Forty years ago at this time, the U.S. was engaged in intense negotiations with the Organization of Petroleum Exporting Countries (OPEC) to try to end the recently announced oil embargo that had jolted our economy. For the better part of the last four decades, we have had endless debates about how to reduce our dependence on foreign oil, with a mixed record of success.
But we know that some things have worked well. Ethanol is one of them. It directly reduces our dependence on oil imports from countries that aren’t necessarily our friends.
Without ethanol production, we would need to import roughly half of our oil. In fact, when the federal standard for blending ethanol was created in 2005, we were importing 60 percent of our oil. With ethanol, imports are at 41 percent.
Congress and several past administrations have shown strong bipartisan support for these efforts to reduce foreign oil imports. However, the Environmental Protection Agency (EPA) recently proposed lowering the federal ethanol standard, reversing decades of backing for the industry.
This proposal creates uncertainty for ethanol producers, who have made multi-year, multimillion-dollar investments based on our federal policy. This policy was designed to reduce foreign oil dependence, drive innovation and investment at home, and create American jobs that cannot be outsourced. It has worked.
The EPA appears to be on shaky legal ground for making such a dramatic policy reversal. Congress granted the EPA authority to waive or lower the renewable fuel standard, but only if it could show that it was necessary to prevent “severe economic harm,” or if there was an “inadequate domestic supply” and the production levels could not be met. Obviously neither criterion can be satisfied with respect to ethanol production.
This misguided EPA proposal should be reversed. It will increase foreign oil imports. It will also reverse several other benefits of domestic ethanol production.
Ethanol lowers the price of gasoline for consumers. Some studies have shown that the use of ethanol has decreased retail gasoline prices by 25 cents per gallon over the last decade because it has increased competition and is less expensive than gasoline by volume.
Corn used for ethanol isn’t used for direct human consumption. It does not tighten our food supply or raise food prices. In fact, a recent World Bank study attributes 50 percent of the increase in food prices since 2004 to rising crude oil prices. And roughly one-third of the corn used in ethanol production is returned in the form of high protein distillers’ grains, which cost 25 percent less than using corn as feed.
Ethanol was supported originally to help clean our air. It has worked. And ethanol has environmental benefits as a nontoxic, biodegradable fuel produced from renewable feedstocks.
By reducing imports, ethanol vastly reduces our imbalance of trade payments. It keeps our hard-earned dollars here at home, and not all in the pockets of major oil companies.
Lastly, ethanol means jobs. It keeps our family farms in business by providing markets for commodities produced in the U.S. The ethanol industry supports more than 400,000 U.S. jobs and contributes more than $40 billion per year to our gross domestic product, making it an important contributor to rural development efforts with lasting, long-term benefits.
We don’t need to be importing more oil from Iran, Venezuela and Nigeria. We don’t need to throw a wrench into the economies of middle America at a time when many are struggling to find sustainable growth. It is our hope that the EPA will reevaluate its proposal and reverse its decision to take us in this misguided direction. At this stage of our fragile economic recovery, domestic producers of corn and ethanol are worth supporting more than ever.
Hastert represented Illinois’s 14th Congressional District from 1987 to 2007 and was Speaker of the House from 1999 to 2007. He is a senior adviser at Dickstein Shapiro LLP and a consultant to Rex American Resources Corp., which has ethanol interests. Nussle represented congressional districts in Iowa from 1991 to 2007 and was director of the White House Office of Management and Budget under former President George W. Bush from 2007 to 2009. He is on the board of Growth America PAC. Growth America advocates for ethanol.