Pumping Us Up

Guest Post by Eric Peters

Most people know they’re paying a lot of taxes every time they buy a gallon of gasoline.

Proportionately, few taxes are more regressive than motor fuels taxes – which currently amount to about 35 percent of the per gallon cost of gas (roughly, 50 cents in federal and state taxes on each gallon, which currently sells for a little over $2).

But there is a another tax on motor fuels which very few people even know exists that also dips deep into their pockets.

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It is the federal mandate that each gallon of gas sold contain a certain percentage (currently, 10 percent) of so-called “renewable” fuels. This being chiefly ethanol alcohol, which is made of corn. About 40 percent of all the corn grown in the United States is not used to feed people or animals. It goes toward mandated-by-government ethanol production, which is then force-fed to American drivers every time they fill up.

This corn con is one of the greatest boondoggles in existence – hugely profitable to the companies which make this product no one really wants – but which they government requires them to buy.

Ethanol is touted as “renewable,” which is true. It is also grossly inefficient. Ethanol contains less energy per gallon than gasoline, so your car’s engine has to burn more of it to go a given distance. It is one of the reasons why modern cars – notwithstanding all their technological advances – don’t get get particularly good gas mileage.

Back in the ’80s, many cars achieved 40-plus MPG on the highway – even though they didn’t have the advantages of modern engine technology. But they did have the advantage of 100 percent gas – not 10 percent ethanol-adulterated “gas.” 

Ethanol-laced fuel also costs more to blend.

Which brings us to the other tax – intimately tied up with the Renewable Fuels Standard – which established ethanol production quotas (very much like affirmative action quotas) back in 2005  – and expanded greatly under President Obama. 

These are called Renewable Volume Obligations (RVOs) and amount to another quota – only this time, it’s a mandate to produce a given volume of “renewables” (chiefly ethanol) before the final product – E10 – is finally sold to motorists. These production quotas affect refiners, distributors and sellers of the fuel – who inevitably pass on the costs they bear to motorists.

But here’s where it gets even shadier.

In order to meet the federal government’s “renewable” mandates, renewable fuels credits can be bought and sold – without necessarily making or even selling any actual fuel, renewable or otherwise.

These credits are called RINs – the acronym standing for Renewable Identification Number. They were ostensibly created to make sure the Renewable Volume Obligations were met; that everyone making/selling fuel participated proportionately in the mandatory renewable fuels program.

But in practice, it works very much like carbon credits – another crony capitalist con – which force car companies to either manufacture a certain number of “zero emissions” electric cars or buy carbon credits from an electric car company that does make “zero emissions” electric cars.

Just so, smaller refiners and independent stations are effectively forced to buy RINs from national operations, including big box retailers like Wal-Mart – which often have their own in-house blending operations – or can easily buy them.

The smaller operations don’t have the facilities to blend in the renewables themselves – and thus, cannot comply with the EPA’s arcane “point of obligation” mandate. The “point of obligation” simply means where the fuel is blended – not who actually makes the renewable additives.

This allows the big crony capitalist operations to get “RIN credit cash” merely for mixing the fuel – not actually making it. And by selling RIN credits to the smaller fry, who have no choice but to buy them, if they wish to continue selling fuel.

It amounts to legalized extortion masquerading as “environmentalism” – just like the electric car sham.

Ordinary people pick up the tab while big cartels – which can easily game the system – rake in the profits.

The big box retailers and large refiners can afford a slightly higher margin cost – due to the up-bid (by them) cost of the RINs.

The smaller outfits cannot.

They are left in the impossible position of either charging their customers more for fuel – and losing business to the big box gas station across the street – or charging less for the fuel than it costs them to sell it.

You can’t stay in business very long that way.

The key thing to bear in mind is that this isn’t free competition. It is crony capitalism. It is big, politically connected companies using the power of government to leverage an artificial advantage over their smaller, not-as-connected competition.

The renewable fuels program was sold to the public as an energy independence measure but has proved to be a motorist dependence measure. American drivers are at the mercy, not of OPEC, but the EPA – and the politically connected businesses that are gaming the EPA’s RIN rigmarole.

It’s not good for the environment – and it’s very bad for our wallets.

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MMinLamesa
MMinLamesa

Too bad Trump, early on, committed in Iowa to maintain this idiocy. This program should be near the top on the Get Rid Of List.

During the campaign, Cruz, whom I intensely dislike, had the balls to stand up to a room full of corn growers and tell them if he was elected, the jig is up. He was actually applauded.

Didn’t I read that the government in planning on an even larger percentage of ethanol to be mixed in with gas which will result in engine failures?

