Ethanol Proponents Accuse Oil Industry Of Forcing Out The Competition

Senators demand feds investigate allegations that gas station owners are being strong-armed by oil companies.
By @TrishaMarczakMP |
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    Two senators from farmland states are calling on the Federal Trade Commission to investigate allegations that oil companies pressured gas stations to rig the system to bump ethanol fuel out of the picture.

    The allegations claim oil companies targeted independent gas stations, convincing them to allow oil companies to work around federal standards that require ethanol, a byproduct of corn, switchgrass or other renewable crops blended with gasoline to provide a ‘cleaner’ form of energy, to be offered at the pump.

    Instead, gas station owners allege oil companies are using their monetary muscle to manipulate the market, taking away consumers’ option for more affordable ethanol fuel and replacing it with the more expensive premium gasoline.

    “Consumers deserve to have access to homegrown renewable fuels that only lower costs at the pump but also help boost our energy security,” Sen. Amy Klobuchar (DFL-Minn.), who filed the complaint along with Sen. Chuck Grassley (R-Iowa), said in a statement. “It is imperative that the Administration investigate any possible anti-competitive behavior by the oil companies that might limit consumers’ access to renewable fuels.”


    Allegations of market manipulation

    The Renewable Fuel Act, created through the Energy Policy Act of 2005, instituted a program mandating that 7.5 billion gallons of renewable fuel (ethanol) be blended into gasoline by 2012.

    For the oil industry, the inclusion of ethanol in fuel supplies meant its market share for its product was threatened.

    In 2011, 13.9 billion gallons of ethanol produced meant 485 million fewer barrels of oil needed to be imported, according to Iowa Corn, a trade group representing Iowa’s ethanol industry.

    Gasoline stations typically have two tanks. To produce the E15 gasoline blend, which includes 15 percent ethanol and is designed to fuel E15-friendly vehicles, the station must designate one tank for ethanol only. Blender pumps are used to mix the ethanol and gasoline, producing E10, which can be used in most vehicles, and the E15 special blend.

    The allegations claim oil companies have been pressuring independent stations to allow both pumps be used for gasoline, eliminating room for ethanol and adding more room for high-priced premium gasoline.

    This, according to Sens. Klobuchar and Grassley, amounts to anticompetitive practices by oil companies that work against the 2007 Energy Independence and Security Act, created to level the playing field and allow domestic clean and renewable fuel.

    In a letter sent to Attorney General Eric Holder and Federal Trade Commission Chairwoman Edith Ramirez, the senators called for an investigation into the allegations.

    “The promise of renewable fuels is rapidly becoming a reality and introducing much needed competition to the transportation fuels sector,” the letter states. “Given the implication these alleged activities, if true, could have on competition in the marketplace, we urge you to investigate them and consider whether any action is necessary.”

    The lawmakers’ call for justice is one applauded by those in the ethanol industry and those who own independent gas stations. Ron Lamberty, senior vice president of American Coalition for Ethanol, is also a gas station owner — for him, the stakes of the allegations are high.

    “As a fuel station owner, every time I hear some Big Oil mouthpiece saying we should ‘let the market decide’ how much ethanol is used, I think of these kinds of restrictions the oil companies have been jamming down station owners’ throats for decades, making sure only one decision is possible — oil,” he told Ethanol Producer. “Senators Grassley and Klobuchar are right.”

    If the allegations prove true, the oil companies would be responsible for altering the market to lock out clean energy alternatives, ethanol in particular.


    Oil companies rally against ethanol

    It’s no secret that oil companies have long opposed EISA, which was intended to allow for fair market introduction of cleaner fuels with the ultimate aim of reducing costs for consumers. The oil industry has never rallied behind EISA.

    “Faced with growing competition from new sources of fuel promoted by the (renewable fuel standard), the oil industry has publicly

    In July, the American Petroleum Institute launched an advertising campaign spanning print, TV radio and online platforms with the message that the 2007 Renewable Fuel Standard is bad news for consumers.

