Federal law requires oil refiners to blend a certain amount of ethanol into fuel each year under the U.S. Renewable Fuel Standard or, alternatively, buy biofuel credits from competitors to make up for its absence in their supply.
High ethanol blends are banned during the summer months, however, because the chemistry of the blend means that more of it will evaporate into the atmosphere during the busiest driving season and contribute to smog.
Now, in a move opposed by the oil industry and Congress but favored by Midwestern farmers, Trump is planning to lift the ban and allow year-long sales of high ethanol blends.
NEW YORK (Reuters) - U.S. President Donald Trump is expected to announce the lifting of a federal ban on summer sales of higher-ethanol blends of gasoline on Tuesday in Washington DC ahead of a trip to Iowa the same day, according to two sources familiar with the planning of the event.
The move, expected sometime around 3 p.m. on Tuesday, is aimed at helping Republicans in competitive elections in the nation’s farm belt. Iowa is the largest U.S. producer of ethanol.
The lifting of the summer ban on so-called E15 gasoline is expected to be coupled with restrictions on trading biofuel credits that underpin the program, the sources said, but it’s unclear whether the restrictions will be detailed or left up to the U.S. Environmental Protection Agency to decide.
I'm calling this a "handout for farmers" because refiners are literally required to buy and blend ethanol and, if Trump lifts the summer ban, they'll be required to buy even more.
Some companies buy biofuel credits to meet their requirements, but the Trump regime is reportedly planning to crack down on that practice as well.
Biofuel credits are traded on the open market like any other commodity, but the Trump regime plans to impose limits on the number of credits that traders can hold, meaning refiners would have to make more direct purchases from the biofuel industry.
I really don't want to defend the oil industry, but I find myself being forced to here. And ironically, the fact that high ethanol blends contribute to smog and pollution more than regular gasoline means that defending the oil industry in this one specific case also means defending the environment.
Industry experts expect the oil industry will challenge this policy in court if Congress does not block it. And that's understandable, because the policy means they'll be required to buy even more of someone else's product for no substantiated reason other than to temporarily improve the GOP's political standing among MAGA farmers.
I think it's abundantly clear that this is only happening because of Trump's trade war. We recently learned that corn farmers are not being reimbursed for Trump's trade war as much as soybean farmers will be. This appears to be Trump's way of making up for that.
You might say corn farmers may end up getting a better deal than soybean farmers, because at least in this case the corn farmers are being promised a new market whereas soybean farmers are just receiving a temporary bailout.
If this policy is blocked in court or by Congress, farmers may get shit all in any case.