. The goal was to meet an ambitious target of 36 billion gallons of blended biofuel by 2022.
Policy makers expected demand for transportation fuel would head higher by 2012. Instead, domestic gasoline consumption has declined by 6%, in part because of the Great Recession and in part because of the proliferation of more fuel-efficient cars. …
… The Obama administration is reviewing the situation. In 2012, the overall EPA mandate was for the industry to mix 15.2 billion gallons of biofuel into gasoline and diesel. The Office of Management and Budget is reviewing a proposal to raise that to 16.55 billion gallons this year.
There’s skepticism in the oil business that the mandate will be cut back or held constant, in part because President Obama has been a big supporter of more biofuel use. The EPA can grant a waiver if it believes the mandate might harm the economy.
Next year, the obligated parties will hit the so-called “blend wall,” when almost all gasoline sold in the U.S. contains 10% ethanol. The industry contends it can’t go any higher than that for a variety of reasons, regardless of the EPA mandate.
The oil interests, of course, fear the EPA won’t defy the biofuels industry, which opposes any easing of the renewable fuel standards. The EPA told me they appreciate the issue, but it also “recognizes that it is important to avoid precipitous action that could have adverse effects on the market.”