When “Renewables” Aren’t

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The Renewable Fuels Standard – which requires a certain percentage of ethanol (and biofuel diesel) be force-fed into the nation’s fuel supply – was sold to the public largely on the basis of the mandated fuels being  . . . renewable

The idea being, ostensibly, to reduce dependence on foreign sources of fuel – and to promote homegrown jobs and industry.

But what happens to that argument when the “renewable” fuel is imported from foreign countries?

As crazy as it sounds, that’s the situation – although it wasn’t intentional.

The problem is one of supply and demand. The demand created artificially – as a result of the RFS, which arbitrarily mandates the production of 15 billion gallons of renewables annually and the “blending” of a certain percentage of ethanol and biodiesel into the total volume of fuels that end up at your local gas n’ go.

Refineries and distributors are required to meet their quota of renewable fuels – or buy credits from someone else (not necessarily someone who actually produces the renewables)in order to satisfy the federal obligation. There is a secondary market for these tradable credits – which are called Renewable Identification Numbers (RINs).

Speculators have made a killing trading them, exploiting the federal RFS mandate much in the same way that Elon Musk has exploited federal carbon credits – which are similarly fungible – to generate cash for his loathsome electric car company. Laws on the books in states like California require every car company that wants to sell any cars in that state to aso sell a certain number of “zero emissions” electric cars. They can satisfy this mandate by purchasing the credits from Elon, which count just the same as if the company had actually built and sold its own electric cars.

Its one of the greatest scams going.

And here’s  where the foreign renewables enter into the mix.

Because there isn’t sufficient production in the U.S. to meet the 15 billion gallon “renewable minimum,” refiners and distributors actually  import renewables.

At the same time, renewables made in the USA are not credited under the RIN system if they are exported.

This has created some extremely perverse incentives.

Because of the way the regs are set up – refiners and distributors have little choice but to pony up for foreign renewables, in order to make up for any shortfall in domestic production or availability (renewables have a very short shelf life) and meet their federal renewable fuels quota.

Or, they can purchase RINs – at whatever the speculation-driven price happens to be.

They have to do one – or the other – or they can’t legally sell any fuel at all.

Meanwhile, if they produce too much ethanol or biodiesel and want to sell it outside the U.S., they get no RIN credit for having produced it.

This doesn’t reduce U.S. dependence on foreign sources of fuel; it increases it. Not only that, resources – money – leaves the U.S. as well and goes into the pockets of foreign energy producers.

The traceable RINs also encourage foreign renewables because RIN credits can be assigned to renewables produced outside the U.S. and imported here.

And it’s not just a capacity – or production  – problem, either. While the feds can continue mandate ever-higher renewable fuels quotas, the market has a finite capacity to use renewables.

Most “gas” currently sold in the U.S. is 10 percent ethanol (E10) but higher concentrations of ethanol cannot be used in cars not designed to accommodate it. This includes almost all passenger cars made before the 2001 model year, which amounts to millions of cars currently on the roads and likely to be on the road for many years to come.

Some newer cars can handle higher concentrations of ethanol, but it will takes years for the millions of cars that can’t to attrite out of circulation.   

Getting rid of the quotas, period, would solve the problem – but the ethanol lobby is as powerful as several sith lords and the vested interests entrenched.

There is, however, an option that would triage the damage: Change the regs to allow the Renewable Fuels Standard to be met by both production and distribution internally as well as the exporting of any surplus, which would have the same RIN value as renewables used domestically.

Producers would at least not be punished for exporting surplus renewables, as under the current regime. At the same time, the artificial incentive to import foreign renewables could be tamped down by eliminating their eligibility for RINs.

Oddly, some of the major players – mostly very large, national-level refiners and distributors – are opposed to this common sense idea. Perhaps because they prefer a more captive (and artificial) market – for renewables (the actual fuels) as well as the RINs (the tradable credits), which they can leverage and which disproportionately advantage large producers at the expense of smaller, independent refiners and distributors.

There is a huge export market for ethanol and other biofuels. American companies – and American workers – shouldn’t be penalized for taking advantage of it. At the same time, American drivers shouldn’t have ethanol force-fed to them, nor have to pay artificially high fuel costs – driven up by speculation in RINs.

