By Curtis Ellis

Curtis Ellis notes how market forces triumphed over government mandates

A funny thing happened on the way to the gas pump.

Consumers want cheaper fuel and bought as much of it as they could without Washington telling them they had to.

That shouldn’t come as a surprise. What’s funny is that some people still needed to learn that economic incentives are a powerful motivator.

Our story begins in Washington, where government regulation is the go-to method of persuasion.

The EPA has sought to increase the use of ethanol, a “renewable” biofuel made from corn. To accomplish this goal, it orders refineries to blend ethanol with the gasoline and other products they produce. Gas sold at the pump contains roughly 10 percent ethanol.

The giant global consolidated oil companies have no problem meeting Washington’s mandate, but it’s put the squeeze on small, independent refiners across the country.

One of those refiners, Philadelphia Energy Solutions, declared bankruptcy after the cost of complying with EPA biofuel regulations hit $300 million – double the cost of its payroll.

The Trump administration has been giving the independent refineries waivers from the EPA regs to help save the thousands of good paying blue-collar industrial jobs that are at risk.

That had the Ethanol Lobby up in arms. They claimed if the government didn’t force every single refinery to adhere to mandatory quotas, there would be no market for ethanol, and demand for the biofuel would fall off a cliff.

Researchers from the University of Illinois department of agricultural economics decided to put this to the test. They wanted to see if the administration’s policy of exempting small refiners from the EPA mandates did in fact reduce demand for ethanol.

And that’s where the funny thing happened.

They found that while the Ethanol Lobby predicted a collapse in ethanol use, it just didn’t happen.

“There is little if any evidence that [demand] for ethanol was reduced as the waivers went into effect. If there has been any ethanol ‘demand destruction’ to date it was very small,” University of Illinois economics professor Scott Irwin writes.

Shorter version of the findings: People are buying just as much ethanol as before even without the government forcing independent refiners into bankruptcy.

More revealing is the reason why ethanol demand remains strong.

Professor Irwin reports, “Ethanol prices since late 2017 have become very cheap relative to gasoline. … This is the reason ethanol demand … has not been affected. … Put differently, ethanol is highly price competitive.”

Imagine that – ethanol is cheaper than gasoline, so people want to buy it.

The market works.

Time and again, we’re told renewable energy (wind, solar and biofuels) is an “infant industry” that can’t stand on its own and absolutely must have government support to survive.

This argument has been used to justify subsidies, perennial tax breaks and production mandates.

It looks like one of the infants has grown up.

The Trump administration has kept its promise, saving good paying blue-collar jobs at independent refineries across the country.

This latest study shows there are win-win solutions that can help corn farmers in the Midwest and industrial workers in the Northeast.