The Renewable Fuels Con

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You can’t just sell gas anymore.

Most people don’t realize it, but what they’re pumping into their car’s tank isn’t actually gasoline, properly speaking. It’s gasoline mixed with ethanol alcohol – the ratio currently set at 10 percent ethanol and 90 percent gas (E10).

“Diesel” often isn’t exactly diesel, either.   

The real stuff – the petroleum-based stuff – is mixed with bio-diesel, which is derived (like ethanol) from non-petroleum sources, usually vegetable matter.

The market isn’t demanding this – but the government is.

There is a law called the Renewable Fuel Standard. It  requires the “blending” of oceans of corn con ethanol and biodiesel boondoggle into the general fuel supply – ostensibly, to reduce America’s dependence on foreign (and non-renewable) oil.

Like so much that government does, it sounds good – but what it actually does isn’t so good.

The RFS has raised refining and distribution costs as well as the cost to motorists, who not only pay more for the Uncle-adulterated fuel but also for the fuel systems in their vehicles, which have had to be modified to be compatible with the not-quite-gas (and sort-of diesel) fuels the government is pushing.

These adulterated fuels are also – ironically – less efficient. A gallon of pure gas will take you farther than a gallon of 90 percent gas and 10 percent ethanol because the gallon of gas contains more energy than a gallon of E10.

As is almost reflexively true of everything the government mandates, we get less – and pay more for it.

But that doesn’t mean someone’s not making a buck – as is also usually true when government intervenes in the market.

In addition to the Usual Suspects – the ethanol lobby, for instance – there is a another group of crony capitalists making hay off the RFS mandate. These are the large refiners and chain gas stations, who can leverage – in the lingo of the federal bureaucracy – Renewable Volume Obligation (RVO) credits to gain an unfair competitive advantage over smaller refiners and independent gas stations.

To understand how this works requires a bit of semantic deconstruction.

The RFS mandate requires a certain volume of “renewable” fuel be produced each year and injected into the general fuel supply. But it does not require that every refiner or fuel wholesaler/distributor actually produce a given volume of it themselves.

They may purchase tradable credits instead – and use these to satisfy the RVO.

It works very much like the “carbon credit” con – which that obliges car companies who want to be allowed to sell conventional cars in states like California to either invest huge sums designing and building electric cars that they can’t sell  . . . or buy credits from a company that builds only electric cars – like, for instance, Tesla. These credits are considered, for regulatory enforcement purposes, the equivalent of actually having manufactured the required number of electric cars. Tesla makes a fortune selling carbon credits to other car companies – which are basically forced to subsidize his business at the expense of their own.

The RVO works on the same model.

Each refiner/wholesaler is assigned a production quota for renewable fuels  very much like the one used to extort car companies into either building electric cars – or buying credits from a company that does build them.

A refiner/wholesaler can achieve compliance by meeting its RVO “in house” – by making or mixing its own renewable brew – or by purchasing credit for what they didn’t actually produce (or introduce into the fuel supply) from a refiner/wholesaler who did.

In both cases, it’s effectively legalized extortion, another government-mandated racket.

The larger refiners/wholesalers – who have economies of scale in their favor – have been using the RVO as way to strong-arm their smaller rivals. They are able to manipulate the price of the renewable fuels, underselling their smaller rivals, who cannot afford to sustain the losses – or compelling them (via the RVO) to buy credits from them at inflated prices.

Consumers, meanwhile, pay more for the adulterated/renewable fuel – which takes them less far per gallon as an additional kick in the keister.

It is important to keep in mind that all of this is artificial – not the supply and demand forces of a free market, working to the advantage of everyone. It is a colossal rent-seeking rip-off that uses legislated “demand” to distort the market for the profit of crony capitalists – whether they are of the Elon Musk variety or the Renewable Fuels variety.

It’s so lousy with price-fixing and outright fraud that even the former head of the EPA’s Criminal Investigation Division, Doug Parker, has called for a major overhaul of the entire architecture of the RFS mandate. Now in the private sector, Parker wrote a white paper last fall (here) detailing the systemic problems.

When a high EPA muckety-muck concedes there is a problem with a regulatory fatwa, it is a sure sign there’s a big problem.

There is nothing wrong with the idea of renewable or alternative fuels. That’s not what’s at issue here. The issue is using a good idea to camouflage and justify a rent-seeking rip-off, another crony capitalist con.

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  1. Great piece Eric!!I have Built a 100 gas stations,bulk plants,refineries,sold, and hauled it.Didn’t
    know this part of it

    • Cowboy, all this bs at a time when Congress voted to overturn the law banning exporting US oil. Got a text from my neighbor the other day with a pic of crude 4 feet deep on a pond build around a collection tank that said “Wanta go swimming?”…..and we can’t buy a rain…..not shaping up to be a good one.

  2. And, try finding pure gas. Especially anything above 87 octane. 93 ethanol free is virtually unobtainable at the retail level. Even the pumps at race tracks don’t have it. Not to mention the fact that 100 octane is also gone the way of the dodo bird.