President Trump will reportedly be meeting with some of these big players sometime next week. As he promised to do on the campaign trail, he has a golden opportunity to put America first – even if it upsets a small band of crony capitalists.

The question is – will he?

. . .

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13 COMMENTS

  1. Bio Fuels place an incredible burden on the nutrients in our soil, and every aspect of
    agriculture from farm equipment prices, farm land, to fertilizer, and the produce in the market.
    The sales pitch that Bio Fuel is somehow clean and affordable is just as insane as the use
    and promotion of absolutely INSANE Nuclear power. We need alternative energy, but lets not
    sacrifice the nutrition, quality of life, and safety of future generations in the bargain.

      • Thanks Eric,
        And thanks for the great work you do.
        I listened to you on David Knight’s ‘Real News’ , that’s what brought me
        here. I could see very well that you were up on ‘issues’ facing us all today.
        You are imo, in the top 2% of guests ‘that get it’ that appear on Knight’s,
        Alex’s and other Libertarian/constitutionalist shows, I hope you might consider
        expanding your reach in some manor , via a ‘Free Speech’ Political Forum
        or just a Libertarian/Constitutionalist forum,
        or something along those lines.
        Alex has been warning us of youtube censorship for the 15 years I have
        followed him, I started a campaign about 5 or so years ago asking him
        to open ‘legal action’ trust accounts to fight the Oathbreakers as well
        as let us fund a new ‘Free tube’ or Free Speech tube of some kind to
        competed with the youtube platform, I also would like to see us (the movement)
        supporting legal assistance to individuals (like the Bundies etc ) that have been
        bullied by fed agencies.
        I have been asked why I don’t do these things myself, which is a pretty obvious
        questions, well, we don’t have 20 years left to fight the Globalists, we don’t have
        20 years for me to become another Alex , info wars has the infrastructure and
        the millions of listeners today, I would imagine that enough of us would contribute
        and actually collectively be able to make some real change, and I do not
        have the talent, skill nor charisma of someone like Alex to be able to attract the scale of viewership that he does.
        Key issues (problems imo) which are slipping off the radar today are things like;
        Asset Forfeiture
        DHS TSA NSA NDAA NUCLEAR POWER
        Police Home invasions
        Militarization of Law enforcement
        Oathbreakers in Congress Senate
        BIO FUELS
        Cashless Society (Bit Coin will wind up the/a roll that no one could see)
        Autonomous Vehicles
        Expansion of Domestic (Commercial Drones)*
        *Trump (I’m a huge fan/supporter, but he is far from perfect) has announced
        a massive expansion program recently which is a massive mistake in my view,
        with drones (large enough to be ‘manned’ ) taking over the responsibility of
        a ‘physical’ pilot, we are setting up a precedent whereby drones that could
        wipe out bus loads of school children through tech fail or drone pilot
        error would be enabled without the ‘operators’ ever having to put their lives
        at risk. A drone vehicle air or land, large enough to
        pose the risk of taking out bldgs. and a significant number
        of people during one incident, should never be flown or operated with anything
        other than an onboard Pilot.
        King winded I know☺☺, but just some observations…..
        One key issue that Alex doesn’t have and could really benefit from is staff/people like you that can articulate the issues as well as you do.
        You are so spot on about the Bio Fuel issue, like I was trying to say
        , I could well see that you were never fooled , but so many people just do not
        have the ability to see through the smoke and mirrors, these horribly counter
        intuitive and destructive programs pop up constantly , they are rolled out
        as Alex might say ‘to save the children’ , save the planet (Carbon tax fraud
        program etc) they need to be exposed, people like you do a great job
        of once again, articulating the dangerous flaws associated with them.
        ….And electric cars…. and Car Review ‘Pitchmen’ I know , I know
        so true, and as another car enthusiast, I can certainly agree, that a ‘sponsored’
        reviewer should be up front and not pretend to be an un biased reviewer.
        Apologies , this is un edited, hope some of it makes sense…..

  2. Lots of reasons to kill ethanol, as Ready said depletion of land and depletion of the water supply. Sine water tables are constantly monitored it doesn’t take a genius to check them and see the non-renewable way they’re being drained.