    The advertising campaign depicted the mandate as one that leads to higher food prices, low mileage and engine damage — a claim that’s already advertised at the pump for those opting for E15, the higher ethanol-content fuel intended for ethanol-friendly cars only.

    Large oil companies also have refining companies on their side, who say they have seen their share of the market dwindle after the introduction of ethanol.

    Meeting muscle with muscle, the clean energy industry vowed in August to fight back against the pro-oil campaign blitz, with plans underway to launch a multimillion campaign that will take on the oil industry’s claims point-by-point.

    It’s called the “You’re No Dummy” campaign, already set up online with sections pointing out “the lies” of the oil industry.

    “If the oil industry was concerned about your food prices they would lower the prices of fuel because a recent World Bank study showed that high fuel prices are the cause of higher food prices,” the campaign site states. “In actuality, the ethanol industry only uses the starch in the corn kernel to produce ethanol and the valuable proteins and micronutrients are returned back to the food chain. So the net effect is that the U.S. ethanol industry uses 17.5 percent of the net U.S. corn crop for ethanol production.”

    This is in direct contrast to the American Petroleum Institute campaign, which states the ethanol industry uses up 40 percent of America’s corn crops — a move they say is leading to higher food prices.

    The campaign is also calling out the oil industry’s expenditures — and tax breaks. In 2012, more than $140 million was spent by the oil industry in lobbying efforts alone. Shell spent just shy of $16 million, followed by Exxon at just over $12 million.

    With every $1 contributed to the lobbying pool, the top oil companies received $30 in tax breaks, according to the campaign.

    In 2011, subsidies for the oil industry rose to $7 billion. In 2012, British Petroleum received task breaks worth $300 million, according to figures provided through profit reports and the Joint Committee on Taxation.


    What happens now?

    The Federal Trade Commission has taken up the suggestions by Klobuchar and Grassley to move forward with an investigation, yet the consequences, if oil companies are found guilty, aren’t yet clear.

    For the senators, it’s a matter of protecting an industry that flourishes within their states, while constituents are looking to their lead as they struggle against an oil industry that has long controlled the game. Ramirez did not follow through with calls for a full investigation, but told the senators in a letter that the Federal Trade Commission will make every effort to persecute those violating competition rules.

    “I’m pleased to see the Federal Trade Commission is taking steps to investigate whether certain practices by oil companies may be impeding competition, and I will continue to work to ensure that Americans can continue to realize the benefits of cheaper, cleaner renewable fuel,” Klobuchar said.

    Klobuchar comes from Minnesota, a key ethanol producer. Al-Corn, an ethanol cooperative, puts the amount of ethanol produced in the state at 862 million gallons. The number of ethanol plants sits at 21, with more than 1.1 billion gallons of production capacity in 2010. The state’s net ethanol export is roughly 619 million gallons, with 243 million gallons consumed by Minnesota drivers.

    Grassley’s state of Iowa ranks sixth in ethanol production, producing nearly 30 percent of the nation’s ethanol supplies. According to Iowa Corn, the industry supports more than 50,000 jobs and accounts for more than 5.4 percent of the state’s gross domestic product.

    “The allegations from retailers about possible anti competitive practices from Big Oil are disheartening, but not surprising, knowing the lengths Big Oil will go to in order to keep biofuels out of the fuel supply,” Grassley said in a statement. “It’s going to take an ‘all-of-the-above’ approach to wean the United States off of foreign sources of oil, so it only makes sense that we all work together. I appreciate the FTC … taking a look at the allegations and look forward to their conclusion.”

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    • Rover

      We have a Prius and it gets 4-5 more MPG with Ethanol Free or “Pure Gas” as it’s sometimes called, I don’t mind paying the extra cost. In some areas there’s little difference, unfortunately here it averages .25/gal higher.

      I’ll be really angry if they block our option to buy pure gas, I consider it to be natural food for the car, motorcycle, lawn mower, weed eater….. And from what I can see it has helped the business at independent stations. Most put up banners and signs promoting that they have EF gasoline. Here’s a list of EF stations derived from volunteer entries, There are also a couple of handy Apps for finding stations.

