John Phipps: Why the Current Ethanol Debate Could Be Trivial By 2023

08:17AM Oct 29, 2019
Blender Pump
John Phipps says because the biofuels market was created by politics it is constantly subject to politics, and the debate may be just getting started. He explains why.
( Farm Journal )

It’s been handy to have harvest as an excuse for only pretending to follow the intense political battle over ethanol. The simple truth, however, is ethanol is a bizarre artificial market, where Economics 101 is only of slight use. I have tried to wade through explanations and charts about Small Refinery Exemptions and RFS deals but either fall asleep or laugh out loud. The rhetoric between ethanol proponents and the EPA is heated and to my way of thinking, nearly futile. Because this is a market created by politics it is constantly subject to politics. As political power shifts between the bickering constituencies of oil and ag, it will be a steady job for lobbyists and association executives. Nothing has ever been or truly will be settled. Forcing customers to buy something takes some pretty airtight language in the law, and as we are finding out, given time and enough legal horsepower, that seems to be an impossible goal.

The current dispute could be child’s play a few years from now - 2023 – when RFS mandated volumes will be set by at EPA discretion. By that time the effect of electric vehicles, the gradually slowing economy, and further trade breakdown could pressure ethanol opponents into even more vigorous political efforts. The failure of biodiesel to come anywhere close to projected volumes will also complicate those future negotiations. The current depopulation trend in rural America will add to ethanol’s problems.

Ethanol undisputedly triggered a farm income spurt that remains a fond memory for those of us lucky enough to have experienced it. Keeping that balloon afloat however is proving far more difficult that many ever imagined. It is exhausting, and the current disagreement in all its intricacy should have farmers soberly looking at what long term outcomes could look like. Some of them are not pretty, but then the current situation is hardly reassuring. Frustrating as it is, I think I need to do the homework required to at least follow this dispute. If it is making planning 2020 challenging, it raises real hurdles to longer term strategies.

USFR 10/26/19 - John's World