Midlands Voices: High gas prices call for higher ethanol blends

Source: By Todd Sneller, Omaha World Herald • Posted: Sunday, November 14, 2021

It’s déjà vu all over again: So said Yogi Berra in one of his more famous quotes. But it sure fits these days as we are once again paying the price, literally, for our dependence on oil. If you feel like you have been here before, you have, multiple times over the past several decades. Yet we do not seem to have learned any lessons.

The ethanol industry was born out of the oil embargoes of the 1970s and has proved to be an important hedge against gasoline prices. With a few occasional inversions, ethanol has consistently been less expensive than gasoline. At this writing we are seeing a 25-cent differential between base gasoline and ethanol, meaning blenders of 10% blends, the norm in the U.S., are saving that difference. For every gallon of gasoline they replace with ethanol, they make 10 gallons of the blend.

In 2014, the last time we had a serious price spike like we are seeing now, a study by Merrill Lynch concluded that ethanol was lowering the price of gasoline by 50 cents per gallon. With no federal subsidies, ethanol remains competitive today. Not only is there a price differential but ethanol also has significantly higher octane and allows refiners to make mid-grade and premium-grade gasoline at even more profit to them.

If you think that is a feel-good story for ethanol, how about doubling the price benefit? Or tripling it? What if we could take out 20% or 30% of the gasoline and replace it with a higher-octane, low-carbon, lower-cost fuel? Well, we can.

While 15% ethanol blends have begun to enter the market, the opportunity to go well beyond that exists.

Here in Nebraska we have tested E30 blends and seen no adverse effects on vehicle emissions or performance. Mileage differences have been negligible, and with the cost considerations, it is time to embrace a higher octane standard. It would utilize more ethanol, provide significantly greater mileage gains, and provide consumers across the country a welcome reduction in gasoline prices.

The agriculture and ethanol industries have shown they can respond quickly to increased demand. We went from displacing 2% of the gasoline used in the U.S. to 10% in just a few years. Using higher ethanol blends would be a boost to agriculture, create jobs in other sectors, and serve as an economic stimulus, lowering costs across a range of industries and consumer goods.

So what’s the holdup? The U.S. EPA has, to put it kindly, failed to truly embrace ethanol and consequently has neglected provisions of existing law that would open the market to higher blends.

Prior to enactment of the RFS, I served as administrator of the Nebraska Ethanol Board and chairman of the Clean Fuels Development Coalition. I was in the trenches working on the Clean Air Act Amendments of 1990 that included a requirement for EPA to reduce toxic, carcinogenic aromatic compounds in gasoline. High-octane, low-carbon ethanol is the perfect replacement for those harmful compounds. EPA needs to act to enforce that provision, which would in turn open the market to higher blends.

An additional benefit of higher-ethanol blends displacing aromatics in gasoline is the fact that aromatics are the highest carbon fraction of the oil barrel. Ethanol is 45% to 55% lower in carbon than gasoline, making it an immediately available pathway to get to net-zero-carbon emissions while helping to protect public health in the process.

Nebraska can lead the way in boosting the ethanol industry to the next level. Just as we went from gasohol in the 1970s to ethanol being a critical part of the motor fuel mix in the U.S. via E10 blends, let’s work to get EPA to use the many existing policy levers they have to open the market to blends of 20%, 25% and 30%. The potential benefits are significant.

Todd Sneller served under eight governors as the administrator of the Nebraska Ethanol Board from 1979 to 2018.