Confessions of a Gasoline Call Girl

Marc J. Rauch, Executive Vice President/Co-Publisher of The Auto Channel, posted a lengthy diatribe on the American Petroleum Institute’s recent lawsuit on the EPA’s approval of E15 blends in newer vehicles. Read it here, and note the title: “Gasoline Whores File Frivolous Lawsuit in Attempt to Derail American Energy Independence.” He is mad.

The lawsuit itself is not all that interesting. What is interesting, I think, is how willfully blind the author is to a number of realities that put the successes of the ethanol industry into perspective. He addresses a number of organizations that provided public comments on the EPA decision:

Grocery Manufacturers Association Vice President for Federal Affairs Scott Faber said: “We were disappointed in the Administration’s decision to allow more ethanol in gasoline before truly sustainable advanced biofuels are commercially available.

The Auto Channel’s response: Truly sustainable advanced biofuels? Humans have been making alcohol for thousands of years from nearly any plant they could find, what’s more sustainable than that. Advanced biofuels? That’s okay, too, once they’re ready, but why wait for cheaper fuel prices, oil independence and a cleaner environment when we have perfectly good truly sustainable biofuels right now – of which ethanol is only one alternative. By the way Mr. Faber, I challenge you to name what projected biofuels you’re referring to. I think you don’t know. I think you are reading/writing off a prepared script.

TAC is correct when he says that humans have been making biofuels for hundreds of years. Cellulosic ethanol was first developed in 1898. But the ability to create biofuels in a laboratory is different than being able to produce them in an economically and commercially viable manner. Despite 30 years of federal subsidies, corn ethanol has been unable to compete in a serious way with petroleum. The same is true (and even more true) of cellulosic ethanol. There just isn’t a whole lot of energy in plants, and it requires a lot of energy to extract them and make them usable. It’s possible that some technological breakthrough will change this, but it is by no means guaranteed. Congress can’t mandate a cure for cancer, yet when it comes to biofuels they seem to believe they can bend reality.

National Council of Chain Restaurants Vice President Scott Vinson said:“This challenge to the EPA’s decision is necessary to reduce the strain that ethanol production from corn has placed on U.S. agriculture. The EPA’s decision will lead to an ever higher proportion of the nation’s corn crop being diverted to fuel use, raising prices for participants in the food chain and consumers. Already supported by market-distorting mandates, tax credits and import tariffs, ethanol demand for corn has been singled out as the preferred use for U.S agricultural production long enough. Corn is an extremely important commodity used in feeding the world, and it’s about time we reverse the trend of burning more and more of it as fuel.”

TACH’s reply: Mr. Vinson, what script are you reading from? Why don’t you question the government subsidies and allotments that the oil/gasoline industry has been receiving for more than 100 years? Why don’t you question the billions of dollars of our money that is spent to protect enemy regimes and their oil? Oh, by the way, the world isn’t fed by eating corn; wheat is your huckleberry. Wake up and smell the grease, buddy.

Do the oil and gas industries receive subsidies? This is a “yes, but” moment. They receive certain tax breaks – an example is the oil depletion allowance that allow them to pay less tax (relative to other industries) based off of the way in which capital investment is deducted from the net amount of income they generate. This seems to infuriate the average American. But what few realize is that as a percentage of profits, the oil industry still pays significantly more tax than other industries in the United States. As the Tax Foundation explains:
In addition to income taxes, the table below shows that Exxon paid or remitted $20 billion in various sales taxes, excise taxes, severance taxes, and property taxes. This brings the total amount of taxes the company paid or remitted to $29.3 billion, nearly three times the net profits it earned for shareholders.

The oil industry certainly pays its “fair” share of taxes, where fair is defined as a much larger percentage of income than other industries.

National Turkey Federation President Joel Brandenberger said: “In trying so hard to rush out an E15 rule before Election Day, EPA completely disregarded the legitimate scientific concerns surrounding E15 and the potentially disastrous impact of diverting even more corn from food and feed to fuel. We believe the agency ignored the law as well, and we are confident the court will agree.”

TACH’s response: There are no legitimate scientific concerns regarding the use of ethanol. Ethanol is a proven engine fuel used around the world. It has been so used since the earliest automobiles in the mid 1800’s. Until lies such as the ones that you spout about ethanol were created by gasoline interests, ethanol was the preferred fuel of choice by people in the know. Contemporary studies and research continually prove that ethanol hasn’t suddenly become bad: It’s as good and safe as it always was.

Ah yes, it was those evil conniving gasoline interests of the 19th century that ruined ethanol’s chance at becoming the preferred fuel of the “people in the know.” I’m going to assume “people in the know” were people who liked walking everywhere. I’m sure the fact that petroleum was incredibly easy to produce in mass quantities compared to ethanol didn’t have anything to do with petroleum’s adoption. The bolded sentence above alone pretty much shows you how detached from reality Rauch is.

Snack Food Association President and CEO Jim McCarthy said: “In addition to failing to follow the spirit of the Clean Air Act, the EPA has made a decision that will adversely impact our food supply and ultimately cost American consumers greatly.”

TACH’s response: Hey, we love a candy bar and potato chips as much as the next person. But now some guy who represents an industry that might just be the biggest demon in the world is telling us about the environment and product costs! If there’s only 6 cents worth of corn in a $4.00 box of corn flakes, I shudder to think of how much we are getting ripped off on a $4.00 bag of tortilla chips.

But, the number one reason why the lawsuit and entire opposition to e15 is so off base: We don’t need corn to make ethanol, there are plenty of other agricultural products and by-products that can be used, and many of them do not require chemical fertilization or the use of “valuable” farm land. The whole issue of corn’s use for ethanol is irrelevant.

There really aren’t very many products available right now that are (1) scalable and (2) can compete with gasoline at its current prices. Corn ethanol is kind of close, but there are still problems with market penetration – automobile manufacturers aren’t going to produce E85 vehicles unless there is significant long term (non government mandated) demand for it, and with oil prices where they are now there isn’t significant demand for it.

Furthermore, imagine the amount of farmland required to produce 210 billion gallons of ethanol (about 17 times what was produced in 2009), which is the equivalent of the ~140 billion gallons of gasoline the U.S. uses each year. This would have significant negative effects on agricultural markets

You can wave all of these problems away if you don’t care about people taking you seriously, but to produce 210 billion gallons of ethanol from anything will require a lot of “valuable” farmland. Note also how he puts “valuable” in quotations as if the idea that farmland has value (and that value is taken away from it when it’s being put towards less productive use) is some sort of conspiracy concocted by gasoline-interest to keep ethanol down.

Finally, he ends with a good\evil list, where rent-seekers are all placed into the “hero” category and the “evil villain” category ranges from API to Hugo Chavez. He placed himself in the hero category — is Marc Rauch a serious person?

The evil villains:
American Petroleum Institute
National Petrochemical & Refiners Association
All gasoline companies
Prism Public Affairs
Jerry Taylor and the CATO Institute
David Fridley
The aforementioned coalition members
Hugo Chavez
Mahmoud Ahmadinejad

The heroes
David Blume & Tom Harvey
Ted Chipner & Ohio Biosystems
American Coalition for Ethanol
Growth Energy
Ethanol Today Magazine
Renewable Fuel Association
Anne Korin & the Institute for the Analysis of Global Security
Dave & Steve Vander Griend & ICM, Inc.
Tom Waterman and Ethanol Monitor Magazine
Edwin Black
My business partner Bob Gordon, me and everyone at The Auto Channel