    • erikkiehle

      Complete and utter bull. The law forces ethanol into fuel, which DOES decrease fuel economy. In my city of Abilene, TX the last holdouts offering ethanol-free gas had to switch last year to ethanol-blends BECAUSE THEY COULD NO LONGER BUY ethanol-free.

      Customers WANT ethanol-free fuel. The oil companies would certainly like to offer it, but FEDERAL MANDATES force ethanol onto Americans.

      • Robert White

        That was because of the oil companies and their decision not to carry it. Ethanol free gas is available in my area. Retailers can only sell what they can buy. The federal mandate does not say where the renewable fuels (not just ethanol) has to be blended or sold. That is a choice by the oil companies, period.

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    • naksuthin

      Americans like to think they have a free market…but it’s really a minipulated market.
      Take Cel phone plans, for example. Cel phone companies all had the two year contract. They don’t compete on price. Their prices are fixed so the only difference is the coverage.
      Or take the airlines for example. Mergers of airlines have allowed all the airlines to start charging for baggage or limiting free baggage to one. Almost all the airlines moved in lockstep to institute this change. I took United Airlines today and you have to pay for even the first bag.
      If this were a truly free market there would be enough competition to keep the consumer in the driver’s seat.
      Unfortunately countries are run by corporate interests where companies conspire with each other to fix prices.

    • Le_Grand_Schtroumpf

      How about a free market, with freedom of choice by the consumer?
      My be is that the pumps containing ethanol adulterated fuel would receive very few customers. Like myself, they would opt for the gas that gives 10% better MPG and doesn’t destroy engines.

      THIS is why its a government mandate – forcing stuff on us that we don’t want.
      For our own good, of course … its just a side effect that certain people get obscenely rich from selling ethanol.

      • erikkiehle

        There already IS freedom of choice. Do you see all those cars and trucks with “Flex-Fuel” labels? They can take any fuel from E0 up to 85% ethanol in E85.

        How many of them demand E85 fuel? None, because the fuel economy is terrible.

        Consumer have a choice, and they’ve chosen the lowest ethanol blend they can find. The government backed by the corn lobbyists have forced this crap upon America.

    • CharliePeters

      EPA: Lodi bakery cited for ethanol emissions

      The Sacramento Bee, The Associated Press, June 28, 2012

      LODI, Calif. — The Environmental Protection Agency says a San Joaquin Valley bakery was emitting more than just good odors during the bread baking process.

      Cottage Bakery in Lodi has been cited for allegedly releasing ozone-producing ethanol as well. The EPA says the commercial bakery failed to obtain permits for new ovens and install air pollution controls.

      The bakery must pay a $625,000 penalty as part of a settlement filed in federal court this week. The settlement still requires the court’s approval.

      Cottage Bakery’s parent company, Ralcorp Frozen Bakery Products, Inc., says the violations occurred before it acquired the bakery, and it has since invested more than $1.4 million to ensure the bakery is in compliance with environmental regulations.

      Federal EPA mandates corn ethanol in our gas, really.

      VOTE NO on AB 8 and SB 11

    • CharliePeters

      California Department of Motor Vehicles (DMV) flushes the motorist wallet using the water to grow GMO fuel to export the profits. It is ok because the fed EPA mandates ethanol and fines us for using what they mandate.

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    • jrlevine

      Is this a press release from the corn lobby?

    • earlrichards

      To stop the gasoline price, rip-off, plug your Tesla s, electric car into your household, solar array.

      • erikkiehle

        Fabulous advice for anyone who can afford a $100,000 car.

        That said, a battery-electric Nissan Leaf is available for $20K-$30K. Not as sexy as a Tesla, but still uses no petroleum/ethanol as fuel. Very good chance my next car will be a Leaf.

        • earlrichards

          The Tesla S sells for $72,000. Tesla is working on an electric car which will sell for $35,000.