Ouirphuqd
Ouirphuqd

Ethanol sucks, I have a ruined outboard to prove it. The fuel draws moisture and needs special fuel lines that don’t deteriorate. I buy ethanol free for the boat and all my power equipment, but it runs almost a dollar more per gallon. The powers that be know what is best, part of the “gargantuan lie” that we are being fed on a daily basis!

TJF
TJF

Interesting post Eric. I knew that the government was in the big-corn supporting business, but I didn’t know all the details. Thanks.

BL
BL

I keep reading that gas prices are lower under Trump than any time in the last 12 years……really where? The price here teeters back and forth between $2.39 and $2.59 per gallon of regular unleaded.
The price per gallon when Oreo took office was $1.69, so are any of you seeing prices under $1.69?

Headline on Drudge today says Shumer is calling this out.

Anonymous
Anonymous

Prices have hit a 12 year low, there are historical records if you don’t believe it.

FWIW, this is the price of wholesale gasoline, there are added taxes in the price you pay and many local taxes have been increased over the past few years.

Retail gas at 2.09 here, including tax (wholesale around 1.55), is the lowest I can recall seeing in a long, long time.

I don’t know where you come up with that 1.69 figure but I don’t think it is the price at the pump including taxes that you are seeing posted, perhaps you could provide a link?

BL
BL

Anon- Read to comprehend, in 2008 the price was $1.69 when Oreo took office which was just 9 years ago ( Eastern US including tax).

We are not getting low gas prices here.

Anonymous
Anonymous

East coast prices are currently 1.58 and Gulf 1.52.

BTW. January is the lowest price of the driving season, July the highest so you have to compare months to get a comparison.

ragman
ragman

BL: wait ’til the fall when the “Winter blend” is delivered to the pumps. Gas in Tennessee and South Carolina is well under 2 bucks now and I wouldn’t be surprised to see it at around $1.80 in the fall. Thanks Eric for the very informative article. Now I understand why E10 costs more than 100% gas. Incidentally, no Ethanol gas is about 30 cents more expensive E10 around here.

BL
BL

Ragman- We are getting reamed in and around Jefferson county. Counties south of here are $2.19 per gal.

We never got the cheap gas here. I guess some states are picking up the slack.

underfire
underfire

100% gasoline is available here, Southern Oregon, but is priced close to $4.00 a gallon. This was a few months ago.

Ghost

What else does this look like?

“It amounts to legalized extortion masquerading as “environmentalism” – just like the electric car sham.
Ordinary people pick up the tab while big cartels – which can easily game the system – rake in the profits.”

How about this… GPS sharing systems between cars being sold as a safety measure when the opportunity for central control of personal transportation is written in the glaring headlights you are no longer allowed to switch to highbeam lest a Robocop type find that an intrusive gesture and pull you over to shoot you for your obvious gang related behavior flicking your lights from highbeam to low and all. So, an entire INDUSTRY is reborn as cars unable to uplink to the central sharing network for GPS sharing purposes (anyone recognize IFF requirements for ALL aircraft at certain altitudes? Do all Drones send an IFF signal upon transponder request? Just one of those things I need to look into.)

Hoboken? You paying attention to the investment opportunities? What if the bureaucrats manage to make every car prior to 2018 models obsolete due to the new traffic regulations issued by the NEWLY formed FOTM (Federal Office Traffic Management) which will have “Ground Traffic Controllers” much like the Air Traffic Control bureaucracy Ronald Reagan had to fire and remind they were NOT indispensable to travel if they were not allowed to put themselves in control. What car companies are on the cusp of being able to jump into this effort of the government to legislate an entire car market into resurrection?

BL
BL

Maggie- If in their wildest dream they made pre-2018 cars obsolete then they better come up with a “New Car EBT” for everybody.

TampaRed
TampaRed

for those of you who want pure gasoline,here is a link-there are also other links on the web —

https://www.pure-gas.org/index.jsp?stateprov=FL

Ouirphuqd
Ouirphuqd

Thanks Red, always on the road to fish, the ethanol free fuel is a lifeline when you’re on the water.

Ouirphuqd
Ouirphuqd

Look up ethanol damage to engines on the web, some ugly pictures are there!

Hondo
Hondo

If everyone would refuse to start any type of gasoline engine on the weekends this whole damn mess would be over in thirty days. But you know the tree people are not going to do that, not today, tomorrow, or ever. As long as their is room for one more ass to squat on one more limb then the tree people will do nothing but stare off into space, making their incoherent muttering noises, while firmly believing that Reading, Writing, and Arithmetic are three cities in China. PS. They probably think Ethanol is the city where the next big refinery is going to be constructed. thans

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