Washington — The battle over ethanol is heating up: Opponents say mandates to increase the amount of the renewable fuel in the nation's gasoline supply could add billions of dollars to American drivers' fuel bills. And congressional leaders plan to take a second look at a 2007 law that mandates ethanol.
It's the latest in the ongoing war of words between corn growers and the oil industry over how much corn-based fuel should be used in the nation's 240 million gas tanks.
Under the 2007 law, the nation is increasing ethanol use in vehicles to 15.2 billion gallons this year, up from 5 billion gallons in 2007. By 2022, the U.S. must use 36 billion gallons of biofuels, with 21 billion gallons of that from advanced cellulosic ethanol made from sources other than corn.
The American Petroleum Institute, which is the oil industry's lobbying arm, says the rising mandates by 2015 could boost the price of diesel fuel 300 percent and hike gas prices 30 percent. It says the current jump in prices for ethanol credits could add 10 cents to the price of a gallon of E10 (which is 10 percent ethanol) at the pump.
Refiners can buy credits rather than actually blending ethanol in fuel. Since January, the price of ethanol credits has jumped: Generally below 10 cents per gallon, they have climbed to as high as $1.10 earlier this month. They have since fallen to around 70 cents.
The price of credits has risen because cars are more fuel efficient and gas prices remain high. As a result, Americans are using less fuel than predicted. But mandates for the amount of ethanol that must be used are the same. So refiners are buying credits rather than boosting the concentration of ethanol above 10 percent.
Most automakers oppose the use of higher blends of ethanol in most vehicles, saying it could damage engines. Without higher blends, the U.S. will reach the "blend wall" this year and won't be able to meet the law's requirements, the oil industry says.
Under current mandates and current prices, that could add about $10 billion to the price of fuel this year.
Sen. Ron Wyden, D-Oregon, who chairs the Energy and Natural Resources Committee, in a letter Thursday to the Environmental Protection Agency, asked it to look into price spikes in ethanol credits.
"American consumers saw gasoline prices climb over the last six months to their highest-ever autumn and wintertime levels," Wyden wrote. "Given that ethanol is an increasingly important factor in the cost and supply of motor fuel in the United States, it is critical that the committee have a better understanding" of the issue.
Oil companies want Congress to revise the mandate.
"Ethanol and other renewable fuels have an important role to play in increasing America's energy security … But the federal RFS (renewable fuel standard) is ill-conceived and irretrievably broken," said Bob Greco, an API official.
The Fuels America Coalition — a backer of ethanol — said the attacks are really about oil companies opposing competition.
"The oil industry has been complaining about the renewable fuel standard, yet they are the ones who failed to invest in the infrastructure necessary to avoid the compliance mechanism that has them up in arms," the group said. "Why are they buying compliance credits rather than lower-cost ethanol? Why are they blaming the renewable fuel industry for a so-called problem they themselves created?"
The House Energy and Commerce Committee said this week it will review the law. "It has been more than five years since the RFS was last revised, and we now have a wealth of actual implementation experience with it," the committee's Republican and Democratic leaders said.
Last year, the EPA rejected a request from eight governors and nearly 200 members of Congress to waive requirements for use of corn-based ethanol in gasoline, after last summer's severe drought wilted much of the nation's corn crop.
Automakers have clashed with ethanol advocates and opposed boosting the percentage of ethanol. They argue that higher concentrations of ethanol in gasoline — which may be necessary in order to meet stepped-up minimums for annual ethanol usage — can harm engines in most vehicles on the road today.
To use the ethanol required, the EPA has approved the use of a higher blend of ethanol fuel called E15 — which is 15 percent ethanol — up from E10 used at most pumps today. Just a handful of stations sell E15.