Monday, October 1, 2007

Big Oil's Big Stall on Ethanol

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Even as it pockets billions in subsidies, it's trying to keep E85 out of drivers' tanks

BusinessWeek online has an article that highlights "Big Oil's" efforts to keep ethanol from gaining traction as an alternative fuel to gasoline. Some of the tactics that are employed range from the well known and well funded congressional lobbying organizations to the less well known stealth campaign to discredit and distort the advantages of ethanol towards petroleum displacement.

For some industries, the prospect of $3.5 billion in federal subsidies now, and double that in three years, might be a powerful incentive. But not, apparently, for the oil industry, which is seeing crude oil prices soar to record highs. Despite collecting billions for blending small amounts of ethanol with gas, oil companies seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas. Congress has set a target of displacing 15% of projected annual gasoline use with alternative fuels by 2017. Right now, wider availability of E85 is the likeliest way to get there.

At the same time the industry is collecting a 51 cents-per-gallon federal subsidy for each gallon of ethanol it mixes with gas and sells as E10 (10% ethanol and 90% gas), it's working against the E85 blend with tactics both overt and stealthy. Efforts range from funding studies that bash the spread of ethanol for driving up the price of corn, and therefore some food, to not supporting E85 pumps at gas stations. The tactics infuriate a growing chorus of critics, from the usual suspects—pro-ethanol consumer groups—to the unexpected: the oil industry's oft-time ally, the auto industry.

Those who criticize the industry's stance see it as reminiscent of its attempts to discredit the theory that human use of fossil fuels has caused global warming. Mark N. Cooper, research director at the Consumer Federation of America, authored a recent paper characterizing the situation as "Big Oil's war on ethanol." The industry, he writes, "reacted aggressively against the expansion of ethanol production, suggesting that it perceives the growth of biofuels as an independent, competitive threat to its market power in refining and gasoline marketing."