    Boats, motorcycles, small engine race cars are all getting the squeeze. Just as with the effort to eliminate incandescent light bulbs, “no, we didn’t ban those bulbs, they just don’t meet the new standards”.

    Tyrants are bad enough but what makes it worse, ours don’t even have the cajones to own up to what they’re doing.

    The backlash that will undo this crap will not be peaceful.

    • Maybe where you’re at Mark. Around here the Kwik Star stations only carry ethanol free gas in the 91+ octane variety.
      I’ve quit buying premium after extensive datalogging on my ’95 LT1 showed that pump premium gave no reduction in spark retard vs. E10 87 octane. Not gonna pay extra if I can’t run a more agressive timing curve and the mpg stays the same….
      Granted this is vehicle specific, my supercharged Regal definitely liked premium (better mpg).

  3. It’s just another artificial industry created by government to make the elite wealthier. Just like how they’ve created a multi-billion dollar industry out the climate change scam. Meanwhile, the so-called environmentally conscious elites are murdering hundreds of thousands of Syrians, so they can profit from the oil at Golan Heights. Fucking psychopaths.

  4. DANNY – Some trust fund prosecutor, got off-message at Brown, thinks he’s gonna run this up the flag pole, make a name for himself, maybe get elected some two-bit, no-name congressman from nowhere, with the result that Russia or China can suddenly start having, at our expense, all the advantages we enjoy here. No, I tell you. No, sir. (mimics prosecutor) “But, Danny, these are sovereign nations.” Sovereign nations! What is a sovereign nation, but a collective of greed run by one individual? “But, Danny, they’re codified by the U.N. charter!” Legitimized gangsterism on a global basis that has no more validity than an agreement between the Crips and the Bloods!

    (beat) …Corruption charges. Corruption? Corruption ain’t nothing more than government intrusion into market efficiencies in the form of regulation. That’s Milton Friedman. He got a goddamn Nobel prize. We have laws against it precisely so we can get away with it. Corruption is our protection. Corruption is what keeps us safe and warm. Corruption is why you and I are prancing around here instead of fighting each other for scraps of meat out in the streets. (beat) Corruption… is how we win.

    So let us all raise a glass……(of frickin strawberry juice) today to celebrate the joint venture of Connex-KIllen with the people of Saudi Arabia, our honored “allies”.

  5. Corn as fuel: Has all the intellect of Seinfeld’s Kramer, when he thought butter was great to shave with.

  6. The renewable fuel standard is an offshoot of the oxygenated fuels mandate, which had the effect of lowering the BTU content of the fuel by pre burning it (ie oxidizing it). Beginning sometime in the middle 1990s, the USG demanded that oxygenated fuels be used in “ozone non attainment” areas such as Dallas, HOuston, LA, NYC and others. In 2000, the number of ozone non attainment areas expanded further as the standards tightened. In 2010, E-10 became the law of the land.

    The whole thing as a nasty boondoggle based also on the fact that oxygenated fuels trick O2 sensors into believing that the car is running rich. The newer cars probably have compensated for the leaner mixtures in the ignition mapping, but the damage has been done. Imagine what it would be like if the government wasn’t using faulty science to tell us what to burn in our cars. Imagine getting 3 mpgs more just because cars would be burning real gas again.

    I am afraid it will never happen.

  7. Then there is the moral and ethical quandary of using crops that feed people, of using those crops to fuel cars while people starve, while the necessary caaaar fuels are obtainable from that abiotic storage well underground. So now we have government mandating the starvation of people while propping up the falsities of renewable energy. Fits in with agenda 21. No energy is renewable. Entropy is the supreme ruler of the universe, and even the most benign and even the most evil of l bureaucrats can’t get around that issue. Try as the psychopaths might, that is one issue out of their control. And so that’s why the sickies like to control us instead, so they can satisfy their evil lusts for power.

    • Not to worry! Science will let us create biofuel from switchgrass and kelp! I saw it on the TV. In the next 5 years, they said! Pinky swear!

      Any time you want to get a renewable “expert” fired up, when they tell you how many homes that wind turbine can power (which is a shockingly small number for how much they cost to put up), just ask them how many biofuel plants it will power. Biofuel could be viable with cellulose sources but it takes more energy to produce them than they can produce after for a net loss. This might not be a bad thing if you think of the biofuel as a transport medium instead of an energy source. But of course you need a very large energy source, like nuclear reactors, to produce enough to scale. Since nuclear is evil technology, we end up using sucrose (food stock) instead.

    • joeallen, I recall a dozen years ago when people in Mexico hit the streets in major protests(didn’t see that on the news? nobody covered it? how surprising)of the high price of corn. People there were actually starving. They don’t have much cushion for the price of corn. There’s a huge amount of land and water being allocated now for the raising of cacti so we Norte Americanos can pay $100/fifth for tequila, one helluva lot better profit than corn.


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