Say you take the car to the transmission shop, and the man says the CV joint needs to be replaced. Then he discovers the timing chain also is about to go. What do you do?
It would feel good to say, “You said the CV joint was broken. Fix that, and I’m not paying a dime more.” But 20 miles down the road, when your car is destroyed, you will realize it was a grave mistake.
That is about where we are on biofuels. We never should’ve let government drive the energy supply car. All the warnings – that government can’t pick winners and losers, that subsidies distort the market, that artificially created demand is not the same as market demand – have come true with a vengeance. But now that we have let government establish these policies, we must finish the job.
American petroleum refiners say they are facing fines of $6.8 million because in 2011 they failed to mix a certain percentage of cellulosic biofuels into their gasoline and diesel products as prescribed by law. The companies which produce these types of biofuels — derived from wood chips and inedible parts of crops, such as corn cobs – were not ready to sell their product commercially and fell short of the federal mandate.
No one has paid these fines yet. The oil companies were allowed to defer their obligations or purchase waivers. Together, these waivers cost American producers less than $5 million. Exxon alone made $9.4 billion in profits in one quarter of 2011.
We could repeal the law, but that seems unlikely. Americans don’t like subsidies, but they don’t like to be overly dependent on oil, either. We could waive the requirement – but it seems to be working in terms of encouraging innovation. Or we could plow ahead, complete the research and begin to produce the more and more of a domestic fuel source.
That seems the best course for a variety of reasons.
Companies in towns such as Hugoton, Kan., Alpena, Mich., Emmettsburg, Iowa, and Vero Beach, Fla. are making progress. Far from the Main Street of American commerce or the centers of energy production, they are turning agricultural residue, byproducts of hardwood manufacturing , municipal solid waste and waste from the forest products industry into real, usable fuel.
There is no question we need the fuel. Americans own nearly 300 million cars, and, as recent events have demonstrated, we are particularly vulnerable to price spikes because we still get nearly half our oil from dangerous places overseas.
Moreover, even with government ordering average mileage to reach 55 miles per gallon by 2025, the Energy Information Agency still estimates we’ll need 90-95 percent as much gasoline in 2035 as we need now. Turning refuse into a valuable component of gasoline is a strategy that, absent government subsidies, would be applauded by all thinking Americans.
And a few million for biofuels research could lead to billions in savings for the military, the nation’s largest fuel customer. Fuel use climbed less than one half of 1 percent from 2010 to 2011, but fuel costs rose 26 percent during the same period – to $17.3 billion.
The biggest challenge in our energy future truly is gasoline. Coal, the vast expansion of natural gas production in the country and new enthusiasm for nuclear power, even from the Obama administration’s Energy Department, are sufficient to meet all other fuel needs for literally centuries to come.
But Americans drive more than ever, and growth in driving here is dwarfed by growth in driving in China, India and other emerging countries. Two decades ago, China used about 10 percent as much gasoline as the United States. Today, the Chinese are nearly equal and expect to pass us as the top consumer of total energy and of gasoline within the next three years. India also has seen dramatic growth in demand for fuel, particularly gasoline. That demand will push prices to untenable levels here soon unless fuel additives, such as biofuels, become commercially viable in short order.
Again, it feels good to rail against subsidies, just as it would feel good to rail against the man in the transmission shop who wants to add to your repair bills. But the smart thing is not to rail against the man. It is to pay the price now to make biofuels commercially viable. We’re closer to the end than to the beginning, and our future depends on us completing this journey.