Lamberty Report: Making a Splash
by Ron Lamberty
Last year, as ethanol prices lagged far behind spiking gasoline prices, several oil companies began to purchase ethanol at bargain prices, blend it with gasoline, and sell pre-blended E10 at the much higher gasoline price. In some areas, this meant the oil companies – with the tax credit they receive for adding ethanol to their gas – were pocketing well over a dollar a gallon on ethanol. That meant 10 cents more for every gallon of E10 sold to their customers, the gas station owners. The numbers looked so good that those oil companies were taking steps to ensure that their branded customers’ stations would sell nothing but E10.
Many were surprised when this Big Oil decision to mandate an all ethanol-enriched slate received a less than enthusiastic review from the ethanol industry . It was, at very least, a curious move for the oil industry – which has historically expressed a hatred of mandates hotter than the white-hot fire of ten thousand suns…
ACE immediately opposed the action, pointing out the resulting lack of competition in the ethanol market would mean higher prices for consumers on a product that should be keeping fuel prices lower. Since the inception of ACE’s market development program, station owners have been encouraged to “do the math” and realize that ethanol could mean better bottom lines for them and lower prices for their customers. They got it – and they realized that they weren’t getting it.
South Carolina’s Petroleum Marketers Association (SCPMA) was so concerned about this “Big Oil takeover of ethanol” (their words, not ours), they passed a law that said they – the marketers – had to be allowed to buy gasoline and ethanol separately so their oil company suppliers couldn’t charge whatever they wanted for E10. The law’s passage was met with an oil company lawsuit – interesting because it challenged the way the law was passed, not the law itself.
Meanwhile, North Carolina passed an identical law, and the oil companies, API, and NPRA littered the courts with paper again, saying they couldn’t meet their RFS requirements without being able to force pre-blended, overpriced E10 on their customers. Apparently they forgot about RINs (their idea, not ours).
South Carolina’s law ended up stuck in the mud of ongoing injunctions, so SCPMA decided to pass another one to eliminate any confusion. Big Oil lawyers are starching their shirts and polishing their Guccis for another trip to Columbia, but they’d better pack heavy. They might have to add stops in Raleigh, Atlanta, Montgomery, Jackson, Lansing, Little Rock, Baton Rouge, and other statehouses working to protect competitively priced ethanol.