    Last year Obamer’s EPA mandated 15% ethanol. The problem being, the corn producers couldn’t produce that much more and the blenders for the refineries didn’t have the capacity to raise to that much.

    Never let it be said the EPA doesn’t have it’s own agenda. 3 of it’s scientists were barred from speaking yesterday about their findings. They evidently didn’t toe the line on “climate change” so they were silenced.

    Maybe they should speak on their own and then sue hell out of the EPA when it terminated them and hung them from the nearest……lightpost. They wouldn’t harm a tree.

    I find it amazing nobody recalls back when(no, the lamestream media didn’t report it night and day)there were riots in Mexico over the price of corn. Not saying there’s a thin line between eating and not….in Mexico, but millions of people didn’t have the means to afford the price of the current tortilla that year. It probably drove up the price of frijoles. Anybody who’s ever stayed any time in Mexico probably understand frijoles and corn feed the masses. It shouldn’t be a difficult concept unless you can’t put down your Big Gulp long enough quieten the ringing in your ears caused by your spiking blood pressure.

  3. Good article, Eric. You brought up details that I haven’t read elsewhere.

    I doubt Trump has the will to fight this entrenched boondoggle that only benefits certain farmers, producers, and fuel producers, while increasing costs to consumers. There are too many midwest politicians that back this program, including senior Republicans in the congressional leadership, that would make it a hard fight for Trump. These Republicans conveniently drop all pretense of being for smaller government when it comes to supporting the ethanol mandate program.

    Trump could make these obvious and easily understandable criticisms of the program:
    1) Ethanol use in vehicles decreases engine efficiency, meaning lower miles per gallon and higher costs. Even the EPA admits it: https://www.fueleconomy.gov/feg/ethanol.shtml

    2) Corn used for mandated ethanol production is not used for livestock feed or human food. Depending on the market and weather, this has in the past resulted in higher food costs for consumers.

    3) The program is yet another crony capitalist scheme to reward politicians’ friends with guaranteed profits, paid for by consumers.

    I don’t think Trump has the will to make a public and sustained effort to modify or eliminate this program.

    • Food being more expensive is probably the main purpose of ethanol.

      If anything, Trump wants even higher food prices, and to use those higher prices to justify a few more farmer mercantilist type jobs. Food tariffs are also not off the table, which further increases prices for all.

      The more OPEC cartels inflate the price of oil.

      The more the US and the greater Western World will burn up its excess foodstuffs in IC engines.

      Its mutually assured value destruction at its finest. Sun Tzu capitalism.

    • I would rather that the government buy up all the stalks of GMO corn and burn them than require us to use it in our gas tanks. They do want to raise the price of food and gasoline to f us over.

  4. Not only that, but by removing productive land from food production it drives up the cost of food. Now here in the US that might be OK but it can devastate the third world.

    Much of the so-called Arab spring was in fact due to skyrocketing grain costs.

    https://www.bostonglobe.com/ideas/2015/08/22/the-arab-spring-was-revolution-hungry/K15S1kGeO5Y6gsJwAYHejI/story.html

    One reason why natural gas isn’t more widely used for transportation is because in the northeast there’s not enough infrastructure to support it when there’s a big cold spell. The problem is made worse when the electric grid is forced to accept wind and solar, since when the wind isn’t blowing and the sun isn’t out the backup source is natural gas turbine plants. By subsidizing ethanol it discourages food production while encouraging soil depletion. Normally if a crop price were too low the farmer would let his field go fallow or find another crop. But in today’s agriculture world farmers take the subsidy, grow corn (ironically using petrochemicals to goose up the soil) and never allow the fields to recover. We’re always pretty close to having a major catastrophe if one little thing changes, like the temperature goes up a few degrees.

    Really a shame when you think about it. Everyone who’s in the system loves things the way they are, except maybe fussing with the gingerbread around the edges. But if you’re on the outside it’s terrible all the way down. Anyone who thinks it’s a bad deal either gets an offer he can’t refuse or ends up on the reservation (or maybe that’s the result of turning down the offer). But sometimes nature and fate have other ideas. The system is so brittle now that it might go horribly wrong with just a minor event.

    Shit, I’m late for work. Got to oil the machines…

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